. Perhaps a U.S. manufacturer using LIFO will deliberately reduce its inventory quantities in low profit years in order to liquidate the old LIFO layers containing low unit costs. Another manufacturer might increase its...
. Perhaps a U.S. manufacturer using LIFO will deliberately reduce its inventory quantities in low profit years in order to liquidate the old LIFO layers containing low unit costs. Another manufacturer might increase its...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
What is the difference between stockholder and shareholder? Definition of Stockholder and Shareholder The term stockholder or shareholder typically describes an investor who own shares of a corporation’s common stock....
How do I calculate depreciation using the sum of the years' digits? Definition of the Sum-of-the-Years’-Digits Depreciation The sum-of-the-years’-digits depreciation (SYD depreciation) is one method for calculating...
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
What is an unpresented cheque or check and does it require an adjustment to the balance sheet? Definition of Unpresented Cheque or Check An unpresented cheque is a check that a company has written, but the check has not...
How do you record an asset that was partially financed? Example of Recording an Asset that was Partially Financed Assume that your company purchased a car for $10,000 by paying cash of $4,000 and signing a promissory...
Why are expenses debited? Why Expenses Are Debited Expenses cause owner’s equity to decrease. Since owner’s equity’s normal balance is a credit balance, an expense must be recorded as a debit. At the end of the...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
What is an imprest system of petty cash? Definition of Petty Cash Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. The amount of petty cash (also...
What causes a reduction in Accumulated Depreciation? Definition of Accumulated Depreciation Accumulated Depreciation is a general ledger contra asset account associated with a company’s property, plant and equipment....
How do the responsibilities of a bookkeeper differ from those of an accountant? I see a bookkeeper’s responsibilities as getting the business transactions into the company’s general ledger. This involves a tremendous...
Why is a product that sells for $50 reported in inventory at its cost of $40? Generally, items in inventory are valued at their cost—not their selling prices—because of the cost principle. Another reason for not...
What is obsolete inventory? Definition of Obsolete Inventory Obsolete inventory refers to products that a company had purchased or produced which cannot be sold. The obsolete items may be the result of one or more of the...
What is accounts payable? Definition of Accounts Payable Accounts payable involves the amounts owed by a company to its suppliers (vendors) for goods or services the company received on credit. Accounts payable is also...
selling price). Therefore, the $2 markup divided by the product’s cost of $8 results in a markup that is 25% of cost. Thus, if a retailer wants its income statement to show a gross profit that is 20% of sales, the...
What is the difference between a deferred expense and a prepaid expense? Definition of Deferred Expense and Prepaid Expense Deferred expense and prepaid expense both refer to a payment that was made, but due to the...
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...
What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when 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 the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
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...
Why is there a large difference between share value and stockholders' equity? There can be many reasons why the market value of a corporation’s stock is much greater than the amount of stockholders’ equity reported...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
Kindly illustrate various depreciation methods. Definition of Depreciation Depreciation is the systematic allocation of the cost of an asset to Depreciation Expenses over the asset’s useful life. If an asset will have...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
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 is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
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 the bookkeeping equation? Definition of Bookkeeping Equation The bookkeeping equation (or accounting equation) is similar to the structure of the balance sheet: For a sole proprietorship: Assets = Liabilities +...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
What is a certificate of deposit? Definition of Certificate of Deposit A certificate of deposit, also referred to as a CD, is a time deposit at a bank, credit union, or other financial institution. A certificate of...
What is net sales? Definition of Net Sales Under the accrual basis of accounting, net sales is the total amount of goods shipped/delivered to customers during a specified period of time minus any early payment discounts...
What is premium on bonds payable? Definition of Premium on Bonds Payable Premium on bonds payable (or bond premium) occurs when bonds payable are issued for an amount greater than their face or maturity amount. This is...
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
Why will some asset accounts have a credit balance? Definition of Asset Account Balances In accounting, asset accounts normally have debit balances. That is, the general ledger accounts for assets typically have their...
What is workers' compensation insurance? Workers’ compensation insurance is likely to be an insurance policy obtained by a company to cover the medical costs and lost wages for its employees’ work-related injuries...
What is the book value per share of stock? Definition of Book Value per Share of Stock The book value of a corporation is the amount of its stockholders’ equity. Assuming the corporation does not have preferred stock...
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