. For example, a company may arrange with its bank to borrow money as needed but never owe the bank in excess of $500,000. The agreement might specify that interest will be calculated by multiplying the prime rate times...
. For example, a company may arrange with its bank to borrow money as needed but never owe the bank in excess of $500,000. The agreement might specify that interest will be calculated by multiplying the prime rate times...
The average time for a company’s accounts receivable to be collected. See days sales in accounts receivable.
A record of the details to support a general ledger account. The general ledger account is often referred to as the control account. For example, the accounts receivable subsidiary ledger provides the details to support...
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
Usually refers to one of the accounts receivable that was deemed to be uncollectible or worthless and was removed from the general ledger account Accounts Receivable.
receivable Amount Reported as Allowance for Doubtful Accounts The balance reported in the balance sheet account Allowance for Doubtful Accounts is the estimated amount of Accounts Receivable that will not be collected....
How do you write off a bad account? Definition of the Write-off of a Bad Account The write-off of a bad account usually refers to eliminating an account receivable due to the customer’s inability to pay the amount...
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...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average...
Which financial ratios are considered to be efficiency ratios? I consider the efficiency ratios to be the ratios also known as asset turnover ratios, activity ratios, or asset management ratios. These efficiency ratios...
of its goods to the buyer and in return has a current asset known as accounts receivable. One consequence is the seller becomes one of the buyer’s unsecured creditors. This means that the seller has the risk of bad...
What is meant by accounts written off? Definition of Accounts Written Off Accounts written off is likely referring to accounts receivable that a company deemed to be uncollectible and were removed from the general ledger...
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...
or may not become a liability. Unless the liability/loss is remote, if the item is signicant, it must be disclosed. An example of a contingent liability is a company’s guarantee of its key supplier’s bank loan....
with the current assets accounts receivable and inventory. While these two assets are initially recorded at cost, there are occasions when the company will collect less than the cost. When that occurs, the company must...
What is the purpose of subsidiary ledgers? Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable...
as the borrower or debtor and records the amount owed in a liability account such as Notes Payable. The person or organization that has the right to receive the money when the promissory note comes due is known as the...
of the unique services it provided nor does it know the market value. As a result, WSC discounts the future $100,000 by using the interest rate of 20% for two years to arrive at the present value of $69,400. WSC will...
appearing first followed by the income statement accounts. Examples of General Ledger Accounts Some of the more common balance sheet accounts and how they are further arranged in the general ledger include: asset...
sheet account Accounts Receivable. The combination of the credit balance in Allowance for Doubtful Accounts and the debit balance in Accounts Receivable is the net realizable value of the company’s accounts...
What is a provision for discounts allowable? The provision for discounts allowable is likely to be a balance sheet account that serves to reduce the asset account Accounts Receivable. The provision account’s counter...
side of a general ledger account? Select... Debit Credit 14. A sale is made with credit terms that allow the customer to pay in 30 days. Under the accrual method of accounting, which account should be debited at the...
the accrual method of accounting, which account should be credited at the time of the sale? Select... Accounts Receivable Cash Sales 14. When the company receives the money from its customer that was billed in the prior...
+ owner’s __________. 3. The __________-entry system requires that amounts be recorded in at least two accounts for each transaction. 4. When goods are sold on credit, the account that is debited is __________....
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...
An account used in combination with another account. For example, the account Allowance for Doubtful Accounts is used with Accounts Receivable in order to present the net amount of the accounts receivable. The account...
! This is the correct answer. Net Worth Ratio Wrong. This answer is incorrect. Working Capital Wrong. Working capital is current assets MINUS current liabilities. The current ratio is current asset DIVIDED BY current...
balance sheet since it will report accounts receivable and prepaid expenses plus accounts payable, deferred revenues and other liabilities. 2. Under the accrual method of accounting, in which month should a company...
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...
capital change when a $10,000 account receivable is collected? The Total Decreases By $10,000 Wrong. The Total Increases By $10,000 Wrong. The Total Remains The Same Right! Cash increased by $10,000 and Accounts...
Advertising Expense. The accounts for revenues are almost always credited. When a bakery sells its products, it credits Sales. When a bank earns interest on its loans, it credits Loan Interest Revenues. When a company...
within one year The principal portion of a long-term loan that must be paid within one year Wages payable Income taxes payable Interest payable Other accrued expenses payable Deferred revenues and customer deposits Join...
). The interest expense for the month of January will be $1,000 ($100,000 x 1%). In this example, as of December 31 no interest has been paid on the loan that began on December 15. However, the company did incur one-half...
card means that the bank (or other financial institution) is making a loan or providing credit to the cardholder. Usually the cardholder will receive a monthly statement showing the credit card transactions and must...
Is it a requirement for a small business to have a CPA? Generally, a small business is not required to have a CPA or certified public accountant. A CPA would be needed if the small business must have its financial...
of cash flows when it is prepared under the indirect method. The term amortization is also used to indicate the systematic reduction in a loan balance resulting from a predetermined schedule of interest and principal...
but is unpaid should be recorded with a debit to Interest Expense and a credit to the current liability Interest Payable. Example of Recording Unpaid Interest Let’s assume that on December 10, a company made its...
statements, what will be the account debited for $2,000 in August? Cash Wrong. The correct answer is Accounts Receivable. The words 'on account' and 'credit terms' indicate that cash was not...
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