marketing consulting services and is billed $10,000 with terms of 1/10, net 30. If the bill is paid within 10 days, the cost is $9,900 ($10,000 minus the 1% discount of $100). This means that Cash should be...
marketing consulting services and is billed $10,000 with terms of 1/10, net 30. If the bill is paid within 10 days, the cost is $9,900 ($10,000 minus the 1% discount of $100). This means that Cash should be...
Are the goods purchased by a retailer an expense or an asset? Definition of Goods Purchased by a Retailer The goods purchased by a retailer are the products or merchandise that it buys and plans to resell. The goods that...
. This will get the proper amounts on the company’s income statement and balance sheet. The account Interest Expense will begin January with a zero balance, since expenses are temporary accounts that are closed at the...
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the delivery employees have earned during the accounting period indicated in the heading of the...
taxes that are not withheld from employees are expenses of the employer and are liabilities until the amounts are remitted. Examples include the employer’s portion of the FICA tax and unemployment taxes. Join PRO to...
What type of expense is the purchase of propane? Technically, the purchase of propane is not an expense. Depending on the business, the propane is an asset until it is used, resold, or included in a product that is sold....
for uncollectible accounts (or) allowance for bad debts This is the title to the contra account associated with Accounts Receivable. It reports the anticipated amount of the receivables that will not be collected. Mark...
Under the accrual method of accounting, this account reports the amount of holiday pay, vacation pay, and sick day pay that the warehouse employees have earned during the accounting period indicated in the heading of the...
by reading our Accounting Basics (Explanation). 1. Which financial statement reports the revenues and expenses for a period of time such as a year or a month? Balance Sheet Wrong. The balance sheet reports assets,...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
of depreciation expense and repairs and maintenance expense throughout the life of the asset. In other words, in the early years of the asset’s life, when the repairs and maintenance expenses are low, the depreciation...
+ Owner’s Equity Basically, the income statement components have the following effects on owner’s equity: Revenues and gains cause owner’s (or stockholders’) equity to increase Expenses and losses cause...
What is the difference between the current ratio and the acid test ratio? The difference between the current ratio and the acid test ratio (or quick ratio) mainly involves the current assets inventory and prepaid...
What is a single-step income statement? Single-Step Income Statement Definition A single-step income statement arrives at a company’s net income in one step or subtraction: [total revenues and gains] – [total...
What is the accrual method? Definition of Accrual Method The accrual method of accounting reports revenues on the income statement when they are earned even if the customer will pay 30 days later. The accrual method of...
of cash flows. Let’s use the following amounts to illustrate this situation. A company’s income statement for a recent year reported revenues of $2,000,000 and expenses of $2,075,000 for a net loss of $75,000. The...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
See fixed expenses.
See mixed expenses.
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 a deferred asset? Definition of Deferred Asset A deferred asset represents costs that have occurred, but because of certain circumstances the costs will be reported as expenses at a later time. You might consider...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
. Depreciation, depletion and amortization are also described as noncash expenses, since there is no cash outlay in the years that the expense is reported on the income statement. As a result, these expenses are added...
What are out-of-pocket costs? Out-of-pocket costs are those costs or expenses that require a cash payment in the current period or during a project. For example, the wages of the person setting up a machine for a new...
on the Balance Sheet Assume that you own and operate a sole proprietorship. You provided a service to a client and earned revenues of $900 and had no expenses. One of the business assets (cash or accounts receivable)...
Does paying an account payable affect net income? Definition of Paying Accounts Payable Under the accrual basis of accounting, expenses are recorded when they have occurred, not when they are paid. Therefore, if an...
This is a record on an individual job (product, batch) within the job costing system. For items in process this is a subsidiary record to the general ledger account inventory: work-in-process (WIP).
R & D costs. These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed...
General rules upon which more-detailed, specific accounting rules and standards are based. To learn more, see Explanation of Accounting Principles.
A revenue account in a bank’s general ledger that indicates the amounts earned by the bank by servicing its customers’ accounts at the bank.
A term to mean the company’s general ledger or accounting records.
The debit or credit balance that would be expected in a specific account in the general ledger. For example, asset accounts and expense accounts normally have debit balances. Revenues, liabilities, and...
A journal entry to correct an erroneous amount previously entered in the general ledger.
The general ledger account Cash that reports currency, coins, undeposited checks, and the checking accounts of a company. (Could also be a reference to a customer required to pay cash for purchases.)
A listing of the accounts in the general ledger along with each account’s balance in the appropriate debit or credit column. The total of the amounts in the debit column should equal the total of the amounts in the...
A request by the petty cash custodian for a company check in order to return the amount of currency and coins in the petty cash box to the amount shown in the general ledger account.
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