will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
number will begin with the digit “1”. Liability accounts will begin with the digit “2”. Operating revenue accounts will begin with the digit “3”, etc. Operating expenses will use accounts beginning with...
of an account. When an account balance is on the right side of an account, we say the account has a credit balance. A credit entry in an asset account will reduce the account’s usual debit balance. A credit entry in...
be sold without a sales effort. Until that effort is made and an item is actually sold, the company cannot report the $10 increase from $40 to $50. This is referred to as the revenue recognition principle. In other...
’ equity usually have credit balances. When a company provides services for cash, its asset Cash is increased by a debit and its owner’s equity is increased by a credit. The credit is initially recorded in a revenue...
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.
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. When a company prepares an adjusting entry to accrue an expense, which type of account is...
will be __________ to the account Delivery Trucks. Select... debited credited 8. The account Accumulated Depreciation will usually have a __________ balance. Select... debit credit 9. The account Interest Expense is...
should the discount on notes receivable be reported as interest revenue? When The Note Is Received Wrong. This would violate the revenue recognition principle. Over The Life Of The Note Right! When The Note Matures...
amounts. 6. Under the accrual basis of accounting, when should the discount on notes receivable should be reported as interest revenue? When The Note Is Received Wrong. This would violate the revenue recognition...
or the left side of a T-account. Example of Dr. Typically, the general ledger accounts for assets and expenses will have debit (dr.) balances and the balances in the asset accounts will be increased with debit amounts....
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
Where can I get official information for federal payroll taxes? For official information on federal payroll taxes we recommend the Internal Revenue Service Publication 15 which is known by two names: Circular E and...
This is an owner’s equity account. The balance in this account reflects the owner’s investment in this sole proprietorship plus the net income and minus the owner’s draws since the company began. (The...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
The owner’s equity account that contains the amount invested in the sole proprietorship by Matt Jones plus the net income since the company began minus the draws made by Matt Jones since the company began. The...
The revenue classification used by nonprofit organizations to account for the amounts received as donations. It is also an expense classification for the donations made to another nonprofit organization. Contributions...
The owner’s equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The...
A measurement of net income arrived at by comparing the amount of total equity at the end of a period to the amount of total equity at the beginning of the period. For example, if Al Capone had $5 million of equity at...
A gain that occurs by holding an asset. For example, if a company bought land for $20,000 many years ago and today the company continues to hold the land and its value is now $175,000, the company has a holding gain of...
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...
so that the readers of the financial statements can make informed decisions. Monetary Unit Wrong. In the U.S. the monetary unit is associated with the reporting of all items in U. S. dollars and that the U. S....
on January 3. On December 28 the company will debit Cash for $5,000 and will credit a liability account, such as Customer Deposits (or Unearned Revenues or Deferred Revenues) for $5,000. No revenue is reported in...
accounts, which consists of asset, liability, and owner’s (stockholders’) equity accounts Income statement accounts, which consist of revenue, expense, gain, and loss accounts Examples of Accounts Affected by...
are decreased with a ________. DEBIT EBITD Unscramble DEBIT ITBED Unscramble 2. A credit will increase the balance in a _________ account. REVENUE NEREVEU Unscramble REVENUE EUVEENR Unscramble 3. Credits are entered on...
and store the transaction amounts involving revenues and expenses. At any point, the balances in the revenue and expense accounts can be moved to the owner’s equity account. Since revenues cause owner’s equity to...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
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.
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
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...
This is the left side of an account and also the normal balance for asset, expense, and loss accounts. Mark as wrong Mark as right credit (or) credit balance This is the right side of an account and also the normal...
. If a company grants an early payment discount, the amount of the discount is debited to the contra revenue account Sales Discounts. Similarly, if a company gives a customer a sales allowance or accepts a return of...
What is Subchapter S? Subchapter S refers to a section of Chapter 1 of the U.S. Internal Revenue Code. A subchapter S corporation, which is also referred to as an S corporation, is a corporation that does not pay the...
A company’s original sales invoice amounts are the source for the company’s gross sales. These amounts are recorded as credit entries in the general ledger account Sales. Any sales returns, sales allowances, and...
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