and have debit balances Revenue accounts generally have credit entries and have credit balances Assets generally have both debit and credit entries, but usually have debit balances Liabilities generally have debit and...
and have debit balances Revenue accounts generally have credit entries and have credit balances Assets generally have both debit and credit entries, but usually have debit balances Liabilities generally have debit and...
that are recorded in income statement accounts. This allows the balance sheet account Owner’s Capital (or Retained Earnings) to avoid having all of the thousands or millions of revenue and expense transactions from...
to the financial statements is usually a summary of the company’s significant accounting policies for the use of estimates, revenue recognition, inventories, property and equipment, goodwill and other intangible...
on this in the Internal Revenue Service Publication 946. Examples of Mid-Month Convention Under the mid-month convention, if a company put a warehouse into service on October 6, it is assumed that the warehouse was put...
of the debit balance in Accounts Receivable is unlikely to be collected. A less common example of a contra asset account is Discount on Notes Receivable. The credit balance in this account is amortized or allocated 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...
profits. Unfavorable Revenue Budget If a company has budgeted its revenues to be $280,000 and the actual revenues end up being $271,000, the company will have an unfavorable variance of $9,000. The variance is...
that the amount will be collected, the landlord should report: Rent Revenue (or Rental Income) during the period of time that the space was occupied but the rent was not received from the tenant, and A current asset...
and will not be liquidating. If your company bought the land for possible expansion, its cost is more relevant than the amount the company could get if it were liquidating. After all your company is not liquidating. The...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
is not relevant. The revenue recognition principle prohibits a company from showing a gain from merely holding a plant asset. What would you credit if you increased the plant asset amount? Those four accounting...
of accounting (generally accepted accounting principles), while the employee payroll records for the Internal Revenue Service (IRS) requires the cash method of accounting. Example of the Corporation’s Wages Expense...
is interest income to be reported during the 365 days that the company waits for the $11,000. Importance of the Time Value of Money in Accounting The time value of money is important in accounting because of the...
are: Economic Entity Assumption Going Concern Assumption Time Period Assumption Monetary Unit Assumption Cost Principle (or Measurement Principle) Matching Principle (or Expense Recognition Principle) Revenue...
the accounting period.] The amount that the employer reports to the Internal Revenue Service on employee’s Form W-2 Wage and Tax Statement is the amount of the gross wages that were paid to the employee during the...
profits. Favorable Revenue Variance If a company had budgeted its revenues to be $200,000 and the actual revenues end up being $208,000, the company will have a favorable variance of $8,000. The variance is favorable...
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...
the systematic allocation of an asset or liability amount from the balance sheet to expense (or revenue) on the income statement. Here are a few examples: The debit balance in the contra liability account Discount of...
Accounting Principles The basic underlying accounting principles consist of the following: Economic entity assumption Going concern assumption Time period assumption Monetary unit assumption Cost principle or...
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
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...
days. cash discount (or) early payment discount (or) purchase discount This discount of 1% or 2% is offered by some vendors if their invoices are paid within 10 days instead of 30 days. Mark as wrong Mark as right Form...
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...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
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...
amount. Loss Wrong. To have a loss the proceeds would have to be less than the carrying amount. Revenue Wrong. Revenues involve the main operations of the company... not with the disposal of long-term assets. 5. On...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
, the corporation’s assets decrease and its stockholders’ equity decreases. Since a corporation will have thousands of transactions involving revenues and expenses, it is useful to have: Separate accounts for every...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
will normally have debit balances. Liability Wrong. Equity Wrong. Revenue Wrong. Expense Wrong. 5. What type of entry will decrease the normal balances of the general ledger accounts Interest Receivable and Fees...
is the __________ chart of accounts. 6. When a check is written, a cash account should be __________. Debited Wrong. Credited Right! 7. Liability accounts will normally have __________ balances. Debit Wrong. Credit...
statement. (The cost of goods sold is likely the largest operating expense and it is being matched to the related sales revenue to arrive at a company’s gross profit.) The cost of the items that are not yet sold are...
of the amount must be reported as 1) revenue in a future period, or 2) expense in a future period. The deferral adjusting entry makes certain that the correct amounts will be reported on a company’s balance sheets and...
on the estimated salvage value) is divided by the estimated years of useful life to arrive at a consistent annual amount to be debited to Depreciation Expense and is credited to Accumulated Depreciation. This method is...
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