A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
since its debit balance is contrary to the normal credit balance of the owner’s equity or capital account. The title of the account for recording R. Smith’s draws from his or her business is R. Smith, Drawing or R....
What is a contra liability account? Definition of Contra-Liability Account A contra-liability account is a liability account in which the balance is expected to be a debit balance. Since a debit balance in a liability...
What is a debit balance? Definition of Debit Balance In accounting and bookkeeping, a debit balance is the ending amount found on the left side of a general ledger account or subsidiary ledger account. Examples of Debit...
of an account. When an account balance is on the right side of an account, we say the account has a credit balance. A credit entry in an asset account will reduce the account’s usual debit balance. A credit entry in...
% 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 a contra account? Definition of Contra Account A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account...
What is a contra asset account? Definition of Contra Asset Account A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance...
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...
is also a contra account to owner’s equity, because the drawing account’s debit balance is contrary to the normal credit balance for an owner’s equity account. At the end of the accounting year, the drawing...
containing the amounts owed for vendor invoices and other bills that have been approved but not yet paid. The normal balance in Accounts Payable is a credit balance. Amounts owed which did not involve a promissory note....
What is a credit balance? Definition of Credit Balance In accounting and bookkeeping, a credit balance is the ending amount found on the right side of a general ledger account or subsidiary ledger account. Examples of...
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...
Why are revenues credited? Why Revenues are Credited Revenues cause owner’s equity to increase. Since the normal balance for owner’s equity is a credit balance, revenues must be recorded as a credit. At the end of...
account? A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance in an asset account is contrary to the normal or...
of a corporation’s earnings to its cash flows from __________ activities is often used to assess the quality of earnings. Select... financing investing operating 3. A highly profitable corporation with $30 million in...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
current liabilities. (A company in an industry where the operating cycle is longer than one year, will report the amount of principal due within the length of the operating cycle as a current liability.) Example of...
when: Actual sales are greater than budgeted sales Actual operating expenses are less than budgeted operating expenses Budget variances should be analyzed to identify the reasons for the differences between the actual...
Instead of LIFO If a U.S. corporation’s cost of inventory items are continuously increasing and the corporation has been experiencing operating losses and negative taxable income, the use of FIFO means matching its...
number will begin with the digit “1”. Liability accounts will begin with the digit “2”. Operating revenue accounts will begin with the digit “3”, etc. Operating expenses will use accounts beginning with...
For most industries, a company’s current assets are defined as cash and other assets that will turn to cash or will be used up or consumed within one year of the balance sheet date. If a company is in an industry...
accounts: assets, liabilities, stockholders’ equity Income statement accounts: operating revenues, operating expenses, other revenues and gains, other expenses and losses The balances and activity in the general...
-operating expenses, and losses from the revenues (both operating revenues and nonoperating revenues and gains). When a corporation’s stock is publicly-traded, the amount of earnings must also be shown on the income...
. (For companies with operating cycles greater than one year, their current liabilities are the obligations due within the operating cycle.) Typical Current Liabilities Some common examples of current liabilities that...
they are arranged include: operating revenue accounts such as Sales and Service Fee Revenues operating expense accounts including Salaries Expense, Rent Expense, and Advertising Expense nonoperating or other income...
Inventory Prepaid Expenses Investments Land Buildings Furniture and Fixtures Vehicles, and more Generally, asset accounts will have debit balances and their account balances will be increased with a debit entry....
At what point are revenues considered to be earned? Revenues, which are derived from an entity’s main activities such as the sale of merchandise or the performance of service, are considered to be earned when the...
on their statement of activities according to the following functions: Each of its major programs Management and general Fund-raising Membership development In addition, not-for-profit organizations report their...
the heading financing activities statement of stockholders’ equity as a subtraction from retained earnings Dividends that were declared but not yet paid are reported on the balance sheet under the heading current...
to the account Cash. Effect of Drawings on the Financial Statements The owner’s drawings will affect the company’s balance sheet by decreasing the asset that is withdrawn and by the decrease in owner’s equity. The...
activities. These indirect costs include repairs and maintenance, depreciation of the manufacturing equipment, utilities, salaries of manufacturing supervisors, etc. Join PRO to Track Progress Mark the Question as Read...
of producing the furniture are indirect product costs, since they must be allocated to the furniture based on labor hours, machine hours, or some other activities. However, the indirect product costs could be direct...
What is periodicity in accounting? Definition of Periodicity Periodicity is an accounting assumption made by accountants so that a company’s complex and ongoing activities can be divided up into annual, quarterly, and...
to arrive at net income available for common stock.) The statement of cash flows will report the amount of the cash dividends as a use of cash in the financing activities section. Join PRO to Track Progress Mark the...
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...
What is benchmarking? Benchmarking is a process for improving some activity within an organization. We will illustrate benchmarking with the following example. Company Q has identified one of its activities that needs...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
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