Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
In accounting, what is the meaning of cr.? In accounting, cr. is the abbreviation for credit. In accounting and in bookkeeping, credit or cr. indicates an entry on the right side of a general ledger account. Credit...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services, and 2) manage...
What is the difference between the accounts rent receivable and rent revenue? Definition of Rent Receivable Rent Receivable is the title of the balance sheet asset account which indicates the amount of rent that has been...
How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
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...
Why are accruals needed every month? Reasons for Monthly Accruals Accrual adjusting entries are needed monthly only if a company issues monthly financial statements. Two reasons for the monthly accrual adjusting entries...
What is the consistency principle? Definition of Consistency In accounting, consistency requires that a company’s financial statements follow the same accounting principles, methods, practices and procedures from one...
What is Subchapter S? Subchapter S refers to a section of Chapter 1 of the U.S. Internal Revenue Code. A subchapter S corporation, which is also referred to as an S corporation, is a corporation that does not pay the...
What is Big 4 Accounting? In accounting, the Big 4 refers to the four largest public accounting and auditing firms: Deloitte PricewaterhouseCoopers (PwC Ernst & Young (EY) KPMG These certified public accounting (CPA)...
What is the difference between expense and loss? Definition of Expense An expense is a cost that a company incurs or uses up when it earns revenues. Examples of Expenses A few examples of the many expenses that a company...
What are accrual adjusting entries? Definition of Accrual Adjusting Entries Accrual adjusting entries or simply accruals are one of three types of adjusting entries which are prepared at the end of an accounting period...
What does crossfoot mean? Definition of Crossfoot or Crossfooting Accountants and auditors use the word foot to mean adding one or more columns of numbers. When there are several columns of numbers along with a...
How do you calculate the payroll accrual? Definition of Payroll Accrual The payroll accrual is the amounts a company owes for work done by employees, but the amounts have not yet been recorded in the company’s general...
What is the difference between receivables and accounts receivable? Definition of Accounts Receivables Accounts receivable are usually current assets that result from selling goods or providing services to customers on...
What is the difference between adjusting entries and closing entries? Definition of Adjusting Entries Adjusting entries are made at the end of the accounting period (but prior to preparing the financial statements) in...
What is the difference between a ledger and a trial balance? Definition of a Ledger A ledger is often defined as a book of accounts. Today the ledger and its accounts are likely to be an electronic record or file....
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
What is columnar? Prior to electronic worksheets, accountants had several pads of paper with a varying number of columns (and rows) preprinted on them. The pads of paper were labeled as columnar pads. The preprinted...
What is meant by owner's draws? Definition of Owner’s Draws Owner’s draws are withdrawals of a sole proprietorship’s cash or other assets made by the owner for the owner’s personal use. The account in which the...
What is the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a balance sheet contra asset account that reduces the reported amount of accounts...
What is the difference between a balance sheet of a nonprofit organization and a for-profit business? Definition of Balance Sheet The balance sheet is one of the main financial statements issued organizations. The...
What if a company's Allowance for Doubtful Accounts is understated? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account. The Allowance account’s credit balance is...
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 working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
What is OEM and EOM? OEM is the acronym for original equipment manufacturer. EOM is the acronym for end of month. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
What is the expanded accounting equation? Definition of Expanded Accounting Equation The expanded accounting equation provides more details for the owner’s equity amount shown in the basic accounting equation. The...
When does a negative cash balance appear on the balance sheet? Definition of Negative Cash Balance A negative cash balance results when the cash account in a company’s general ledger has a credit balance. The credit or...
What is cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
How does the aging of accounts receivable determine bad debts expense? Definition of Aging of Accounts Receivable The aging of accounts receivable sorts the amounts that a company is owed (from customers who had...
What does amortization mean? Definition of Amortization In general, the word amortization means to systematically reduce a balance over time. In accounting, amortization is conceptually similar to the depreciation of a...
What are adjusting entries? Definition of Adjusting Entries Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that a company’s financial statements comply with the...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
Is a security deposit a current asset? Definition of Security Deposit A security deposit is often an amount paid by a tenant to a landlord to hold until the tenant moves. The amount of the security deposit is refundable...
What is FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act. FICA consists of the U.S. Social Security payroll tax and the Medicare payroll tax. The FICA payroll tax is withheld from...
Reducing the Need for Accruing Expenses One day I was explaining to the owner of a small business that I would have to accrue for the shipping expenses associated with his company’s sales. Since the shipping company...
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
How should the cost of a yearly subscription for a newspaper be recorded? Definition of Recording a Yearly Subscription Typically, yearly subscriptions are paid in advance or at the start of the subscription period. If...
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