What is accounts payable? Definition of Accounts Payable Accounts payable involves the amounts owed by a company to its suppliers (vendors) for goods or services the company received on credit. Accounts payable is also...
What is accounts payable? Definition of Accounts Payable Accounts payable involves the amounts owed by a company to its suppliers (vendors) for goods or services the company received on credit. Accounts payable is also...
into the software and can instantaneously obtain a complete set of financial statements by simply selecting them from a menu. After reviewing the financial statements, the accountant is able to make additional...
to as a draw.) A corporation’s board of directors, which is elected by the stockholders, decides if a cash dividend is needed. The considerations for paying or not paying a dividend include the stockholders’ wishes,...
Entries The closing entries will transfer all of the year-end balances from the revenue accounts and the expense accounts to a corporation’s retained earnings account or a sole proprietorship’s owner’s equity...
What is a post-closing trial balance? Definition of Post-closing Trial Balance A post-closing trial balance is a trial balance which is prepared after all of the temporary accounts in the general ledger have been closed....
What is a line of credit? In business a line of credit or credit line is an arrangement/commitment by a bank or other creditor with a customer. The agreement specifies an amount that the customer can borrow or use in the...
What is workers' compensation insurance? Workers’ compensation insurance is likely to be an insurance policy obtained by a company to cover the medical costs and lost wages for its employees’ work-related injuries...
What is a creditor? Definition of Creditor A creditor could be a bank, supplier or person that has provided money, goods, or services to a company and expects to be paid at a later date. In other words, the company owes...
, let’s assume that a new company has only one asset, Cash of $10,000, and its owner’s equity is $10,000. The company then pays $500 for advertising that occurs at the time of payment. The company must reduce its...
in an expense account When recording a correcting entry to reclassify an amount from the incorrect expense account to the correct account Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
expense account to record the amounts that employees paid toward the company’s health insurance costs. For instance, the company might debit its expense account 4210 Employee Health Insurance Expense when recording...
Where does accrued interest on notes receivable get reported on the balance sheet? Definition of Accrued Interest on Notes Receivable Accrued interest on notes receivable is the amount of interest the lender has earned,...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
What is capital surplus? Definition of Capital Surplus In the past, capital surplus was used to describe what is now referred to as paid-in capital in excess of par or Premium on Common Stock. Example of Capital Surplus...
What is interest payable? Definition of Interest Payable Interest payable is the interest expense that has been incurred (has already occurred) but has not been paid as of the date of the balance sheet. [Interest payable...
contains all of its asset, liability, owner equity, revenue, expense, gain, and loss accounts. Each account contains the transaction amounts that pertain to the account title. Definition of a Trial Balance A trial...
find it advantageous to use the periodic inventory system in its general ledger (instead of the perpetual inventory system) especially when it uses the LIFO cost flow assumption for valuing its inventory and cost of...
). Employer’s Social Security Payroll Tax for 2023 The employer’s Social Security payroll tax rate for 2023 (January 1 through December 31, 2023) is 6.2% of each employee’s first $160,200 of wages, salaries, etc....
value is not depreciated. However, it is common to assume that the salvage value will be $0. The depreciation method used for financial reporting is often different from the depreciation method used for U.S. income tax...
What is the difference between stockholder and stakeholder? Definition of Stockholder A stockholder or shareholder is the owner of shares of a corporation’s common or preferred stock. Definition of Stakeholder A...
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...
and is recorded in a contra asset account Accumulated Depreciation. The balance in Accumulated Depreciation is reported on the balance sheet as a separate deduction from the assets’ historical costs. Advantage of...
to track the order and to schedule various activities that will be needed to ship the products to the customer. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
, a contingent asset and gain will not be recorded in a general ledger account or reported on the financial statements until they are certain. [This is different from contingent liabilities and contingent losses, which...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
What is an ordinary annuity? Definition of Ordinary Annuity In accounting, an ordinary annuity refers to a series of identical cash amounts with each amount occurring at the end of equal time intervals. Another term for...
What is the difference between a contingent liability and an estimated liability? Definition of a Contingent Liability A contingent liability is a potential liability (and a potential loss or potential expense). For a...
How do you record an asset that was partially financed? Example of Recording an Asset that was Partially Financed Assume that your company purchased a car for $10,000 by paying cash of $4,000 and signing a promissory...
How do I calculate depreciation using the sum of the years' digits? Definition of the Sum-of-the-Years’-Digits Depreciation The sum-of-the-years’-digits depreciation (SYD depreciation) is one method for calculating...
is a debit balance. In other words, the corporation has a negative amount of retained earnings. Example of Deficit Within Stockholders’ Equity Assume a corporation was formed just over three years ago. In its first...
to manually posting them to the accounts in the general ledger or subsidiary ledger. Examples of Journals in a Manual Accounting System Manual systems usually had a variety of journals such as a sales journal, purchases...
What is a controller's cushion? A controller’s cushion or controller’s reserve involves temporarily recording too much expense for an item that the controller calculates. For example, the controller might budget...
What is the debt to total assets ratio? Definition of Debt to Total Assets Ratio The debt to total assets ratio is an indicator of a company’s financial leverage. It tells you the percentage of a company’s total...
Are utility bills an expense or a liability? Definition of Utility Bills Utility bills are invoices received by a company for the natural gas, electricity, water, and sewer charges that the company used during a previous...
What is a deferred cost? Definition of Deferred Cost A deferred cost is a cost that is already recorded in a company’s accounts, but at least some of the cost should not be expensed until a future accounting period....
the check was written and recorded. The problem was the previous bank statements. The bank statement balances were too high since the check had not yet cleared the bank checking account. That’s why we subtract the...
What is the difference between gross profit margin and gross margin? Definition of Gross Profit Gross profit is an amount that is computed as follows: A company’s net Sales minus its cost of goods sold A product’s...
What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
that are affected by the Statement. In the left panel of the website, the first four links (Recent Additions, Action Alert, Project Activities, and Exposure Documents) allow you to monitor the status of rules being...
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
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