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 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 is double-entry bookkeeping? Definition of Double-Entry Bookkeeping Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least...
, the company should issue a replacement check for $124 and send it to the payee. The replacement check for $124 should be credited to the company’s general ledger Cash account and also debited to the same Cash account...
-term or noncurrent liability. Example of a Note Payable If a company borrows money from its bank, the bank will require the company’s officers to sign a formal loan agreement before the bank provides the money. The...
, a company sells one of its machines that is no longer used for $3,000. Depreciation was last recorded on December 31. Also assume that the depreciation expense is $400 per month and the general ledger shows the...
What is Notes Payable? Definition of Notes Payable In accounting, Notes Payable is a general ledger liability account in which a company records the face amounts of the promissory notes that it has issued. The balance in...
in the general and subsidiary ledgers Preparing an unadjusted trial balance and perhaps preparing a worksheet Determining and recording adjusting entries Preparing an adjusted trial balance Preparing the financial...
in a general ledger intangible asset account. If a company designs and registers its trademark, the amount recorded is limited to its cost. Costs incurred to defend a trademark are also recorded in the trademark...
for both the payee and for the person writing the check. A check returned as not sufficient funds could be an indication that the financial condition of the maker of the check may be suspect. Example of Not Sufficient...
statement, statement of earnings). Rather, the equipment’s cost will be reported in the general ledger account Equipment, which is reported on the balance sheet under the classification Property, plant and equipment....
which is lower than the market interest rate for similar bonds. The difference between the amount received and the face or maturity amount is recorded in the corporation’s general ledger contra liability account...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
What is the purpose of the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts or Allowance for Uncollectible Accounts is a general ledger contra account...
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...
If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance? An expense is a temporary account which reduces owner’s equity or stockholders’ equity. The decrease...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
What is the difference between a budget and a standard? Definition of a Budget In business and other organizations, a budget often refers to a department’s or a company’s projected revenues, costs, or expenses....
, the entry to record the stock dividend will be a debit of $250,000 to Retained Earnings and a credit to a paid-in capital account such as Common Stock. It is important to note that dividends are not expenses and...
at its cost of $15,000 Report the inventory at its net realizable value (NRV) of $12,000. (NRV is equal to the estimated sales value of $14,000 minus $2,000 of expenses necessary to get the goods sold for $14,000.) The...
, withdraws $2,000 each month for the owner’s household expenses. The company’s entry to record each month’s draws will be: A debit to R. Smith, Drawing (an owner’s equity account with a debit balance) A credit...
in accounts receivable, inventory, accounts payable, and most other current assets and current liabilities. The direct method for reporting the cash from operating activities lists the following: the amounts collected...
Adding the increase in accrued expenses payable Example of the Direct Method of SCF When the direct method of presenting a corporation’s cash flows from operating activities is used, the amount of net income is not...
, the $850 of revenues minus the related expenses results in the amount of net income. Effect from Collecting an Account Receivable Assume that on January 8, HRS receives the $850 from the customer whose furnace was...
, and prepaid expenses. Evaluating Liquidity Liquidity depends on 1) the speed at which the assets should be turning to cash, or 2) the assets’ nearness to cash. For example, some temporary investments are marketable...
and an industrial division to more effectively market the company’s products. Each division’s manager is responsible for sales and expenses. However, if the company’s executive team makes all of the investment...
of $250, but the bill will be paid 10 days later. Since owner’s equity is reduced by expenses (and is increased by revenues), the bookkeeping equation will show the following: Assets of $900 = Liabilities of $250 +...
. As of November 30 none of the $2,400 cost has expired and the entire $2,400 will be reported on the balance sheet as Prepaid Insurance or Prepaid Expenses. On December 31, an adjusting entry will debit Insurance...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
If repairs expense was budgeted to be $50,000 but the actual repairs expense ends up being $63,000, the $13,000 variance is unfavorable because having more actual expenses than were budgeted was not good for the...
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...
, sheltered) because the loss was also deductible on the company’s income tax return. net income. Revenues and gains minus expenses and losses. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
as a current liability such as Accrued Expenses Payable. On the corporation’s income statements, the interest that occurred (whether paid or not paid) during the period of the income statement will be reported as...
, if supplies expense was budgeted to be $30,000 but the actual supplies expense ends up being $28,000, the $2,000 variance is favorable because having fewer expenses than were budgeted was good for the company’s...
What are the required financial statements? The required financial statements for U.S. business corporations are: Statement of income. This financial statement is also known as the statement of operations, statement of...
to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
be reported. The negative net income occurs when the current year’s revenues are less than the current year’s expenses. If the cumulative earnings minus the cumulative dividends declared result in a negative...
as prepaid expenses. As the prepaid amount expires, the balance in Prepaid Insurance is reduced by a credit to Prepaid Insurance and a debit to Insurance Expense. This is done with an adjusting entry at the end of each...
by the company within one year of the balance sheet date. An example is a retailer’s unredeemed gift cards. Accrued compensation which includes a company’s obligations related to employees working for the company....
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
liability account such as Accrued Expenses and Liabilities. To learn more about the various aspects of accounts payable, see our Explanation, Quiz, Q&A, and more. Join PRO to Track Progress Mark the Question as Read...
Featured Review
"I am one exam short of finishing a different bookkeeping course. It is a very good course but AccountingCoach PRO is so much better. For example, the Cash Flow Statement is explained in such great detail and tests you on your understanding thoroughly. Nothing is left unexplained. The thoroughness of the course is unbelievable. This gives me a lot more confidence when dealing with issues that will crop up. And like a good reference/textbook, you can always go back and check on anything you may not be sure of. This is a lifetime resource. Highly recommended." - Rob H.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: