to the modifications. Irrevocable letters of credit are often used to facilitate international trade because of the additional risks involved. The irrevocable letter of credit assures the seller that it will be paid by...
to the modifications. Irrevocable letters of credit are often used to facilitate international trade because of the additional risks involved. The irrevocable letter of credit assures the seller that it will be paid by...
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of...
What is the dividend payout ratio? The dividend payout ratio, or simply the payout ratio, is the percentage of a corporation’s earnings that is paid out in the form of cash dividends. The calculation of the dividend...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
statement Focusing on the balance needed in Allowance for Doubtful Accounts (which will be reported on the balance sheet) Examples of Allowance Method Let’s assume that a corporation begins operations on November 1 in...
in December but allows the customer to pay 30 days later, the company’s December sales are $75,000 (even though no cash was received in December). Reporting revenues in the period in which they are earned is known as...
terms of net 60 days or the company pays its bills by using its business credit card, the company may be able to operate with negative working capital. Managing Working Capital In short, net working capital management...
in Accounts Receivable and its balance in Allowance for Doubtful Accounts was a credit balance of $3,000. As a result, the December 31 balance sheet will be reporting that $97,000 will be turning to cash. During the...
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...
, both the company’s balance sheet and its income statement will not report the correct amounts. Adjusting entries are usually dated as of the final day of the accounting period. As is the case with all journal...
on the balance sheet? Select... They will be too large They will be too small There will be no problem 20. Which of the following is more likely to require an accrual adjusting entry at the end of an accounting period?...
value or carrying value. 8. How will a corporation report the amount paid to repurchase shares of its own common stock that are not retired? Select... As a short-term asset As a long-term asset As a loss on its income...
for a total of $2,000 and the stock’s par value is $1 per share, the accounting entry is a debit to Cash for $2,000 and a credit to Common Stock—Par $100, and a credit to Paid-in Capital in Excess of Par for...
What is Additional Medicare Tax? Definition of Additional Medicare Tax The Additional Medicare Tax is one of the U.S. government’s payroll withholding taxes that is paid solely by employees and the self-employed. In...
. This could result in a significant reduction in the amount of income taxes to be paid in the early years of an asset’s life, which in turn reduces the time required for the corporation to recover the amount it paid...
Is sales tax an expense or a liability? Definition of Sales Tax In the U.S., a sales tax is a state tax (and possibly an additional city and/or county tax) that is paid by the buyer at the time of purchase. The...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
What is carriage inwards? Definition of Carriage Inwards Carriage inwards refers to the transportation costs required to be paid by the purchaser when it receives merchandise it ordered with terms FOB shipping point....
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
Are salaries and wages part of expenses on the income statement? Definition of Salaries and Wages Salaries and wages are forms of compensation paid to employees of a company. Salaries and Wages as Expenses on Income...
What are accrued liabilities? Definition of Accrued Liabilities Accrued liabilities are usually expenses that have been incurred by a company as of the end of an accounting period, but the amounts have not yet been paid...
in order to report this person as an asset owned by the entity. The salary and bonuses paid to a key employee are reported as expenses in the period in which the employee performed services. Not being able to record a...
of the outside accountants who are CPAs are not qualified to be independent auditors while others do qualify as independent auditors. Since the outside accountant is not an employee of the client, the outside accountant...
Is an entry made for outstanding checks when preparing a bank reconciliation? Definition of Outstanding Checks Outstanding checks are checks written by the company, recorded in the company accounts, but not yet appearing...
-Term Bank Loans on the Statement of Cash Flows The cash inflows received through short-term bank loans and the cash outflows used to repay the principal amount of short-term bank loans are reported in the financing...
. In the U.S. the interest paid to the bondholders by the corporation is a deductible expense on the corporation’s income tax return. Typically businesses do not issue bonds. Join PRO to Track Progress Mark the...
Retained Earnings is debited for the total amount of the dividend that will be paid and the current liability account Dividends Payable is credited for the same amount. (Some corporations will debit the temporary...
Are dividend payments shown as an expense on the income statement? Definition of Dividend Payments The cash dividends paid to stockholders are a distribution of the corporation’s earnings. Dividends are not an expense...
What is an uncleared cheque? Definition of Uncleared Cheque An uncleared cheque is a cheque (check) that has been written and recorded in the payer’s records, but has not yet been paid by the bank on which it is drawn....
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...
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...
to postpone issuing checks for vendors’ invoices that should have been paid. The postponement allows its general ledger Cash account to temporarily have a positive amount. On January 2, the company will issue the...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
to Advertising Expense. Example of Advertising as an Asset and as an Expense Let’s assume that in December a corporation paid $15 million to prepare an ad and to book a time for it to be shown during the Super Bowl...
within one year The principal portion of a long-term loan that must be paid within one year Wages payable Income taxes payable Interest payable Other accrued expenses payable Deferred revenues and customer deposits Join...
What is an unpresented cheque or check and does it require an adjustment to the balance sheet? Definition of Unpresented Cheque or Check An unpresented cheque is a check that a company has written, but the check has not...
for the current month will again show the outstanding check amount as a subtraction from the bank statement balance. If an outstanding check of the previous month clears the bank, it means the bank paid the check and...
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