What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
How is working capital defined and measured? Definition of Working Capital Working capital is defined as the amount of a company’s current assets minus the amount of its current liabilities usually as of the final...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
, true amount of cash. Adjustments to the Balance per Bank A tip for listing the adjustments for the bank reconciliation is: “Put it where it isn’t.” For instance, a check that had been written and recorded in the...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
Where do credit card payments get recorded? Definition of Credit Card Payments We define a credit card payment as the amount a company remits to the credit card company for the purchases that occurred by using the credit...
What does arms length transaction mean? Definition of Arms Length Transaction An arms length transaction exists when two independent (unrelated) parties are each attempting to get the best deal possible. Example of Arms...
, a __________ is reported on the income statement. 7. The combination of net income and other comprehensive income is known as __________ income. 8. The __________ basis or method of accounting does a better job of...
, a __________ is reported on the income statement. 7. The combination of net income and other comprehensive income is known as __________ income. 8. The __________ basis or method of accounting does a better job of...
. $500 Wrong. Try another answer. $550 Right! [40 hours X $10] plus [10 hours X $15] = $550 OR [50 hours X $10] plus [10 hours X $5] = $550 Use the following information for Questions 15 – 17: An employee worked the...
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...
Operations of an entire division, subsidiary, or segment of a company where a formal plan exists to eliminate it from the company. (It involves more than pruning a product line of certain models of products.) The...
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
Usually involves a company’s customers remitting amounts to a bank account close to the customers in order for the company to have collected funds sooner. For example, a company with its headquarters in the...
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
How do I record money received for an insurance claim on inventory loss? Definition of Money from Insurance Claim for Inventory Loss Let’s assume that a company has insurance on its inventory and its inventory is...
What is the segregation of duties? Definition of Segregation of Duties The segregation of duties involves dividing a task so that more than one person is involve in the company’s transactions. By segregating duties, it...
What is the return on assets ratio? Definition of Return on Assets Ratio The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average...
What is an unpresented cheque or check and does it require an adjustment to the balance sheet? Definition of Unpresented Cheque or Check An unpresented cheque is a check that a company has written, but the check has not...
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...
about investing in stocks and bonds. A bond is also used to describe a guarantee of another person’s obligation. For example, an insurance company might issue a $500,000 surety bond needed by a company in order to...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
is calculated using this category or classification of assets and liabilities. CURRENT RURNTEC Unscramble CURRENT TUERNRC Unscramble 2. The word pertaining to a company's ability to pay its obligations when due....
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
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...
Why is Rent Expense a debit and Service Revenues a credit? Why Rent Expense is a Debit Rent expense (and any other expense) will reduce a company’s owner’s equity (or stockholders’ equity). Owner’s equity which...
What is relevant range? Definition of Relevant Range In accounting, the term relevant range usually refers to a normal range of volume or normal amount of activity in which the total amount of a company’s fixed costs...
How should the cost of a yearly subscription for a newspaper be recorded? Definition of Recording a Yearly Subscription Typically, yearly subscriptions are paid in advance or at the start of the subscription period. If...
predict and estimate the future costs, but the past costs are otherwise irrelevant to the decision. That is why accountants will refer to a past cost as a sunk cost. Examples of Relevant Costs Assume that a company has...
. As the prepaid amount expires, the company will reduce the asset account Prepaid Insurance with a credit entry and will debit Insurance Expense. (If the company arranges for its insurance premiums to be paid monthly,...
What is the difference between gross profit margin and gross margin? Definition of Gross Profit Gross profit is an amount that is computed as follows: A company’s net Sales minus its cost of goods sold A product’s...
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
What is the meaning of aging? Definition of Aging In accounting, the term aging is often associated with a company’s accounts receivable. Accounts receivable arise when a company provides goods or services and allows...
What is an outstanding deposit? Definition of Outstanding Deposit An outstanding deposit refers to a company’s receipts (cash, checks from customers, etc.) which have been recorded in the company’s general ledger...
What causes an increase in break-even point? Definition of Break-even Point The break-even point is the sales volume or sales revenue that is needed to cover the company’s expenses. In other words, it is the point...
A fee for the printing of checks ordered by a company. Often the amount is deducted automatically from a company’s checking account by the company that printed the checks.
A directive to a company’s bank to not honor (pay) a specific check that the company had written. The company making the request will be charged a fee by the bank for this service.
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