What are wages payable? Definition of Wages Payable Wages payable refers to the wages that a company’s employees have earned, but have not yet been paid. Under the accrual method of accounting, this amount is likely...
What are wages payable? Definition of Wages Payable Wages payable refers to the wages that a company’s employees have earned, but have not yet been paid. Under the accrual method of accounting, this amount is likely...
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...
How does the aging of accounts receivable determine bad debts expense? Definition of Aging of Accounts Receivable The aging of accounts receivable sorts the amounts that a company is owed (from customers who had...
What is OEM and EOM? OEM is the acronym for original equipment manufacturer. EOM is the acronym for end of month. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
What is the difference between notes payable and notes receivable? Definition of Notes Payable and Notes Receivable Notes payable and notes receivable are both associated with a written note that promises to repay the...
share of a corporation’s common stock. Often the purpose is to allow small investors to purchase 100 shares of the corporation’s stock at a more reasonable total cost. Reverse stock splits such as 1-for-10 (which...
What are dividends? In accounting, dividends often refers to the cash dividends that a corporation pays to its stockholders (or shareholders). Dividends are often paid quarterly, but could be paid at other times. For a...
How do you account for a project under construction? Accounting for a Project Under Construction If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
Why isn't the direct write off method of uncollectible accounts receivable the preferred method? Definition of Direct Write Off Method Under the direct write off method of accounting for credit losses pertaining to...
What is IFRS? IFRS is the acronym for International Financial Reporting Standards. IFRS is used throughout the world except in the United States where U.S. GAAP (generally accepted accounting principles) is followed....
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
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...
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...
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
Is the reversal of a previous year's accrued expense permanent? Definition of Reversal of Accrued Expense An accrued expense typically requires an accrual adjusting entry recorded at the end of an accounting year (or any...
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 the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
What is a voided check? A voided check is a check written or partially written but then canceled or deleted by the maker of the check. The notation of “void” is used because checks are prenumbered for control...
What is a checking account? Definition of Checking Account A checking account is a bank account in which a company deposits money and can subsequently withdraw the money by writing a check, using a debit card, arranging...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
Should receipts be recorded using the date the money was received or the date the money was deposited in the bank accounts? Cash receipts should be recorded with the date the money was received. For example, a church...
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...
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 are accrued expenses and when are they recorded? Accrued Expenses Accrued expenses are expenses that have occurred but are not yet recorded in the company’s general ledger. This means these expenses will not...
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...
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
What is lead time in purchasing? In purchasing, lead time is the estimated time between ordering goods and receiving the goods. For instance, if 100 units of Product X are ordered on April 11 and are expected to be...
What is a bank reconciliation? What is a Bank Reconciliation A bank reconciliation is a process performed by a company to ensure that its records (check register, general ledger account, balance sheet, etc.) are correct....
What is an outstanding check? Definition of Outstanding Check An outstanding check is a check that a company has issued and recorded in its general ledger accounts, but the check has not yet cleared the bank account on...
What is the difference between Rent Receivable and Rent Payable? Definition of Rent Receivable Rent Receivable is an asset account in the general ledger of a landlord which reports the amount of rent that has been earned...
How do I determine my payroll tax liabilities? Your payroll tax liabilities will include the following: Federal, state, and local income taxes withheld from employees’ wages, salaries, bonuses, etc. but not yet...
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....
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
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...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
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...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
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