and asked that his billing period be changed to cover the calendar month. They were pleased to make the change. Next, the owner called his bank and asked if the bank would be able to deduct the current month’s loan...
and asked that his billing period be changed to cover the calendar month. They were pleased to make the change. Next, the owner called his bank and asked if the bank would be able to deduct the current month’s loan...
when the bill arrives in January The following are a few examples of payments that will never be an expense: A payment of $100,000 to purchase the land adjacent to a company Payments that are cash dividends to...
of expenditures that will not be an expense in the accounting period in which the payments are made include the purchase of land for a future expansion and the principal portion of a monthly loan payment. Here is an...
financial statements. Example of a Compilation A company prepares its own monthly financial statements by using popular accounting software. However, as part of the company’s loan agreement with its bank, the company...
. Examples of a Bank Debit Memo Some examples of a bank debit memo include the following withdrawals from a company’s checking account: The company’s monthly loan payment The fee for printing the company’s checks...
off. The accountant will prepare adjusting entries to record expenses that occurred but are not yet entered by the bookkeeper. (Examples include interest on bank loans since the last loan payment, wages earned by...
. The reason is that the interest is not owed as of that date. Each month, one month’s interest on the note or loan should be recorded with a debit to Interest Expense and a credit to Cash or Interest Payable (if the...
get back to Company X’s checking account, Company X’s bank will have two options when Company X’s checking account does not have sufficient funds to cover the checks: 1. The bank could pay the checks and allow...
. This journal entry will debit Depreciation Expense and will credit Accumulated Depreciation. Another example of a general journal entry is the adjusting entry to accrue interest on a bank loan. This journal entry will...
roots in manufacturing businesses. However, today it extends to service businesses. For example, a bank will use cost accounting to determine the cost of processing a customer’s check and/or a deposit,...
$100,000 and signed a note requiring monthly payments of principal and interest for 48 months. Let’s also assume that the loan repayment schedule shows that the monthly principal payments for the 12 months after the...
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
statements. Example of Recording Accrued Revenues Assume your company lent a supplier $100,000 on December 1. The loan agreement specifies that the $100,000 is to be repaid on February 28 along with $3,000 of interest...
of the amount borrowed, the company will decrease the amount in its Cash account with a credit entry of $3,000 and will reduce the balance in its Loan Payable account with a debit entry of $3,000. If the company pays...
or from obtaining a bank loan are not revenues Revenues are amounts that companies earned by selling products or providing services. When the cash is received (at the time of the sale or service or at a later date) is...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
worked multiplied by an hourly rate of pay. Generally, the employees earning hourly wages will be paid in the week that follows the hours worked. Example of Wages For example, a warehouse employee works 40 hours during...
there are expected to be 560,000 MHs. Using normal costing, the company applies the manufacturing overhead to products at a rate of $22.50 per MH ($12,600,000/560,000 MH) throughout the year. Using actual costing,...
. Another example of a non-discount method in capital budgeting is the accounting rate of return method, which is similar to the return on investment (ROI). [To overcome the above shortcomings, capital budgeting should...
issue costs to Interest Expense over the remaining life of the bonds. (Bonds are likely to mature 10 years or more after they are issued.) The most precise way to amortize these amounts is to use the effective interest...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
rate. For instance, in some states unprepared grocery items are not subject to a sales tax. Items purchased for resale are not subject to the sales tax when purchased by the retailer, but will be subject to the sales...
of the manufacturing overhead costs are fixed in total (manufacturing rent, depreciation, managers’ salaries, repairs, etc.), the per unit cost of a product depends on the number of units manufactured during a given...
What is Construction Work-in-Progress? Definition of Construction Work-in-Progress Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The...
What is the rationale for not reporting plant assets at their liquidation value? I will assume that the plant assets‘ liquidation values are higher than the present carrying values when answering your question. Plant...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
of the areas of accounting in which accounting clerks are employed include: Accounts Receivable Accounts payable Payroll accounting Cost estimation Fixed asset accounting Assist in preparing various reports Salary Range...
spent to acquire or improve a company’s fixed assets. The capital expenditures increase the respective asset accounts which are reported in the noncurrent asset section of the balance sheet entitled property, plant...
What is a fully depreciated asset? Definition of Fully Depreciated Asset A fully depreciated asset is a plant asset or fixed asset where the asset’s book value is equal to its estimated salvage value. In other words,...
to the allocations (which are viewed as arbitrary), consider that changes in volume will affect a product’s cost. For example, if a company’s total fixed costs remain constant but its volume of products decreases by...
minus $40,000 of accumulated depreciation). Net book value or simply book value indicates that $60,000 of the noncurrent asset’s cost has not yet been charged to depreciation expense. Net book value or book value can...
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...
expensing assets having a cost of less than $2,500 instead of setting up fixed asset records and depreciating those assets over their useful lives. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
for investing in future fixed assets as well as arranging for the financing of the projects. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
with the accrual basis of accounting Fixed asset accounting Cost accounting Budgeting and profit planning, and more Common titles for accountants include corporate accountant, chief accountant, controller, assistant...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
and equipment (or) fixed assets This noncurrent section of the balance sheet reports the assets that are used in a business (buildings, equipment, etc.) and the related accumulated depreciation. property, plant and...
of manufacturing overhead costs also allows for the computation and application of several departmental overhead cost rates instead of having a single, plant-wide overhead rate. This is important when there are a...
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
Featured Review
"I am a small business accountant and tax preparer. A lot of my clients are do-it-yourself bookkeepers for their small business. Most of them, if not all, use bookkeeping software to keep track of their business. Although software programs are great at what they do and are easy for the user, the double entry accounting method is still occurring in the background. Accounting concepts and terms are not easily explained to a small business owner who doesn't understand why reports look the way they do. To help them, I always direct them to AccountingCoach to learn the concepts and terms. The tutorials, glossary, and web topics are presented in the best way that anyone can understand accounting. It's the best source on the web!" - Kathleen F.
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: