involves a change in two estimates: the estimated useful life and the estimated salvage value. Changes in estimates are not accounting errors and therefore any previously reported amounts are not changed. Any change in...
involves a change in two estimates: the estimated useful life and the estimated salvage value. Changes in estimates are not accounting errors and therefore any previously reported amounts are not changed. Any change in...
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...
Are LIFO inventory amounts ever written-up to their market value? LIFO inventory amounts will not be written-up, even when the current market value of the inventory is far greater than the amount reported on the balance...
The stockholders’ equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock’s par value. This account is sometimes referred to as the premium...
The stockholders’ equity account that reports the amount paid to a corporation that is in excess of the common stock’s stated value. The stated value of each share issued is recorded in the Common Stock...
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...
What is the rationale for not reporting plant assets at their liquidation value? I will assume that the plant assets‘ liquidation values are higher than the present carrying values when answering your question. Plant...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
The stockholders’ equity account that represents the amount paid to a corporation for its preferred stock that was in excess of the preferred stock’s par value. This account is sometimes referred to as the...
that a corporation's board of directors declares a cash dividend, a current ____________ is created. LIABILITY LAYIITBLI Unscramble LIABILITY IILIYBTLA Unscramble 8. When a small stock (not cash) dividend is...
accounts. The aging lists every customer’s balance and then sorts each customer’s balance according to the amount of time since the sale(s) occurred. The most recent sales are assumed to be fully collectible, but...
A past, historical cost. They are called sunk because a past cost cannot be changed and decisions involve only the present and the future.
One of the first efforts begun in the 1970s by the Financial Accounting Standards Board to articulate and organize into a cohesive framework all of the accounting rules that had been developed in the past. It was hoped...
An estimated income statement for a future period of time that is based on projected or budgeted transactions.
Commitments are items that are not reported as liabilities as of the balance sheet date. Some of these items are reported in the notes to the financial statements. Examples include noncancelable contracts to rent space...
A commitment to purchase a specific number of items in the future at a fixed price. If the agreement is noncancelable, the company must report a loss when the current cost of the items falls below the contracted price.
A current asset account that reports the amount of future rent expense that was paid in advance of the rental period. The amount reported on the balance sheet is the amount that has not yet been used or expired as of the...
A current asset account which contains the amount of investments that can and will be sold in the near future.
A financial ratio that compares a company’s interest expense to the company’s income before interest expense and income taxes. It is an indicator of the likelihood that interest payments will be made in the...
A balance sheet liability account which reports the total amount owed to employees at the balance sheet date for future vacation days as a result of the employees’ past work.
A projection or estimate of the future quantities and selling prices of products and/or services.
This current liability account reports the amount of interest the company owes as of the date of the balance sheet. (Future interest is not recorded as a liability.)
A current asset representing amounts paid in advance for future expenses. As the expenses are used or expire, expense is increased and prepaid expense is decreased.
A balance sheet which is a projection of the amounts at a future date. It should be based on the projected, budgeted transactions.
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
A journal entry that adjusts an amount already recorded on the books of a company because part of the amount pertains to a future accounting period. To learn more, see Explanation of Adjusting Entries.
A check bearing a date in the future. The company receiving such a check should not report the check as cash until the date of the check.
A requirement that the receiving nonprofit organization must return an asset to the donor in the event that some future and uncertain event does or does not occur.
A sorting of a company’s accounts payable by due date.
A current asset account that represents an amount of cash for making small disbursements for postage due, supplies, etc.
A current liability account which reflects the amount of income taxes currently due to the federal, state, and local governments.
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
Money set aside for a specific purpose. An individual’s monthly mortgage payment might include $300 per month for the real estate taxes due at the end of the year. The $300 is said to be put into escrow each...
The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
Receivables other than Accounts Receivable. Examples include amounts due from employees and income tax refunds receivable.
Receivables due from customers. See accounts receivable.
Receivables due from customers. See accounts receivable.
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
receivable is critical for a company to pay its obligations when they are due. The calculation of the accounts receivable turnover ratio is: credit sales for a year divided by the company’s average amount of accounts...
Featured Review
"I have been using the AccountingCoach platform for years now, and I have learned so much. Having a background in health sciences hadn't really afforded me the opportunity to learn as much as I would have liked on financial topics. This is why I use AccountingCoach. I help my husband with the bookkeeping in his business, and AccountingCoach got me started from scratch. I learned new concepts in very easily-digestible lessons and immediately applied what I learned on the platform. I upgraded to PRO to have access to all the additional features, which I do find value in. In managing my very small business, AccountingCoach has helped me learn how to navigate my own books. I don't know where else I would have gotten this education for the price. I am someone who consumes as much information as possible, as often as I can, to have the skills and knowledge to navigate daily life. I'm also the type of person who enjoys structure and organization. Though I'm sure the information is available all over the web, chaotic and directionless, AccountingCoach has given the knowledge I've sought out and presented it in a very organized manner. I love it. I revisit on occasion to freshen up my knowledge and practice. I thoroughly enjoy using AccountingCoach." - A.J.
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: