What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
What is an adjusted trial balance? Definition of an Adjusted Trial Balance The adjusted trial balance is an internal document that lists the general ledger account titles and their balances after any adjustments have...
What are the benefits of a revenue budget? The main benefit of a revenue budget is that it requires looking into the future. The revenue budget should contain the assumptions made about the future and the details about...
What type of account is the Dividends account? Definition of Dividends Account When a corporation declares a cash dividend, the amount declared will reduce the amount of the corporation’s retained earnings. Instead of...
Is a loan payment an expense? Definition of Loan Payment Generally a loan payment consists of: An interest payment, which is an expense A principal payment, which reduces the loan’s principal balance If the interest...
What does the term arrears mean in accounting? Definition of Arrears In accounting, the term arrears will be used in the following situations: If a corporation does not declare and pay the dividend on its cumulative...
What are the top accounting schools? Many colleges and universities use their former students’ pass rates from earlier CPA Exams as an indicator of being a top accounting school. I recommend that you expand the...
Why is income received in advance a liability? Definition of Income Received in Advance Under the accrual method of accounting, when a company receives money from a customer prior to earning it, the company will have to...
What is a deferral adjusting entry? Definition of Deferral Adjusting Entry A deferral adjusting entry (one of three types of adjusting entries) pertains to a transaction that has already been recorded in the general...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
What are some examples of investing activities? Definition of Investing Activities Investing activities often refers to the cash flows from investing activities, which is one of the three main sections of the statement...
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...
Which accounts are debited in the closing entries? Definition of Closing Entries Closing entries occur at the end of an accounting year to transfer the balances in the temporary accounts to a permanent or real 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 would cause a decrease in accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the cumulative amount of depreciation taken since a depreciable asset was put into service. The...
What are the various types of adjusting entries? Types of Adjusting Entries Adjusting entries, which are required in order to have a company’s financial statements comply with the accrual method of accounting, are...
The balance sheet and income statement are connected. Definition of Balance Sheet and Income Statement The balance sheet reflects the accounting equation: Assets = Liabilities + Owner’s (Stockholders’) Equity When a...
How do you write off a bad account? Definition of the Write-off of a Bad Account The write-off of a bad account usually refers to eliminating an account receivable due to the customer’s inability to pay the amount...
How does an expense affect the balance sheet? Definition of Expense An expense is a cost that has been used up, expired, or is directly related to the earning of revenues. Most of a company’s expenses fall into the...
A series of equal amounts occurring at the beginning of each equal time interval. Also known as an annuity due. An example would be the monthly rent on an apartment.
The average balance in the account Accounts Receivable during a period of time. Since the amount reported in the Accounts Receivable account is the ending balance on one specific day, it is necessary to compute an...
An adjunct account is a valuation account that increases the book value or carrying value of a liability account. For example, the account Unamortized Premium on Bonds Payable (or simply Bond Premium) is an adjunct...
A series of equal amounts occurring at the end of each equal time interval. Also known as an ordinary annuity. An example would be the monthly payments on a loan. Another example is the semiannual interest on a bond.
What adjustment is needed when a check that was written in a previous month appears on the current month's bank statement? A check written in any previous month but not appearing on previous bank statements, should have...
Bookkeeping Video Training Part 7 Adjusting entries: deferred revenues, accrued revenues, reversing accruals to avoid double-counting Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
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…...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
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...
Bookkeeping Video Training Part 2 Accounting equation, why revenue accounts have credit balances, accrual method of accounting Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
See Allowance for Doubtful Accounts.
A section of a publicly traded corporation’s annual report to the SEC (Form 10-K). This section contains extensive information from management about the corporation’s financial condition and its operations.
See accrual basis of accounting.
What are gains? Definition of Gains In financial accounting, gains often pertain to some of a company’s transactions which occur outside of the company’s main business activities. Transactions which are outside of a...
Also known as time-and-one-half. A term used in conjunction with overtime pay when an employee gets a 50% higher pay rate for hours in excess of 40 hours per week. The “half” is also known as the overtime...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
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