A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
. The payment for the equipment is to be made on February 10. Under the accrual method, on December 29 the company should debit the asset account Equipment and credit the liability account Accounts Payable. (When the...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
What is an invoice? Definition of Invoice An invoice is a dated bill prepared by the seller of goods sold (or services provided) which includes brief descriptions of the items, quantities of items and their unit prices,...
Usually the pay for the hours worked in excess of 40 hours per week. Federal laws require payment for these hours for employees who are not able to control their hours. For example, a company is required to pay a...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
of Gains Other examples of gains that could appear on a company’s income statement include: Gain on sale of investments Gain on sale of building Gain on legal settlement Gain on early extinguishment of debt Join PRO...
bills tell you the cost of the gas and electricity used between the meter reading dates appearing on the utility bill. For example, if the meters are read on the last day of the month then the utility bills received in...
. This could result in a significant reduction in the amount of income taxes to be paid in the early years of an asset’s life, which in turn reduces the time required for the corporation to recover the amount it paid...
no amounts recorded in them. False Right! You selected the correct answer. Some accounts listed in the chart of accounts will NOT have amounts recorded in them, especially if it is early in the accounting year. 2. The...
Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
was returned unpaid. Perhaps, the customer’s checking account balance was insufficient, perhaps a stop payment order prevented the check from being paid, or perhaps there was another reason. When the unpaid check...
and/or revenues that have already been recorded in the general ledger accounts. The reason is that some of the recorded amounts will actually be used up and/or earned in a future accounting period. An example...
What is an overdraft? Definition of Overdraft An overdraft (also known as a bank overdraft) generally means that the amount of a company’s checks being presented at the bank for payment exceeded the amount on deposit....
of a bond is the rate that will discount both the bond’s future interest payments and the bond’s maturity value to a present value that is equal to the bond’s current market value. If the market interest rate...
of the debit balance in Accounts Receivable is unlikely to be collected. A less common example of a contra asset account is Discount on Notes Receivable. The credit balance in this account is amortized or allocated to...
outflows for each option. Since these cash flows will occur at different times, you must “discount” the future cash flows to a present value. (This is necessary in order to recognize the time value of money.) The...
of contra accounts that will result in the balance sheet totals being different from the post-closing trial balance totals include: Allowance for Doubtful Accounts Discount on Bonds Payable Bond Issue Costs Owner’s...
or the owner’s capital account at the end of each accounting year.) Contra-liability accounts such as Discount on Bonds Payable or Unamortized Bond Issue Costs. (These debit balances allow for the presentation of both...
is paid, the following will occur: Current liabilities (Dividends Payable) will decrease Current assets (Cash) will decrease The income statement is not affected by the declaration and payment of cash dividends on...
, the seller will debit Accounts Receivable and will credit Sales. When the seller receives payment from the customer, the seller will debit Cash and will credit Accounts Receivable. Example of a Credit Sale Assume that...
Other increases in long-term liabilities and stockholders’ equity Uses of cash reported in the financing activities section of SCF include: Repayment of short-term loans and/or long-term loans Retirement of bonds...
. income tax return. Definition of Bonds Bonds are a form of long-term debt in which the issuing corporation promises to pay the principal amount at a specified maturity date. Bonds also promise to pay a fixed interest...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
months. Between the interest payment dates, the company will have: Accrued interest income that is to be reported on the income statement Accrued interest receivable that is to be reported on the balance sheet Accrued...
on Notes Receivable Assume that on December 1, a company has lent one of its suppliers $30,000 with interest at 12% per year. Interest is to be paid quarterly (with the first interest payment to be made on March 1). On...
What accounting entry is made when a company receives an order for its goods or services? Definition of Accounting Entry When an Order is Received At the time when a company receives a customer’s order (without...
entitled Petty Cash when the petty cash fund is established. Example of Petty Cash Affecting Expenses Assume that the petty cash money is used to pay postage of $10. While the company incurs this cost at the time of...
of a Sale on Credit Assume that a company is in an industry where it is necessary to give customers invoice payment terms of net 30 days. If the company sells $10,000 of goods to a customer with those terms, the company...
to arrive at their present value. The annuity payments can also be used to determine the effective interest rate that is embedded in an agreement. Depending on the starting point of the first payment, an annuity will be...
deferred income taxes customer deposits Some long-term debt that will be due within one year of the balance sheet date can continue to be reported as a long-term liability if there is: a long-term investment that is...
of the 20 six-month time intervals. Another example of an ordinary annuity is a mortgage loan having a fixed interest rate and a series of equal monthly payments. For instance, a 15-year mortgage loan will result in an...
What are out-of-pocket costs? Out-of-pocket costs are those costs or expenses that require a cash payment in the current period or during a project. For example, the wages of the person setting up a machine for a new...
. The entry will debit Loan to Employee for $5,000 and will credit Cash for $5,000. Under the accrual method of accounting, at each balance sheet date the company should record any accrued interest by debiting Interest...
, it debits Cash. Every transaction will require a debit to at least one account and a credit to at least one other account. Here are two examples to illustrate our five tips. A bakery records its cash sales at a local...
What is a petty cash voucher? Definition of Petty Cash Voucher A petty cash voucher is usually a small form that is used to document a disbursement (payment) from a petty cash fund. Petty cash vouchers are also referred...
What is a defined benefit pension plan? A defined benefit pension plan is a retirement plan in which the employer commits to paying a specified monthly payment to each eligible employee when he or she retires at a stated...
months A magazine publisher receiving money from a subscriber for magazines for the following year A website design company receiving a client’s down payment for future work A law firm receiving a retainer fee from a...
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