account must have a credit balance (which is contrary to the debit balances found in asset accounts). The Allowance for Doubtful Accounts is directly related to the asset account entitled Accounts Receivable. Therefore,...
account must have a credit balance (which is contrary to the debit balances found in asset accounts). The Allowance for Doubtful Accounts is directly related to the asset account entitled Accounts Receivable. Therefore,...
sheets reveals that its accounts receivable decreased by $10,000 and its accounts payable increased by $7,000 during the same year. To keep our illustration simple, let’s assume that except for cash, the reported...
with the heading current assets. Current assets are listed in the order in which they are expected to turn to cash. This is known as the order of liquidity. Since cash is the most liquid asset, it is listed first. After...
What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
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...
, when a cash dividend or stock dividend is declared. There are many other situations as well. Here are some specific examples when only the left side of the accounting equation is affected. 1) A customer cannot pay an...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
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...
Temporary investments Accounts receivable Inventory Supplies Prepaid expenses Current Liabilities Current liabilities are the company’s obligations that will come due for payment within one year of the balance...
An account with a balance that is the opposite of the normal balance. For example, Accumulated Depreciation is a contra asset account, because its credit balance is contra to the debit balance for an asset account....
the company immediately, you can record the $100 phone bill by debiting Telephone Expense for $80 and debiting the asset account Receivable from Employees for $20. When you receive the $20 from the employee, you will...
general ledger account Cash (or Cash: Checking Account) with the bank’s information. Prior to issuing a company’s financial statements, it is wise to reconcile every balance sheet account by collecting the...
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
revenues are considered earned when the goods have been shipped or delivered to the customers and the merchandiser has a right to a collectible accounts receivable. (Under accrual accounting it is not necessary to have...
sheet. Here are some of the changes: Owner’s equity or stockholders’ equity will increase by the positive amount of net income Accounts receivable will change by the amount of sales/services provided with...
Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company’s...
statements) at the time that an order is received: The company has not yet earned the revenue The company does not yet have a right to a receivable or other asset The revenues and a receivable will not be earned until...
Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
What is the entry when merchandise has been received but not the vendor's invoice? Definition of Merchandise Received but Not Vendor’s Invoice If a retailer receives merchandise from one of its vendors, but has not...
noncurrent liabilities (or) long-term liabilities These obligations are not due within one year of the balance sheet date. Examples include bonds payable and the mortgage loan payable. noncurrent liabilities (or)...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
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...
, Stockholders' Equity will decrease by an entry to Retained Earnings or to Dividends. No Effect Wrong. 4. The company receives cash from a bank loan. Assets Increase Right! The company's asset account Cash...
Generally, the changes in current assets and current liabilities (other than loans payable) will be reported as cash flows from operating activities, which is the first section of the SCF. Examples (sometimes referred...
is the __________-test ratio. 6. The numerator in the calculation of the receivable turnover ratio is the net credit __________ for the year. 7. The inventory turnover ratio is best computed with the numerator being the...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
Financial Statements Video Training Part 2 Balance sheet: accounts receivable, estimated allowance for doubtful accounts, inventory cost flows (FIFO & LIFO) Must-Watch Video Learn How to Advance Your Accounting and...
Bookkeeping Video Training Part 13 Sales on credit: risk, unsecured accounts receivable, aging to monitor allowance for doubtful accounts, bad debts expense Must-Watch Video Learn How to Advance Your Accounting and...
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
A record in the general ledger that is used to collect and store similar information. For example, a company will have a Cash account in which every transaction involving cash is recorded. A company selling merchandise...
This is an operating expense resulting from making sales on credit and not collecting the customers’ entire accounts receivable balances.
A document issued to a customer by a seller which reduces the seller’s accounts receivable and its net sales. It also reduces the buyer’s accounts payable and net purchases. A document issued by a bank that...
A “book” containing accounts. For example, there is the general ledger that contains the balance sheet and income statement accounts. There is a subsidiary ledger that contains the detailed, customer account...
Assets such as Cash, Temporary Investments, and Accounts Receivable.
Same as the Days Sales in Accounts Receivable
Merchandise that was returned to the seller by a customer. This account is a contra sales account. When merchandise sold on credit is returned, this account is debited and Accounts Receivable is credited.
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