What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
What are term bonds and serial bonds? Term bonds are bonds which mature or come due on a single date. Serial bonds are bonds which do not mature or come due on a single date. Instead, serial bonds have maturity dates...
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
What is the difference between liability and debt? Definition of Liability In accounting and bookkeeping, the term liability refers to a company’s obligation arising from a past transaction. Examples of Liabilities A...
What is the payout ratio? The payout ratio indicates the percentage of a corporation’s earnings which are distributed as cash dividends to its stockholders. Typically, the payout ratio is computed by using the per...
Why does a company prepare a bank reconciliation? Reasons for Preparing a Bank Reconciliation There are several reasons for a company to prepare a bank reconciliation: To safeguard the company’s cash. Performing a bank...
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
What adjustment is needed when a check that was written in a previous month appears on the current month's bank statement? A check written in any previous month but not appearing on previous bank statements, should have...
How is a short term bank loan recorded? Definition of Short Term Bank Loan When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its...
Which accounts normally have debit balances? Definition of Debit Balance In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by...
What are reversing entries and why are they used? Definition of Reversing Entries Reversing entries are made on the first day of an accounting period to remove accrual adjusting entries that were made at the end of the...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
What is the meaning of sundry and sundry debtors? Definition of Sundry Sundry can mean various, miscellaneous, or diverse. Definition of Sundry Debtors Sundry debtors could be referring to a company’s customers who...
What are accrual adjusting entries? Definition of Accrual Adjusting Entries Accrual adjusting entries or simply accruals are one of three types of adjusting entries which are prepared at the end of an accounting period...
What is a contra revenue account? Definition of Contra Revenue Account A contra revenue account is a revenue account that is expected to have a debit balance (instead of the usual credit balance). In other words, its...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
What is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
Is contributed capital a noncurrent asset or a current asset, and is it a debit or credit? Definition of Contributed Capital Contributed capital is one of the major components of a corporation’s stockholders’ equity....
When are expenses credited? Definition of Expenses Credited Normally, the general ledger accounts for expenses are debited and are expected to have debit balances. The reason they are debited is they cause the normal...
What is a common carrier? A common carrier is a business that transports goods for other companies, organizations, or individuals. The common carrier is responsible for any loss associated with the transport of the...
Which items on a bank reconciliation will require a journal entry? Journal Entries for Bank Reconciliation The items on the bank reconciliation that require a journal entry are the items noted as adjustments to books....
What is the difference between par and no par value stock? Definition of Par Value Stock Some states’ laws require or may have required common stock issued by corporations residing in their states to have a par value....
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
Why are expenses debited? Why Expenses Are Debited Expenses cause owner’s equity to decrease. Since owner’s equity’s normal balance is a credit balance, an expense must be recorded as a debit. At the end of the...
Where should a business report cash which is restricted to purchase a long-term asset? The cash which a business has restricted to purchase a long-term asset should be reported on the balance sheet under the asset...
What are sales? Definition of Sales In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc. When a company sells a noncurrent asset that had been used in...
Should a retailer's delivery surcharges be reported as revenues or as other income? I believe that a retailer’s delivery surcharges are a price adjustment and should be reported as operating revenues. The surcharges...
Is Accounts Payable a debit or a credit or both? Definition of an Accounts Payable Credit Since Accounts Payable is a liability account, it should have a credit balance. The credit balance indicates the amount that a...
What is the difference between biweekly and semimonthly payroll? Definition of Biweekly Payroll Biweekly payroll refers to paydays that occur 26 times per year (52 weeks in a year divided by 2 weeks = 26 times per year)....
What is net? In accounting, net usually refers to the combination of positive and negative amounts. For example, the amount of net sales is the combination of the amount of gross sales (a positive amount) and some...
What is a bill payable? Definition of Bill Payable A bill payable is a document which shows the amount owed for goods or services received on credit (meaning not paid at the time that the goods or services were...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
What is a standard cost? Definition of Standard Cost A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the “should be”...
How do you calculate an asset's salvage value? Definition of Asset Salvage Value In accounting, an asset’s salvage value is the estimated amount that a company will receive at the end of a plant asset’s useful life....
What is the employer's Social Security tax rate for 2022 and 2023? Employer’s Social Security Payroll Tax for 2022 The employer’s Social Security payroll tax rate for 2022 (January 1 through December 31, 2022) is the...
What is meant by the term relevance in accounting? Definition of Relevance In accounting, the term relevance could mean one of the following: An amount, disclosure, etc. that will make a difference to the decision maker...
When should costs be expensed and when should costs be capitalized? Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be:...
What is a nonprofit organization? A nonprofit organization is an organization without commercial owners and which addresses the needs of society. Nonprofit organizations are also known as not-for-profits, NFP’s or...
Reconciling the Bank Statement When preparing a bank reconciliation, you may find the following tip to be helpful: “Put it where it ain’t.” My now deceased neighbor (Herb) insisted that I share this tip, which he...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
What is the book value per share of stock? Definition of Book Value per Share of Stock The book value of a corporation is the amount of its stockholders’ equity. Assuming the corporation does not have preferred stock...
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