earnings. This explains why state laws likely require corporations to have a credit balance in Retained Earnings before declaring and paying dividends. Practically speaking, the corporation must also have sufficient...
earnings. This explains why state laws likely require corporations to have a credit balance in Retained Earnings before declaring and paying dividends. Practically speaking, the corporation must also have sufficient...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). For a...
Where is a contract with a customer reported on the balance sheet? A contract to perform future services for a customer is not reported on the balance sheet of the company that will be providing the services. For...
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...
withholdings Examples of payments that will be expenses in a future accounting period(s): Payments for construction of a building that will be put into service next year Payments for an exhibit at next year’s trade...
or maturity amount at a specified date some years in the future. The agreement containing the details of the bonds payable is known as the bond indenture. U. S. corporations issue bonds instead of common stock for...
to as financial leverage. Using debt financing allows the existing stockholders to maintain their percentage of ownership, since no new stock is being issued. However, the additional debt adds risk and may result in...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
and distribute to its stockholders, the following corporation information should be considered: Present cash balance Cash needed to finance the business operations (growth, inflation, etc.) Cash needed to finance future...
, and/or Planned amounts that will be spent for future additions to property, plant and equipment When the depreciable assets that are included in capex are put into service, their costs will be depreciated over the...
-in-process, finished goods, manufacturing and packaging supplies Office supplies Prepaid expenses, such as insurance premiums which have not yet expired Advance payments on future purchases Join PRO to Track Progress...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
space and other costs of holding/carrying inventory While inventory is critical to meet demand for the goods, but having too much of the wrong inventory items can result in cash flow problems that may jeopardize...
the future benefit of the cost Examples of Expense Some of the expenses that will be reported on a retailer’s income statement for the month of August include: Cost of goods sold for the August sales. (The date that...
the company’s management to understand the financial impact of its past and future decisions. The distinction between accountant and bookkeeper keeps changing as accounting software and other software evolves. For...
are the future costs and the opportunity costs (neither of which are not in the general ledger and are probably unknown at the time a decision must be made). Join PRO to Track Progress Mark the Question as Read...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Temporary investments Accounts receivable Inventory Supplies Prepaid expenses Current Liabilities Current liabilities are the company’s obligations that will come due for payment within one year of the balance...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
details. The $50,000 is a lump sum payment. Sometimes the term lump sum payment merely indicates a single payment. For example, the maturity value of a bond might be referred to as a lump sum payment in order to...
stockholder or preferred shareholder. Stockholders may receive dividends based on the number of shares of stock they own. Stockholders also hope to see the market value of their shares of stock increase. In short, there...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
An accounting guideline where the U.S. dollar is assumed to be constant (no change in purchasing power) over time. This allows an accountant to add one dollar from a transaction in 2010 to one dollar in 2024 and to show...
A dividend in the form of more shares of stock. A 5% stock dividend means that a stockholder holding 100 shares would receive 5 additional shares of stock. Since all shareholders receive additional shares, each...
a delivery truck with a cost of $100,000 and it is expected to be used for 5 years. If we also assume that the truck will have no salvage value, the company will record depreciation expense of $100,000 over the five...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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...
are referred to as __________. Select... expenses losses 3. Advertising costs and research and development costs are usually __________. Select... deferred to a future period expensed when they occur 4. What is the...
of inventory should include all costs necessary to acquire the items and to get them ready for sale. When inventory items are acquired or produced at varying costs, the company will need to make an assumption on how to...
by smaller depreciation expense and greater taxable income in the later years of the asset’s life. Therefore, a corporation with consistent taxable income will be able to defer some income taxes until the later years...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
) but the actual quantity exceeded the standard quantity due to inefficiencies, the materials usage variance will have to be reported on the income statement as an addition to the standard amount of the Cost of Goods...
to determine the approximate amount of inventory that has been lost due to theft, fire, or other reasons. The gross profit method of estimating ending inventory assumes that the gross profit percentage or the gross...
invoices from suppliers that are to be paid in 30 days are reported in Accounts _______. PAYABLE PEALYAB Unscramble PAYABLE ABEPAYL Unscramble 20. The ______ of accounts receivable sorts the customers' balances...
How do you write off a bad account? Definition of the Write-off of a Bad Account The write-off of a bad account usually refers to eliminating an account receivable due to the customer’s inability to pay the amount...
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