system, if the balance in the account Prepaid Insurance is overstated (too much is being reported) it is likely that the account Insurance Expense is understated (too little is being reported). Join PRO to Track...
system, if the balance in the account Prepaid Insurance is overstated (too much is being reported) it is likely that the account Insurance Expense is understated (too little is being reported). Join PRO to Track...
are overlooked initially, they will be adjusting items to the balance per books in the bank reconciliation. If a rubber check is not redeposited by the payee, the payee must also reduce its general ledger cash account...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
’ 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...
on the company’s balance sheet is accurate. The additions and deductions on the bank statement are compared (or reconciled) with the items that are entered in the company’s general ledger Cash account. Some...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The end-of-year balances in the revenue accounts will become the following year’s beginning balances....
in the general ledger account Petty Cash. Example of Replenishing Petty Cash Let’s assume that a company has a petty cash fund of $100 and its general ledger account Petty Cash has a debit balance of $100. Mary is the...
in a temporary account entitled Purchases. Then at the end of the accounting year, the Inventory account balance will be adjusted so that its balance is equal to the cost of the inventory items that are actually on...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
and one-half for every hour worked that is in excess of the 40-hour workweek. This $20,000 a year office employee is a nonexempt salaried employee. 2. An office employee with a monthly salary of $1,800 works 46 hours...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
on the balance sheet as a contra liability account along with Bonds Payable in the long-term liability section.) Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
% minus the company’s normal gross profit percentage. (This should be available from the previous year’s income statements. Multiply the cost of goods sold percentage times the sales since December 31. The result is...
What is interest income? Definition of Interest Income Interest income is the amount of interest earned on investments (that promise to pay interest) and/or compensation for agreeing to receive cash payments from...
, some fixed costs could be eliminated. Here’s an illustration. A company manufactures products in its 100,000 square foot plant. The company’s depreciation on the plant is $1,000,000 per year. The capacity of the...
by a patent and trademark, and the demand for the product is high, customers may accept a selling price that is unusually high. In other words, the value of the product is much greater than the costs identified with the...
that salaried employees having a gross salary of less than $455 per week for a 40-hour work week must receive overtime pay when working more than the normal 40 hours. In addition to the U.S. Department of Labor’s Fair...
of prepaid insurance that has expired in the accounting period is reported as an _____________. EXPENSE XEPSENE Unscramble EXPENSE SXNPEEE Unscramble 6. A credit entry will cause the Cash account balance to...
a debit to Depreciation Expense and a credit to __________ __________. 6. Accumulated depreciation is a contra asset account and therefore will likely have a __________ balance. 7. The depreciation methods that result...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
How can I determine the difference in earnings from using LIFO instead of FIFO? The difference in a corporation’s earnings from using LIFO instead of FIFO can be determined by the amounts reported in the balance sheet...
This current liability account reports the ”net” amount a company owes its employees as of the date of the balance sheet. The ”net” amount is the amount of the employees’...
A liability account with a credit balance associated with bonds payable that were issued at more than the face value or maturity value of the bonds. The premium on bonds payable is amortized to interest expense over the...
This current liability account reports the amount a company owes as of the balance sheet date for its worker compensation insurance policy premiums. The amounts owed are usually based on the policy’s rates for the...
Obligations of a company or organization. Amounts owed to lenders and suppliers. Liabilities often have the word “payable” in the account title. Liabilities also include amounts received in advance for a...
An assumption that determines the order in which costs should flow out of a balance sheet account (e.g. Inventory, Investments, Treasury Stock) when the item is sold. For an illustration of the cost flow assumption, see...
on the company’s balance sheet is an increase in current assets and an increase in owner’s or stockholders’ equity. The company’s income statement will also report the amount of the revenues earned. Example of...
savings account or money market account. The length of a certificate of deposit will vary. It could be for one month, three months, six months, one year, 17 months, three years, etc. Generally the longer the time until...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
account, another balance sheet account, __________ __________, __________, will also be understated. 12. The amount assigned to an item in inventory might be less than its cost when the item’s __________ __________...
Treasury stock is usually the amount that a corporation has paid to repurchase some of its own shares of stock (and has not reissued or retired the shares). The corporation’s cost is debited to the general ledger...
of common stock as required by some states in the U.S. The balance in the account Common Stock will be this amount times the number of shares of common stock that have been issued. par value per share of common stock...
or other assets into the business. For example, if M. Jones invests $20,000 of cash in her business, the company’s asset Cash increases by $20,000 and the owner’s equity account M. Jones, Capital increases by...
31. The adjusting entry will consist of a debit of $2,000 to Interest Expense (an income statement account) and a credit of $2,000 to Interest Payable (a balance sheet account). Balance Sheet: Retail/Wholesale –...
to be collected within one year of the balance sheet date is reported in the current asset section of the lender’s balance sheet. The remaining principal of the note receivable is reported in the noncurrent asset...
Unscramble ASSUMPTIONS MSTNISPOSUA Unscramble 4. Under this inventory system the balance in the Inventory account changes with each sale. PERPETUAL ERLPTAEPU Unscramble PERPETUAL PRETPELAU Unscramble 5. Under this...
, but is not paid until the bill is received in the first month of the following year. For the current year’s financial statements to be complete (under the accrual method of accounting) the following is necessary: the...
account entitled Petty Cash must be opened. (This will be an additional cash account that can be listed separately on the company’s balance sheet or its balance could be included with the balances in the other cash...
of the amount must be reported as 1) revenue in a future period, or 2) expense in a future period. The deferral adjusting entry makes certain that the correct amounts will be reported on a company’s balance sheets and...
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