In accounting, what is the meaning of dr.? Definition of Dr. In accounting, dr. is the abbreviation for the Italian term used more than 500 years ago to indicate today’s term debit. In accounting and bookkeeping, debit...
In accounting, what is the meaning of dr.? Definition of Dr. In accounting, dr. is the abbreviation for the Italian term used more than 500 years ago to indicate today’s term debit. In accounting and bookkeeping, debit...
Are salaried employees entitled to overtime pay? Some salaried employees are entitled to overtime pay. The salaried employees entitled to overtime pay are referred to as nonexempt employees. Nonexempt means that the...
Why is prepaid insurance a short term asset? Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums are rarely billed for periods...
What is the meaning of debit? Definition of Debit The term debit is similar to the term used in Italy more than 500 years ago when the double entry accounting system was documented. What you need to know today is that...
If a mortgage payment is due on January 1, should the payment be accrued at December 31? The following answer assumes that the accrual basis of accounting (also known as the accrual method of accounting) is being used…...
What is the difference between stock dividend and cash dividend? Definition of a Stock Dividend A stock dividend is a dividend consisting of additional shares of stock. Assume that before a corporation declares a stock...
What is interest expense? Definition of Interest Expense Interest expense is the cost of borrowing money during a specified period of time. Interest expense is occurring daily, but the interest is likely to be paid...
Should an owner's compensation be recorded as an expense or in the Drawing account? If the enterprise is a sole proprietorship, the owner’s compensation should be debited to the Drawing account. If the enterprise is a...
What is a classified balance sheet? Definition of Classified Balance Sheet A classified balance sheet arranges the amounts from a company’s balance sheet accounts into a format that is useful for the readers. For...
What is a blank check? Definition of Blank Check A blank check often refers to a check that has been signed by an authorized check signer without completing the other information (date, payee, amount). A blank check...
What is a burden rate in inventory? I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead, indirect production costs, and...
Under accrual accounting, how are worker comp premiums handled? Worker comp insurance premiums should be charged to the areas where the related wages and salaries are charged. Let’s assume that the net cost of worker...
What are goods in transit? Definition of Goods in Transit Goods in transit refers to inventory items and other products that have been shipped by a seller, but have not yet reached the purchaser. When goods are in...
What is the difference between a debit and a debit balance? Definition of Debit A debit is an entry on the left side of a T-account. A debit entry is used to record assets, expenses, losses, and owner’s draws in their...
What is the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
What is a journal entry? Definition of a Journal Entry In manual accounting or bookkeeping systems, business transactions are first recorded in a journal…hence the term journal entry. Journal entries that are recorded...
What is the FISH inventory method? FISH is the acronym for first-in, still-here. FISH is an attempt to bring humor to the fact that some items have been sitting in inventory for years. Unlike FIFO and LIFO, which are...
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
What entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
What are the ways to value inventory? Definition of Valuing Inventory Generally, the financial statements of a U.S. company must report its inventory at its historical cost (not at its selling prices). Inventories are to...
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
What is an early payment discount? Definition of Early Payment Discount An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier promptly. The early payment...
Why is a negative cash balance reported as a liability? The following will illustrate why a negative cash balance is reported as a liability instead of being reported as a negative asset amount. Company X writes checks...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
Is it possible for owner's equity to be a negative amount? Definition of Negative Owner’s Equity Negative owner’s equity means the amount of a sole proprietorship’s liabilities exceeds the amount of its assets....
cost (had FIFO been used) and the LIFO cost. Definition of Provision The term provision is sometimes used by corporations when reporting an expense that is an estimated or uncertain amount. Two examples include...
What is the debt ratio? Definition of Debt Ratio The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio. Hence, the formula for the debt ratio is: total liabilities divided by...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
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of the debit balance in Accounts Receivable is unlikely to be collected. A less common example of a contra asset account is Discount on Notes Receivable. The credit balance in this account is amortized or allocated to...
Is there a difference between work-in-process and work-in-progress? It depends on the user of the terms. Definition of Work-in-Process I use the term “work-in-process” to mean a manufacturer’s inventory that is not...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
What is the difference between fixed assets and noncurrent assets? Fixed Assets are Part of Noncurrent Assets Fixed assets are one of several categories of noncurrent assets. Fixed assets are usually reported on the...
What is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
What is the definition of net sales? Definition of Net Sales Net sales is a company’s gross sales of products minus any sales discounts and sales returns and allowances. When a company makes a sale, the general ledger...
Is a money market account a current asset or a fixed asset? A money market account is a current asset unless it is restricted for a long-term purpose. The amount of an unrestricted money market account will likely be...
How do I start a petty cash fund? Definition of Petty Cash Fund A petty cash fund is a small amount of money available to pay small amounts without requiring the processing of a business check. Example of Starting a...
What is a mortgage loan? Definition of Mortgage Loan A mortgage loan is a loan associated with the purchase of real estate, such as a home or buildings used in a business. As part of the loan process, the lender files a...
What is the definition of capital market? Often, capital market refers to the structured market for trading stocks and bonds. Examples are the New York Stock Exchange, the American Stock Exchange, NASDAQ, and the New...
What are byproducts? Byproducts, or by-products, are products with relatively little value that emerge from a common process along with the main products. The main products have significant value and are referred to as...
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