What is inventory change and how is it measured? Definition of Inventory Change Inventory change is the difference between the amount of last period’s ending inventory and the amount of the current period’s ending...
What is inventory change and how is it measured? Definition of Inventory Change Inventory change is the difference between the amount of last period’s ending inventory and the amount of the current period’s ending...
Are payroll withholding taxes an expense or a liability? Definition of Payroll Withholding Taxes Payroll withholding taxes are amounts withheld from employees’ wages and salaries. The amounts withheld are actually the...
What is a rubber check? A rubber check is a check that is not paid (or honored) by the bank on which it is drawn. The reason the check is not paid is the maker’s account had insufficient funds or not sufficient funds...
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
Where do you account for payroll taxes on the income statement? Definition of Payroll Taxes Payroll taxes are based on the wages (salaries, commissions, bonuses, etc.) of a company’s employees and on a self-employed...
What are the disclosures for a manufacturer's inventory? A manufacturer should disclose the following categories of inventory: raw materials, work-in-process, finished goods, manufacturing supplies, and packaging...
What are sundry expenses? Definition of Sundry Expenses In accounting and bookkeeping, sundry expenses are expenses that are small in amount and rare in occurrence. For these rare and insignificant expenses, a company...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
What are some examples of financing activities? Definition of Financing Activities Financing activities often refers to the cash flows from financing activities, which is one of the three main sections of the statement...
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
Our income statement shows wide fluctuations in utilities expense from month to month. I suspect our accounting is not proper. Any suggestions? Under accrual accounting, your income statement should report the amount for...
Does the income statement explain the change in the equity section of a balance sheet? The income statement could explain the change in the equity section of a balance sheet. However, there are likely to be some other...
What is the meaning of arrears? In accounting we use the word arrears in at least two ways. One use involves the omitted dividends on cumulative preferred stock. For example, if a corporation has cumulative preferred...
What is a checking account? Definition of Checking Account A checking account is a bank account in which a company deposits money and can subsequently withdraw the money by writing a check, using a debit card, arranging...
What is a deposit in transit? Definition of Deposit in Transit A company’s deposit in transit is the currency and customers’ checks that have been received and are rightfully reported as cash on the date received,...
What are common-size financial statements? Common-size financial statements present the financial statement amounts as a percentage of a base number. For example, the common-size income statement will report the revenue...
What are the effects of overstating inventory? Definition of Overstating Inventory Overstating inventory means that the reported amount for the cost of a company’s inventory is greater than the actual true cost based...
What is the meaning of debtor? Definition of Debtor A debtor is a person, company, or other entity that owes money. In other words, the debtor has a debt or legal obligation to pay the amount owed. Example of Debtor If...
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
What is meant by nonoperating expenses and losses? Definition of Nonoperating Expenses and Losses Nonoperating expenses are business expenses that are outside of a company’s main or central operations. (Some describe...
What is a T-account? Definition of T-Account A T-account is a visual aid used to depict a general ledger account. The account title is written above the horizontal part of the “T”. On the left-side of the vertical...
Is there a difference between the accounts Purchases and Inventory? Purchases Account Under the Periodic Inventory System The general ledger account Purchases is used to record the purchases of inventory items under the...
What is owner's equity? Definition of Owner’s Equity Owner’s equity is one of the three main sections of a sole proprietorship’s balance sheet and one of the components of the accounting equation: Assets =...
A credit is not a normal balance for what accounts? Definition of Credit Balance A credit balance refers to the balance on the right side of a general ledger account or T-account. Normally, the liability and owner’s...
What is the statement of financial position? Definition of Statement of Financial Position The statement of financial position is another name for the balance sheet. It is one of the main financial statements. The...
What is bookkeeping? Definition of Bookkeeping Bookkeeping includes the recording, storing and retrieving of financial transactions for a business, nonprofit organization, individual, etc. Examples of Bookkeeping Tasks...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
What are the elements of financial statements? Definition of Elements of Financial Statements The elements of financial statements are the classes of items contained in the financial statements. Examples of Elements of...
Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
What is Notes Payable? Definition of Notes Payable In accounting, Notes Payable is a general ledger liability account in which a company records the face amounts of the promissory notes that it has issued. The balance in...
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
What is a customer deposit? Definition of Customer Deposit A customer deposit could be money that a company receives from a customer prior to the company earning it (by providing the customer with goods or services). In...
What is Form 10-K? Definition of Form 10-K Form 10-K is a required annual report filed with the U.S. Securities and Exchange Commission (SEC) by U.S. corporations whose common stock is publicly traded. It is common for a...
Where can I find a sample of a cash flow statement? A cash flow statement or statement of cash flows should be presented with a U.S. corporation’s annual financial statements. If a corporation’s stock is publicly...
What is the advantage of issuing bonds instead of stock? Definition of Bonds Bonds payable are a form of long-term debt, which include a formal agreement to pay interest semiannually and the principal amount at maturity....
Where is the premium or discount on bonds payable presented on the balance sheet? Definition of Premium or Discount on Bonds Payable The premium or discount on bonds payable is the difference between the amount received...
What is book value? Definition of Book Value In accounting, book value refers to the amounts contained in the company’s general ledger accounts (or books). It is important to realize that the book value is not the same...
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