Depreciation for the car’s accumulated depreciation Credit the asset account containing the car’s cost Credit the account Gain on Sale of Vehicles for the amount necessary to have the total of the debit amounts...
Depreciation for the car’s accumulated depreciation Credit the asset account containing the car’s cost Credit the account Gain on Sale of Vehicles for the amount necessary to have the total of the debit amounts...
for commissions on recent sales, but has not yet paid or recorded them, an accrual adjusting entry is made so they are included in the commissions expense reported on its income statement and are also reported as...
What is the difference between information and data? I was taught that information is useful data. The point is there are lots of data (plural of datum) everywhere, and most of the data will not be useful to a decision...
of a company’s liabilities divided by the total amount of the company’s assets. Note: Debt includes more than loans and bonds payable. Debt is the total amount of all liabilities (current liabilities and long-term...
was $3,600,000 and the average cost of its inventory account during the year was $400,000. As a result, the company’s inventory turnover ratio is: cost of goods sold of $3,600,000 divided by average inventory of...
marketing consulting services and is billed $10,000 with terms of 1/10, net 30. If the bill is paid within 10 days, the cost is $9,900 ($10,000 minus the 1% discount of $100). This means that Cash should be...
In a bank reconciliation, what happens to the outstanding checks of the previous month? Definition of Outstanding Checks Outstanding checks are checks written by a company, but the checks have not cleared the bank...
in the company’s general ledger accounts. Examples of Journal Entries for Bank Reconciliation Examples of items requiring a journal entry as the result of the bank reconciliation include: Bank service charges which...
What is the difference between gross margin and markup? Definition of Gross Margin Gross margin or gross profit is defined as net sales minus the cost of goods sold. However, some people intend for the term gross margin...
What is the difference between the Cash Flow and Funds Flow statements? Definition of Cash Flow and Funds Flow Statements The cash flow statement, known formally as the Statement of Cash Flows, reports a company’s...
What is a dividend and why is it needed? A dividend paid by a corporation is a distribution of profits to the owners of the corporation. The owners of a corporation are known as stockholders or shareholders. (In a sole...
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...
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...
to provide the goods or services to the customer or to return the money. Hence, the current liability account Customer Deposits is credited. When the company earns the deposit amount, the current liability will be...
What is illusory profit? Illusory profit, also called phantom profit, is the difference between 1) the profit reported using historical costs required by US GAAP, and 2) the profit computed using replacement costs....
they are not expenses. However, dividends on preferred stock will appear on the income statement as a subtraction from net income in order to report the earnings available for common stock. Join PRO to Track Progress...
Which accounts are debited in the closing entries? Definition of Closing Entries Closing entries occur at the end of an accounting year to transfer the balances in the temporary accounts to a permanent or real account....
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
What is capital stock? Definition of Capital Stock Capital stock refers to the shares of ownership that have been issued by a corporation. The amount received by the corporation when its shares of capital stock were...
is described as a transposition error. Another example of the many possible transposition errors is recording 3662 as 3626. In this situation, the difference between the correct and incorrect amounts is 36. Because the...
, 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 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....
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...
an accounting adjusting entry in which the account Depreciation Expense is debited and the contra asset account Accumulated Depreciation is credited. Effects of Depreciation The following are some of the effects for a...
during the month, but the transactions had not been recorded in the accounts as of the end of the month To record the expenses, losses, and their related liabilities which were incurred during the month, but the...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
What is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
How do the income statements of a sole proprietorship and a regular corporation differ? Definition of Income Statements of Sole Proprietorship and Regular Corporation The income statement of a sole proprietorship and a...
What is the difference between an unadjusted trial balance and an adjusted trial balance? Difference between Unadjusted Trial Balance and Adjusted Trial Balance The differences between an unadjusted trial balance and an...
on the estimated salvage value) is divided by the estimated years of useful life to arrive at a consistent annual amount to be debited to Depreciation Expense and is credited to Accumulated Depreciation. This method is...
If a company issues stocks or bonds to pay outstanding debt, should this noncash transaction be included in the cash flow statement? If a company issues stocks or bonds for cash and then pays off the debt, the...
will be required to report the precise amount of interest for the month and the accrued interest liability at the end of the month. The loan’s principal balance is a liability such as Loans Payable or Notes Payable....
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 the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
goes out” or “personal accounts” are inadequate and not helpful to people such as yourself. If you desire to gain a true and deeper understanding of debits, credits, and accounts you are likely to find our free...
What is reported as property, plant and equipment? Definition of Property, Plant and Equipment Property, plant and equipment is the long-term asset or noncurrent asset section of the balance sheet that reports the...
to make meaningful comparisons between years. Consistency does allow a company to make a change to a more preferred accounting method. However, the change and its effects must be clearly disclosed for the benefit of the...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
A corporation has a large balance in retained earnings. Does that mean that its dividends to stockholders will be increasing? Definition of Retained Earnings Retained earnings is one part of a corporation’s...
December 31 that debits Commissions Expense for $6,000 and credits Commissions Payable for $6,000. (Without the matching principle and the adjusting entry, the company might report the $6,000 of commissions expense in...
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