Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
are reported as ________. ASSETS TEASSS Unscramble ASSETS SSETSA Unscramble 20. Customer deposits are reported as _____________. LIABILITIES BIILLASTEII Unscramble LIABILITIES EBLLAITSIII Unscramble Mark the Word...
with the current assets accounts receivable and inventory. While these two assets are initially recorded at cost, there are occasions when the company will collect less than the cost. When that occurs, the company must...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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...
equal to credits, the account balances must satisfy the accounting equation, which is: Assets = Liabilities + Stockholders’ Equity Asset accounts (normally debit balances) include: Cash Accounts receivable Inventory...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
, revenue recognition). The accrual method results in a better picture of a corporation’s net income during a specified period of time and it results in a better picture of a corporation’s assets and liabilities at...
or lower its selling prices 7. Property, plant and equipment are __________ assets. Select... current noncurrent 8. The title of the contra asset account that is reported in the section with the heading property, plant...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
and to increase the balance you need to CREDIT the account. Credit Right! To increase a liability you credit the liability account. Cash Debit Right! Cash and other assets are debited to increase their balances. Credit...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
collects $100,000 of its accounts receivable, the asset Cash is increased by $100,000 and the asset Accounts Receivable is decreased by $100,000. There is no change to stockholders' equity. (There is no change to...
usually accept a fixed cash dividend that will be paid by the corporation before the common stockholders are paid a dividend. In exchange for this preferential treatment of dividends, the preferred stockholders...
and Exchange Commission (Form 10-K), especially the section entitled Management’s Discussion and Analysis Quarterly earnings reports, press releases and other communications The notes to a company’s financial...
are traded on a stock exchange, the earnings per share must appear on the face of its income statement. Example of Earnings per Share Assume a corporation has only one class of common stock outstanding and has no...
. receives $24,000 on December 31, 2023 in exchange for promising to provide the client with services for the year January 1 through December 31, 2024. As of December 31, 2023 the entire $24,000 is unearned. Therefore,...
that common rules be followed. In the U.S., the common rules are known as generally accepted accounting principles (GAAP), which are established by the Financial Accounting Standards Board (FASB) and the Securities and...
and to the liquidation of the corporation (if that were to occur). In exchange for this preferential treatment, the preferred stockholders (shareholders) generally will never receive more than the preferred stock’s...
money to the business, the entry will be to debit Cash and credit a liability account such as Notes Payable. (If Amy invests an asset other than cash, the business will record the cash equivalent or fair market value of...
, the amount of interest paid, and significant noncash investing and financing activities (such as issuing common stock in exchange for land) The statement of cash flows is important because investors, lenders, financial...
estate are known as __________ bonds. 15. Bonds that are not secured by specific assets are known as __________. 16. The document that specifies the terms of a bond is the bond __________. 17. A fund that contains cash...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
asset turnover and fixed asset turnover are indicators of a company’s effectiveness in utilizing its assets. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
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...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
: To have cash available for unforeseen events and for increases in its costs To reduce its long-term debt or repurchase shares of its common stock To increase inventory to expand, to purchase in larger quantities for...
the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth. Join PRO to Track Progress Mark the...
with a reseller’s certificate, which allows the supplier to not charge the sales tax. If a sales tax is paid by the reseller and the sales tax could have been avoided, the sales tax would have to be expensed...
, seasonal variations will be included. Using only the end of year point for two years is generally not indicative of the inventory levels in the months throughout the year. The 13-point average is also useful for...
in which the office furniture is recorded, such as Furniture and Fixtures or Office Furniture. In other words, the discount is a reduction of the asset’s cost. [If the discount is received by a retailer who is in the...
to be part of the cost of items purchased, since an asset’s cost is defined as all costs that are necessary to get the asset in place and ready for use. Join PRO to Track Progress Mark the Question as Read Must-Watch...
Typically, the combined amount of cash and cash equivalents will be reported on the balance sheet as the first item in the section with the heading current assets. Join PRO to Track Progress Mark the Question as Read...
How do you amortize goodwill? Definition of Amortize Goodwill Prior to 2001, to amortize goodwill meant to consistently and in uniform increments move the reported amount of the intangible asset goodwill from the balance...
of a company’s customers who were given 30 days in which to pay has filed for bankruptcy and the customer’s assets are close to $0. Therefore, there will be no amount left to pay any of the $4,000 it owes to the...
How do drawings affect the financial statements? Definition of Drawings Drawings are the withdrawals of a sole proprietorship’s business assets by the owner for the owner’s personal use. The drawings or draws by the...
Featured Review
"I'm a virtual assistant to two amazing small-business owners, and I get paid as a contractor, so I needed to brush up on my accounting skills before I started invoicing. I wanted to set up my own accounting system in Notion (my go-to, everything-management app) that would grow with my personal needs, so I became a PRO user so I could have long-term access to the lessons and information. What I love about AccountingCoach are the generously-written explanations for everything; I only have high-school accounting knowledge from the 1990s (and Australian accounting, at that), but I could still jump in and find my way immediately. It's also a relief to have just one single trusted information source, so I don't ever have to scour the internet for accounting info. I basically use AccountingCoach as a textbook that I can rely on to be accurate and complete. My main benefit from all this has been confidence—I've built my little Notion-based accounting system, and I know if I need to expand it or improve it I can just jump on AccountingCoach PRO and find the information I need to help me do that." - Dan S.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: