funds. Mark as wrong Mark as right internal control This term refers to the procedures followed in order to safeguard an organization’s assets. An example is segregating duties so that the bank reconciliation is done...
funds. Mark as wrong Mark as right internal control This term refers to the procedures followed in order to safeguard an organization’s assets. An example is segregating duties so that the bank reconciliation is done...
similar to the sole proprietor’s Drawing account and Capital account which are part of owner’s equity. Both the Dividends account and the Drawing account are temporary balance sheet accounts since they are closed at...
. In order for a company to avoid losses, it is important that the stock of goods in all locations (retail display area, warehouses, factory, etc.) be rotated. When the grocery store rotates its stock, the units are...
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...
What is a revenue expenditure? Definition of Revenue Expenditure A revenue expenditure is a cost that will be an expense in the accounting period when the expenditure takes place. Revenue expenditures are often discussed...
What is a credit memo? Definition of Credit Memo One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. Another type of credit memo, or...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to...
be the case under the allowance method. [The Internal Revenue Service requires the direct write off method in order to prevent taxpayers from claiming a bad debts expenses based on an anticipated potential loss.] Join...
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...
to the health insurance company. Then in account 4211 they can see the portion of the cost that was paid by the employees. The company’s income statement will report the combination of the amounts in accounts 4210 and...
outflows for each option. Since these cash flows will occur at different times, you must “discount” the future cash flows to a present value. (This is necessary in order to recognize the time value of money.) The...
can be converted to cash much faster than inventory. The nature of the company’s sales and how customers pay. If a company has very consistent sales via the Internet and its customers pay with credit cards at the time...
= the cost of goods sold of $440,000. When there is inflation, the retailer must also elect a cost flow assumption in order to determine the cost of the ending inventory, which of course is a factor in the calculation...
record the $9 cash discount with a debit to the account Sales Discounts. The buyer will record the $9 savings as a credit to Purchase Discounts or as a reduction to the cost recorded in inventory. My dentist offers a 5%...
. The payout ratio policy should reflect the needs of the corporation as well as the interests of the stockholders. For instance, a startup corporation will likely have a payout ratio of 0%, since 1) the corporation will...
these are recorded in accounts such as Purchases, Purchases Returns and Allowances, Purchases Discounts, etc. Must be adjusted at the end of the accounting year in order to report the costs actually in inventory...
some use Sales because the Cost of Goods Sold number is not readily available for every company. In order to have comparability with all companies, they may have opted to use Sales.) Join PRO to Track Progress Mark the...
. Hence, both presentations show the cost of goods sold of $990. Recap Again, inventory is a current asset that is reported on the balance sheet. The change in inventory is used to adjust the amount of purchases in order...
its owner (as would be the case with a corporation). However, the sole proprietor may be able to register as a limited liability company in order to limit his or her personal liability. You should seek professional...
What is a balance sheet and why is it prepared? Definition of Balance Sheet The balance sheet is prepared in order to report an organization’s financial position at the end of an accounting period, such as midnight on...
run smoothly with the same amount of monthly fixed costs, which on average are approximately $200,000 per month for the cost of supervisors, rent, depreciation, and other fixed costs. However, if the manufacturer’s...
of the sale, the company can experience a temporary or even permanent cash flow problem. In order for the company to minimize these potential problems, a company is wise to routinely review an aging of accounts...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
not been previously entered into the accounts, there will be many debits in order to record each of the many credit card purchases/transactions into the company’s appropriate general ledger account(s). Assuming...
of the sale. In order to know the asset’s book value at the time of the sale, the depreciation expense for the asset must be recorded right up to the date that the asset is sold. If the cash received is greater than...
period in order to report the amount of its ending inventory for its balance sheet and the cost of goods sold for its income statement. Computing the Inventory Amount Under the Periodic Inventory Method At the end of an...
times Mary should have some combination of cash and petty cash vouchers (receipts) that are equal to $100. Next, let’s assume that there is only $20.00 in cash remaining and Mary realizes that $20 is not sufficient....
and to credit Sales $60,000. We also knew that the beef would shrink approximately 800 pounds as it traveled in the refrigerated truck and that the customer would deduct $1,200 (800 pounds X $1.50) when the customer...
invoices. MATCH MCTAH Unscramble MATCH CMATH Unscramble 4. Vendor invoices for repairs and maintenance are likely debited to this type of account. EXPENSE EPXSNEE Unscramble EXPENSE XENEEPS Unscramble 5. This type of...
low. There can also be differences within the same industry. For example, one computer company might assemble and ship computers within hours of receiving the order via its website. Its inventory turnover will be off...
to the financial statements. These notes are needed in order to disclose additional information about items that are reported or are not reported in the financial statements. You can see examples of the required...
. Accounting for Office Supplies The cost of office supplies on hand at the end of an accounting period should be the balance in a current asset account such as Supplies or Supplies on Hand. The cost of the office...
prepare a balance sheet as of the end of each day, you will need to make daily adjusting entries in order for the balance sheet to be meaningful. For example, each day more electricity is used and therefore each day...
involving: Operating revenues Operating expenses Non-operating revenues and gains Non-operating expenses and losses Large companies may have thousands of income statement accounts in order to budget and report revenues...
shares of common stock the number of issued and outstanding shares will increase. This increase will cause the previous stockholders’ ownership percentage to be reduced. Definition of Debt Financing Debt financing...
of the balance sheet date. Current portion of long-term debt which includes the principal payments of a mortgage loan or other long-term loans that must be paid within one year of the date of the balance sheet. There is...
corporations may have negative retained earnings, which are reported as a deficit. State laws require corporations to have a positive amount of retained earnings in order to pay cash dividends. It is important to note...
Why are the amounts on the financial statements rounded to thousands or millions? Definition of Rounding Amounts on Financial Statements Rounding the amounts on a company’s financial statements means dropping the less...
or will create a current liability in order to pay the bondholders when the bonds mature. Note that the bonds maturing within one year of the balance sheet date can continue being reported as a long-term (noncurrent)...
underlying accounting principles, there are various characteristics that also guide accountants. Some of the characteristics include objectivity, conservatism, materiality, cost/benefit, comparability, relevance,...
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