Definition of a Leasehold Improvement A leasehold improvement is a permanent change to the property that a company (lessee/tenant) is leasing from the owner (lessor). The amount spent by the lessee/tenant is...
Definition of a Leasehold Improvement A leasehold improvement is a permanent change to the property that a company (lessee/tenant) is leasing from the owner (lessor). The amount spent by the lessee/tenant is...
, and the company’s required profit. Assume that the final amount is $240,000. The customer wants the house, but believes there is a little “wiggle room” in the $240,000. The company and the customer go back and...
of Accounts Payable. If a company owes for goods and services but the amounts are not yet recorded in Accounts Payable as of the end of each accounting period, the amount must be recorded with an adjusting entry. The...
the $10,000 liability and causes a $10,000 credit balance in Interest Expense. The negative amount in Interest Expense will disappear when the actual interest expense is recorded in January. Join PRO to Track Progress...
What is the difference between a cost and an expense? Definitions of Cost and Expense Some people use cost interchangeably with expense. However, we use the term cost to mean the amount spent to purchase an item, a...
or maturity amount at a specified date some years in the future. The agreement containing the details of the bonds payable is known as the bond indenture. U. S. corporations issue bonds instead of common stock for...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
of interest that will be received every six months for 5 years to its present value and 2) the $100,000 maturity amount that will be received at the end of 5 years. These cash amounts are discounted by the market...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
the payee $124, the company should contact the the payee to cash the check. (If the check is not cashed within a certain number of years, the company will have to remit the amount of the uncashed check to its state...
Why does a company debit Purchases instead of Inventory? Definition of Purchases and Inventory When a company uses the periodic inventory system the amount of the company’s inventory is determined by a physical count...
could be less than the cost of not filing a customer’s order on time or having to stop its production line. Example of Safety Stock Assume that a company uses the economic order quantity (EOQ) model to determine the...
), and the targeted or required interest rate. Example of the Effective Interest Rate Assume that a corporation issues a $1,000 bond with a stated, contractual, face, or nominal interest rate of 5%. This means that the...
: Sales for the year $800,000; Cost of Goods Sold for the year $600,000; Inventory (average amount at cost during the year) $200,000. Inventory Turnover Ratio = $600,000 divided by $200,000 = 3 times. On average the...
The composition of the current assets is also an important consideration. If the current assets are predominantly in cash, marketable securities, and collectible accounts receivable, that is likely to provide more...
amount is reported as a liability. After the services are provided, an entry is needed to reduce the liability and to report the revenues. Note that a common characteristic of every adjusting entry will involve at least...
. Definition of Expenditure An expenditure is a payment or disbursement. The expenditure may be for the purchase of an asset, a reduction of a liability, a distribution to the owners, or it could be payment in the same...
revenues with a limited amount of expenses. In short, the financial statements provide only some of the information needed when attempting to determine the value of a business. Join PRO to Track Progress Mark the...
Where do credit card payments get recorded? Definition of Credit Card Payments We define a credit card payment as the amount a company remits to the credit card company for the purchases that occurred by using the credit...
the required amount of college credits, many students enroll in a CPA Review course just prior to sitting for the CPA Exam. Within AccountingCoach.com’s Accounting Career Center we provide othe assistance and links...
. On January 31, the date the machine is sold, the company must record January’s depreciation. This entry debits $400 to Depreciation Expense and credits $400 to Accumulated Depreciation. Also on January 31, the...
How are dividends paid when there are dividends in arrears? Definition of Dividends in Arrears Dividends in arrears exist when a corporation has: Cumulative preferred stock Omitted past dividends on the cumulative...
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...
to increase on January 1, 2020 to $684 per week. For a full-year employee, this means the current annual amount of $23,660 ($455 X 52 weeks) will become $35,568. You should refer to both the U.S. Department of Labor...
is that the amount is objective, unbiased, verifiable, and therefore easily audited. The reason is that there will be lots of documentation such as contracts, invoices, payments, transfer taxes, and so on. On the other...
has not earned any of the contract amount and therefore does not have a right or a receivable to the $20,000 as of December 31. Similarly, Company Jay’s income statement for December and its December 31 owner’s...
What is the advantage of issuing bonds instead of stock? Definition of Bonds Bonds payable are a form of long-term debt, which include a formal agreement to pay interest semiannually and the principal amount at maturity....
is debited under the allowance method. The use of Allowance for Doubtful Accounts allows us to see in Accounts Receivable the total amount that the company has a right to collect from its credit customers. The credit...
Discount The company selling the product (and the buyer of the product) will record the transaction at the amount after the trade discount is subtracted. For example, when goods with list prices totaling $1,000 are sold...
the average amount of inventory throughout the entire year since using only the end-of-the-year amounts may result in a much lower average. Example of Inventory Turnover Ratio To illustrate the inventory turnover ratio,...
by the employer, the amount is based on each employee’s wages, salary, commissions, etc. Often the FUTA tax ends up being 0.6% (6% minus a credit of 5.4%) of the first $7,000 per year of each employee’s wages,...
approach is to compare the real estate’s total cost of $220,000 to the total appraisal amount of $250,000. This shows that the total cost is 88% ($220,000/$250,000) of the total market value. Using this approach...
, 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...
Which accounts normally have debit balances? Definition of Debit Balance In accounting, a debit balance refers to a general ledger account balance that is on the left side of the account. This is often illustrated by...
account and credits the owner’s drawing account. Please note that the owner’s drawing account is not an expense and as a result it does not get closed to the Income Summary account nor will the amount appear on the...
. Manual accounting systems will likely use special journals for recording routine transactions. Therefore, the general journal will have a limited amount of entries. In the general journal you must enter the account(s)...
will never receive more than $8 per share no matter how successful the corporation becomes. The preferred stock could have any of the following features: cumulative, convertible, callable, participating, and more. Since...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
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