In accounting this word is often included in the title of liability accounts. It means the amount owed by a company as of the balance sheet date, even if the company did not yet receive an invoice from the supplier. For...
In accounting this word is often included in the title of liability accounts. It means the amount owed by a company as of the balance sheet date, even if the company did not yet receive an invoice from the supplier. For...
. A deferred credit is reported as a liability on the balance sheet. Depending on the specifics, the deferred credit might be a current liability or a noncurrent liability. In the past, it was common to see a noncurrent...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
What is depletion? Definition of Depletion In accounting, depletion refers to the expensing of a company’s cost of a natural resource. Ultimately, it means moving a natural resource’s cost from the company’s...
Journal entries usually dated the last day of the accounting period to bring the balance sheet and income statement up to date on the accrual basis of accounting. Adjusting entries are made to report (1) revenues that...
. For example, a company may arrange with its bank to borrow money as needed but never owe the bank in excess of $500,000. The agreement might specify that interest will be calculated by multiplying the prime rate times...
One of the main financial statements (along with the income statement and balance sheet). The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities,...
activity. A 200% increase in activity is so significant that even fixed costs will likely change. For example, you may need to add another supervisor, another manager, and to expand the warehouse. 7. A sole...
with Par Values If a corporation’s common stock has a par value, the par value of an issued share of common stock must be recorded in an account separate from the amount received over and above the amount of par...
an agent of the state and will record the sales taxes collected in a current liability account such as Sales Taxes Payable. When the merchant remits the sales taxes to the state, the current liability account is...
of $28,000 to Accounts Payable. At the payment date within 10 days: debit of $28,000 to Accounts Payable, credit of $27,720 to Cash, credit of $280 to Purchases Discounts (a contra account to Purchases) Net method....
at the buyer’s location on January 2. On December 30, the seller should record a sale, an account receivable, and a reduction in its inventory. The buyer should record the purchase, the account payable, and the...
received only $1,940,000 from investors. The resulting difference of $60,000 must be recorded in the contra-liability account Discount on Bonds Payable. The corporation must also record the bond issue costs (legal,...
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...
for use as the site for the new office building, the entire $160,000 should be recorded in the Land account. 2. On July 1 of the current year, Jelco began using new equipment in its warehouse. The equipment had a cost...
as of June 20th. Since the balance sheet is dated June 30th (and the income statement is for the entire month of June), an adjusting entry should be made to record the additional liability for the utilities used from...
and the purchases of gas by NEP from MGC did not occur outside of the group of companies, these purchases are also eliminated.) The consolidated balance sheet of NEP will report all of the cash, receivables, plant, etc....
to be $15,000. As a result, its balance sheet will report inventory of $15,000 and its income statement will report cost of goods sold of $85,000 ($100,000 – $15,000). During January the company purchased $130,000 of...
, it results in a liability to appear on the balance sheet for the end of the accounting period. The matching principle is associated with the accrual basis of accounting and adjusting entries. If an expense is not...
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...
A company’s original sales invoice amounts are the source for the company’s gross sales. These amounts are recorded as credit entries in the general ledger account Sales. Any sales returns, sales allowances, and...
What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
starting next year. Because of this assurance, the utility will record the $300,000 as a deferred asset. In each of the five subsequent years, the utility will credit the deferred asset account for $60,000 and will...
costs must be reported as Advertising Expense at the time the ads are run. A prepayment of the cost of ads that will air in the future should be recorded in a current asset account such as Prepaid Advertising. When the...
for deposit to account #xxxx followed by the payee’s signature. Many companies endorse checks by using a rubber stamp containing this restriction. Another example of a restrictive endorsement is Pay to the order of...
What is petty cash? Definition of Petty Cash Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
, 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...
is required by SellerCo. Under the accrual basis of accounting, SellerCo will report $5,000 in its income statement accounts Sales and will report $5,000 in its current asset account Accounts Receivable. Assume that on...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
the stock is issued, the corporation will debit Cash and will credit its stockholders’ equity account Common Stock for the amount received. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn...
bookkeepers may be involved in the following activities: Processing vendors’ invoices Billing and following up on accounts receivable Payroll processing Managing cash Reconciling account balances Perhaps preparing and...
. The petty cash voucher should provide space for the following: Date Amount disbursed Person receiving the money Reason for the disbursement General ledger account to be charged Initials of the person disbursing the...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
What accounts for the difference in inventory values between periodic LIFO and perpetual LIFO? Difference Between Periodic LIFO and Perpetual LIFO The difference between periodic LIFO and perpetual LIFO involves the time...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
What accounting entry is made when a company receives an order for its goods or services? Definition of Accounting Entry When an Order is Received At the time when a company receives a customer’s order (without...
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