What is the difference between an accrual and a deferral? Definition of an Accrual An accrual pertains to: expenses that should be reported now, but have not yet been recorded or paid, and revenues that should be...
What is the difference between an accrual and a deferral? Definition of an Accrual An accrual pertains to: expenses that should be reported now, but have not yet been recorded or paid, and revenues that should be...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
Our income statement shows wide fluctuations in utilities expense from month to month. I suspect our accounting is not proper. Any suggestions? Under accrual accounting, your income statement should report the amount for...
Why is there a difference in the amounts for Bad Debts Expense and Allowance for Doubtful Accounts? Amount Reported as Bad Debts Expense The amount reported in the income statement account Bad Debts Expense pertains to...
Accounts Receivable & Bad Debts Expense(Quick Test #2) Download PDF After you have answered all 15 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your...
Debits and Credits For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
What is a contra expense account? Definition of Contra Expense Account A contra expense account is a general ledger expense account that will intentionally have a credit balance (instead of the debit balance that is...
What is the income summary account? Definition of Income Summary Account The Income Summary account is a temporary account used with closing entries in a manual accounting system. (Computerized accounting systems may...
Accounts Payable(Quick Test #2 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
The financial ratio which indicates the speed at which a company collects its accounts receivable. If a company’s turnover is 10, this means the company’s accounts receivable are turning over 10 times per...
What is a contra inventory account? A contra inventory account is a general ledger account with a credit balance. The credit balance in the contra inventory account will be combined with the debit balance in the...
What is a contra asset account? Definition of Contra Asset Account A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance...
See contra equity account.
What are the stockholders' equity accounts? The stockholders’ equity accounts are balance sheet accounts and a part of the accounting equation Assets = Liabilities + Stockholders’ Equity. In this light you can view...
What is a contra liability account? Definition of Contra-Liability Account A contra-liability account is a liability account in which the balance is expected to be a debit balance. Since a debit balance in a liability...
What does an accountant do? Some accountants are directly involved in preparing an organization’s financial statements. This is likely to include maintaining the general ledger and supervising some employees. Other...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
What is a general ledger account? Definition of General Ledger Account A general ledger account is an account or record used to sort, store and summarize a company’s transactions. These accounts are arranged in the...
What is a contra revenue account? Definition of Contra Revenue Account A contra revenue account is a revenue account that is expected to have a debit balance (instead of the usual credit balance). In other words, its...
What is meant by reconciling an account? Definition of Reconciling an Account Reconciling an account is likely to mean proving or documenting that an account balance is correct. Examples of Reconciling an Account When a...
What is a certified public accountant? Definition of Certified Public Accountant A certified public accountant (CPA) is a person who has completed the required accounting degree, passed the very difficult CPA Exam, has...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
This organization has changed its name to Institute of Management Accountants. It is currently using the name IMA to reflect the many backgrounds of its membership.
What are balance sheet accounts? Definition of Balance Sheet Accounts Balance sheet accounts are one of two types of general ledger accounts. (The other accounts in the general ledger are the income statement accounts.)...
What is the purpose of control accounts? Definition of Control Account A control account is a general ledger account containing only summary amounts. The details for each control account will be found in a related (but...
What are income statement accounts? Definition of Income Statement Accounts Income statement accounts are one of two types of general ledger accounts. (The other accounts in the general ledger are the balance sheet...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Accounts Receivable and Bad Debts Expense For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space...
What is a journal? Definition of a Journal In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry. The...
Bonds Payable (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (40) Marked Wrong (0) Marked Right (0) bonds payable These long-term debt securities are likely to require semiannual interest...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
What is the procedure for preparing a trial balance? Definition of a Trial Balance A trial balance consists of the following information: The title of each general ledger account that has a balance To the right of the...
Where should I enter unpaid wages? Definition of Unpaid Wages Unpaid wages are usually the amounts that hourly-paid employees have earned, but have not yet been paid to the employees. Entering Unpaid Wages Under the...
If a mortgage payment is due on January 1, should the payment be accrued at December 31? The following answer assumes that the accrual basis of accounting (also known as the accrual method of accounting) is being used…...
What is the purpose of depreciation? Purpose of Depreciation The purpose of depreciation is to achieve the matching principle of accounting. That is, a company is attempting to match the historical cost of a productive...
Does paying an account payable affect net income? Definition of Paying Accounts Payable Under the accrual basis of accounting, expenses are recorded when they have occurred, not when they are paid. Therefore, if an...
What is interest expense? Definition of Interest Expense Interest expense is the cost of borrowing money during a specified period of time. Interest expense is occurring daily, but the interest is likely to be paid...
What are the effects of depreciation? Definition of Depreciation Depreciation is the systematic allocation of the cost of a company’s assets used in its business from the balance sheet to the income statement (as an...
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