Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
This term is used in several ways. Some use the word interchangeably with revenues. Others use the word to signify a net amount, such as income from operations (revenues minus expenses in the company’s main...
The acronym for earnings before interest, taxes, depreciation, and amortization. This measure is used by some companies as a supplementary disclosure, since EBITDA does not comply with U.S. GAAP (generally accepted...
Usually used in describing fixed costs. We often state that fixed costs will not change as volume changes. However, if volume were to triple, there would likely be more fixed costs as the company will need more space and...
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...
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
A current liability account that reports the amounts owed to the utility companies for electricity, gas, water, phone as of the date of the balance sheet. If a utility bill has not been received, the company will have to...
The amount of interest expense incurred during the time interval shown in the heading of the income statement that pertains to a company’s bonds payable. Bond interest expense also includes the amortization of the...
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
The owner’s equity account that reports the amount invested in the sole proprietorship owned by Tony Mandella plus the cumulative amount of net income minus the cumulative amount of the sole proprietor’s...
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
... Asset Liability Expense 17. A company with a calendar year and calendar months is more likely to need adjusting entries for which group of employees? Select... Hourly employees paid weekly Salaried employees paid on...
for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Normal practice is for the buyer of a bond to pay the quoted price plus any accrued __________. 2. If a...
Payroll Accounting Payroll Accounting Payroll accounting involves the recording of a company’s: Gross wages, salaries, commissions, bonuses, overtime premium, sick pay, holiday pay, and vacation pay that are earned by...
of the goods that were sold during the current period, and the following which also occurred during the current period: salaries earned by the company’s employees, interest expense incurred, commissions earned by...
of the general ledger income statement accounts that had debit balances Next, if the Income Summary has a credit balance, the amount is the company’s net income. The Income Summary will be closed with a debit for that...
What is purchase discounts lost? Definition of Purchase Discounts Lost The account Purchase Discounts Lost is a general ledger account used by a company that records vendors’ invoices using the net method. A debit...
What are operating expenses? Definition of Operating Expenses Operating expenses are the costs that have been used up (expired) as part of a company’s main operating activities during the period shown in the heading of...
Why not use Sales in the Inventory Turnover Ratio? The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover Ratio is Cost of Goods Sold...
of the accounting periods. (Hence, the number of years, partial years, passage of time, etc. are not relevant with the units-of-activity method of depreciation.) Example of Units-of-Activity Depreciation Assume that a...
What is the meaning of base year? In accounting, base year may refer to the year in which a U.S. business had adopted the LIFO cost flow assumption for valuing its inventory and its cost of goods sold. Under the...
Depreciation) The amount that has not yet been depreciated (the book value of the asset) Example of Accumulated Depreciation Let’s assume that at the beginning of the current year a company’s asset account Equipment...
entered as debits must be equal to the amounts entered as credits. Example of a Double-Entry System To illustrate double entry, let’s assume that a company borrows $10,000 from its bank. The company’s Cash account...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
Depreciation However, U.S. companies continue to use the term reserve in regards to the accounting for inventories using the LIFO cost flow method. For example, the company will use a contra inventory account entitled...
What is the difference between cost and price? Definition of Cost and Price In accounting, the term cost can mean the cash or cash equivalent amount a company paid to acquire an asset or the amount of an expense it...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
relatively soon, accountants will usually skip recording the asset. Here are three examples of how the expense might be reported on the company’s income statement. Example 1. A service company purchases $900 of...
done by using a predetermined annual overhead rate. Example of Applied Overhead Let’s assume that a company expects to have $800,000 of overhead costs in the upcoming year. It also expects that it will have its normal...
and utilities, and interest on loans are examples of expenses that are not assigned to the products. Instead, these costs are described as period costs since they are expensed immediately in the accounting period in...
on this in the Internal Revenue Service Publication 946. Examples of Mid-Month Convention Under the mid-month convention, if a company put a warehouse into service on October 6, it is assumed that the warehouse was put...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
the employee's _______ wages. GROSS SROSG Unscramble GROSS GOSRS Unscramble 6. A person who performs a service for a company but is not the company's employee is referred to as an _________________ contractor....
What is the entry for the down payment from a signed contract? Definition of Down Payment on a Contract A down payment on a signed contract means a company has received money in advance of doing the work specified in the...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
be on hand based on the accounting information. Examples of Determining the Cost of Missing Inventory If a company’s accounting records or its inventory system uses the perpetual inventory system (and it is maintained...
of fixed manufacturing overhead costs The amount of the fixed manufacturing overhead costs that were assigned to (or absorbed by) the company’s good output Example of Production Volume Variance Assume that a...
profit might have a variety of definitions. We will assume that net profit means a company’s net sales minus all expenses. The expenses include the cost of goods sold, the selling, general, and administrative...
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