by reading our Accounting Principles (Explanation). 1. The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline? Cost Wrong. The cost...
by reading our Accounting Principles (Explanation). 1. The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline? Cost Wrong. The cost...
What is a contingent asset? Definition of Contingent Asset A contingent asset is a potential asset that is associated with a potential gain. The asset and gain are contingent because they are dependent upon some future...
future is jeopardized. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to re-enter...
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
months A magazine publisher receiving money from a subscriber for magazines for the following year A website design company receiving a client’s down payment for future work A law firm receiving a retainer fee from a...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
What are prepaid expenses? Definition of Prepaid Expenses Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or...
of the chart of accounts: Asset section if the cash was from the sale of another asset or the collection of an asset Liability section if the cash was a deposit for future work to be done Revenue section if the cash was...
about its future pension expense and liabilities. It also means simpler accounting. As a result, more companies are choosing defined contribution pension plans over defined benefit pension plans. Join PRO to Track...
members. In addition to comparing your company’s financial ratios to its industry, you will want to compare your company’s financial ratios to its own past and future financial ratios. Spotting a trend early can be...
The amount of cash received is debited to the company’s Cash account If the cash received is greater than the asset’s book value, a Gain on Sale of a Plant Asset is recorded. If the cash received is less than the...
is the carrying amount or book value of the main account. An adjunct account might be referred to as a valuation account. Example of Adjunct Account Assume that a corporation issued bonds with a maturity value of...
an opportunity cost, or some other amount. A concern with transfer pricing is whether the transfer price will cause a subunit’s manager to take the action that is best for the company as a whole. Example of Transfer...
of inventory and $1,000 of supplies and prepaid expenses. These amounts result in the following: Current ratio is 1.5 to 1 (1.5:1, or simply 1.5). This is the result of dividing $60,000 by $40,000. Quick ratio is 0.6 to...
Income Statement (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. If you have difficulty answering the following questions, learn more about this topic by reading...
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...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Which financial statement is considered to be a “snapshot” of a company’s financial...
by reading our Financial Statements (Explanation). 1. Which accounting method will result in financial statements that report a more complete picture of a corporation’s financial position and a better measure of...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
be deducted if paid within 10 days. 2/10, net 30 This invoice term indicates that the net amount (after any returns or allowances) is due within 30 days. However, 2% can be deducted if paid within 10 days. Mark as...
Financial Statements Video Training Part 4 Balance sheet: property, plant and equipment (accumulated depreciation, book value) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
at the top of the page. 1. A current asset is a company’s resource that is expected to be converted to cash within one year or within the operating cycle, whichever is ____________. Select... longer shorter View...
What is a calendar year? Definition of Calendar Year A calendar year is the 12 consecutive months from January through December. In other words, it is the 365 days (366 days in a leap year) beginning on January 1 and...
on credit and offers an early payment discount expressed as 1/10, net 30. This means that a customer is allowed to deduct 1% of the invoice amount, if payment is made within 10 days (instead of paying the full...
What is a valuation account? Definition of Valuation Account In accounting, a valuation account is usually a balance sheet account that is used in combination with another balance sheet account in order to report the...
, the property, plant and equipment are reported at cost minus the accumulated depreciation (except land). If these assets have increased in value, the fair value is not reported because of the cost principle. Also,...
, unattractive, etc. New technologies that disrupt the way things are done Decline in overall demand for the items Arrival of unique competitors Consequences of Obsolete Inventory When inventory items become obsolete,...
have increased in value, the depreciation and cost of goods sold reported on the income statement will be less than the value of the economic capacity being used up. As a result, the reported net income will be greater...
the cost of $40 for a gross profit of $10. There are some exceptions to reporting inventory at cost. One exception is industries where no sales effort is required and the extensive effort of production has been...
. The landlord requires a security deposit of $1,000. The company debits the long-term asset Security Deposit for $1,000 and credits Cash for $1,000. The landlord debits Cash for $1,000 and credits a liability account...
’ Equity):1. Generally, the higher the ratio of debt to equity, the greater is the risk for the corporation’s creditors and prospective creditors. Example of Debt to Equity Ratio A corporation with $1,200,000 of...
to the amount of current liabilities. Example of Quick Ratio If a company’s cash and cash equivalents + marketable securities + accounts receivable adds up to $1,000,000 and the amount of the company’s current...
, you might see $1,400,000 expressed as $1.4 million or $1.4MM or $1.4mn or $1.4m. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
assume that a company uses the accrual basis of accounting. If the company borrows $100,000 on December 15 and agrees to pay interest on the 15th day of each month at the rate of 1% per month, the interest expense for...
Present value.
The par value of common and preferred stock.
Featured Review
"I came across AccountingCoach some years ago and since then it has been my go-to solution for all and any problems or issues that arise in my day-to-day work. Whenever I come across a situation I have not faced before I sign in, read up on the related data, of which there is plenty, and solve another problem. I think of AccountingCoach as my personal library where I can look up information on any aspect of my business. My clients are always impressed with the results I provide. Thank you AccountingCoach." - Joseph C.
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: