is a credit. A debit is also the amount entered on the left-side of a T-account. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
is a credit. A debit is also the amount entered on the left-side of a T-account. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
stockholders want their investments to grow in value instead of receiving taxable dividends. A large, established public utility with stable earnings and the ability to issue bonds payable (with low, tax-deductible...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services, and 2) manage...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
the following: Debit Cash Credit the account(s) that was debited when the check was originally recorded This entry increases the general ledger account Cash (that contains the company’s checking account). It also...
’ equity section of the balance sheet, the cash that was generated from those retained earnings is not likely be in the company’s checking account. Instead, the corporation likely used the cash to acquire additional...
accounts, but with differing amounts. Recurring journal entries may also be referred to as memorized journal entries or standard journal entries. Examples of Recurring Journal Entries A company that prepares monthly...
informs the reader that cash was received and thereby increased the company’s cash and cash equivalents. When a company repays the principal portion of its short-term or long-term loans, redeems any of its bonds...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed to...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
What are bonds payable? Definition of Bonds Payable Bonds payable are a form of long term debt usually issued by corporations, hospitals, and governments. The issuer of bonds makes a formal promise/agreement to...
subtract the cost of the items that are in inventory from the costs shown in the perpetual inventory system. If the perpetual inventory method is not used (or it is not maintained properly) you can determine the cost of...
of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
depreciation expense, assume that a company had paid $480,000 for its office building (excluding land) and the building has an estimated useful life of 40 years (480 months) with no salvage value. Using the...
What is Form 10-K? Definition of Form 10-K Form 10-K is a required annual report filed with the U.S. Securities and Exchange Commission (SEC) by U.S. corporations whose common stock is publicly traded. It is common for a...
What is callable stock? Callable stock is an ownership interest (shares) in a corporation that can be “called in” by the corporation at a specified price. For example, a corporation might issue 9% $100 Preferred...
equity. The amount reported as the cost of goods sold will affect the calculations of gross profit and net income. Since the amount reported as the cost of this year’s ending inventory will carry forward to become the...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee...
, the difference between the amounts of assets and liabilities is reported as net assets (instead of owner’s or stockholders’ equity). The net assets are presented as: without donor restrictions or with donor...
What is a contra inventory account? A contra inventory account is a general ledger account with a credit balance. The credit balance in the contra inventory account will be combined with the debit balance in the...
What is the difference between public sector and private sector? Definition of Public Sector Public sector refers to: government-owned organizations, and government-provided services (Note: public sector entity is...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
. If the employee is paying (reimbursing) the company immediately, you can record the entire phone bill with a debit of $100 to the company’s account Telephone Expense. You will also credit Telephone Expense for $20...
What is an equivalent unit of production? Definition of Equivalent Unit of Production An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially...
not been recorded in the company’s general ledger accounts. Examples of Journal Entries in a Bank Reconciliation Common adjustments to the balance per books include: Bank fees or service charges for maintaining the...
of comprehensive income along with the amount of net income from the income statement. Since the OCI items do not affect the net income, they do not cause a change in a corporation’s retained earnings. Instead, the...
How are fully depreciated assets reported on the balance sheet? Definition of Fully Depreciated Asset A fully depreciated asset is a depreciable asset for which no additional depreciation expense will be recorded. In...
Do corporations issue both common stock and preferred stock? Some corporations issue both common stock and preferred stock. However, most corporations issue only common stock. In other words, it is necessary that a...
What is accounting for price level changes? In 1979 the Financial Accounting Standards Board (FASB) issued its Statement of Financial Accounting Standards No. 33 entitled Financial Reporting and Changing Prices. (You...
in a general ledger intangible asset account. If a company designs and registers its trademark, the amount recorded is limited to its cost. Costs incurred to defend a trademark are also recorded in the trademark...
What is financial reporting? Definition of Financial Reporting Financial reporting includes all of a company’s communication of financial information to people outside of the company. Examples of Financial Reporting...
and finished goods. The notes to the financial statements will also described how the manufacturer’s inventory is valued. For example, the notes will disclose whether FIFO lower of cost or net realizable value, LIFO,...
and it purchases goods with terms FOB shipping point. As a result the company is responsible for paying the cost of the carriage inwards. The company will record the amount in the general ledger account Carriage Inwards...
What does overstated mean? Definition of Overstated When an accountant uses the term overstated, it means two things: The reported amount is incorrect, and The reported amount is more than the true or correct amount. In...
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...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
income statement. Since the costs of products may be higher when they are reordered/purchased, the order in which their costs are removed from inventory will have an impact on the inventory valuation and the amount...
with accrual adjusting entries by the borrower and the lender before issuing their financial statements. The borrower’s adjusting entry will debit Interest Expense and credit Accrued Interest Payable (a current...
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