is recorded in its general ledger account entitled Accounts Receivable. The unpaid balance in this account is reported as part of the current assets listed on the company’s balance sheet. When goods are sold on...
is recorded in its general ledger account entitled Accounts Receivable. The unpaid balance in this account is reported as part of the current assets listed on the company’s balance sheet. When goods are sold on...
of the plant assets’ cost has been depreciated and how much has not been depreciated. Another contra asset account is Allowance for Doubtful Accounts. This account appears next to the current asset Accounts...
issue bonds to finance projects, operating deficits, or to redeem older bonds that are maturing. For example, a profitable public utility might finance half of the cost of a new electricity generating power plant by...
year is reported under investment activities on the statement of cash flows. Definition of Revenue Expenditure A revenue expenditure is an amount that is spent for an expense that will be matched immediately with the...
was acquired.) The depreciation entry is an estimate based on the asset’s historical cost, its estimated useful life, and its estimated salvage value. The depreciation entry is an allocation of the asset’s cost, it...
are not part of the seller’s sales or revenues. This means the amount of sales taxes that were collected by the retailer will not be reported on its income statement. Instead, the sales taxes collected are reported on...
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...
What is the purpose of the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts or Allowance for Uncollectible Accounts is a general ledger contra account...
of its customers, the company will credit its current asset account Accounts Receivable for $100 and will debit a contra revenue account such as Sales Returns and Allowances. Join PRO to Track Progress Mark the Question...
during the asset’s construction The interest on the debt related to the asset’s construction Adding the capitalized interest to the asset’s cost instead of reporting it as interest expense of the current...
in the beginning inventory (the prior year’s ending inventory) + the cost of the current year’s net purchases. Allocating Cost of Goods Available to Inventory and Cost of Goods Sold At the end of the year, the cost...
balances. Example of Using the Dividends Account Assume a corporation declares a cash dividend of $50,000 on its common stock. On the date the dividend is declared, the corporation will credit the current liability...
by the investor is 4% per semiannual period or 8% annually. The reason that the bond can be purchased at a discount from its face and maturity amount, is that the current market interest rate is now 8% and the bond is...
Seventeen years ago I earned an accounting degree. How should I proceed to become a CPA? To pass the CPA Exam you will need to review all that you had learned plus get current on accounting and auditing standards that...
When should costs be expensed and when should costs be capitalized? Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be:...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
statement (regardless of when the company pays the commissions). If a cause-and-effect relationship does not exist between a company’s revenues and its costs, and there is no future economic benefit which can be...
What is the meaning of base year? In accounting, base year may refer to the year in which a U.S. business had adopted the LIFO cost flow assumption for valuing its inventory and its cost of goods sold. Under the...
as a current liability. The remaining amount of principal owed should be classified as a long-term (or noncurrent) liability. Example of Loan Payment A company makes monthly payments of $500.00 on the last day of every...
, the allocated manufacturing cost will be included as part of the following costs: Cost of goods that are in inventory (a current asset on the balance sheet) Cost of goods that were sold (as the expense cost of goods...
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.
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
our Accounts Payable (Explanation). 1. The general ledger account Accounts Payable is a current __________ liability account. 2. A __________ balance is typical for Accounts Payable. Debit Wrong. Credit Right! 3. The...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
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The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to re-enter the workforce Pass your accounting class Understand your small...
, liability, and stockholders’ equity accounts. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job...
will best serve your needs. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to...
to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to re-enter the workforce Pass your...
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to re-enter the workforce Pass...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
A constant or unchanging amount that is often used when referring to petty cash. For example, if the petty cash account in the general ledger has an imprest balance of $100, the account balance will be a constant $100....
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