What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
the employee worked four 8-hour days and one 10-hour day. Assuming that overtime is paid at a rate of time and one-half, the employee’s total gross pay for the week is $__________. 8. The amount of each employee’s...
within 10 days, MARCO is being paid 20 days sooner than if they are paid in 30 days. The cost of receiving the money 20 days sooner is 2% of the invoice amount. Expressing the 2% discount as a rate per year (interest...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The report that sorts a company’s accounts receivables into current,...
for the month amounting to $63,000. The sales invoices represent the goods shipped to customers and includes $1,000 of sales taxes pertaining to its retail customers. The company offers credit terms of 1/10, net 30...
turned over 10 times during the year, or approximately every 36 days (360 or 365 days per year divided by the turnover of 10). Whether the accounts receivable turnover ratio of 10 is good or bad depends on the...
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 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 Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
its inventory every 72 days.) A limitation of the inventory turnover is that it is an average, which means that some important details may be hidden. For instance, what if four inventory items make up 40% of the...
of the present and future situation. It is also wise to consider the financial ratios to be averages. For example, the sales are unlikely to have occurred evenly throughout the year. Therefore, the resulting number of...
of net 30 days. Its sales, accounts receivable and inventory had uniform increases each month of the year. The cost of goods sold was a constant 70% of sales. The balance in accounts receivable was $40,000 at the start...
... Accounts payable Accounts receivable Cash Inventory 6. Which of the following will result in an increase in the quick ratio? Select... Collection of an account receivable Sales of products on credit 7. Which of the...
How many days after a month ends should the bank reconciliation be done? Definition Bank Reconciliation The bank reconciliation (if prepared or reviewed by someone other than the person with access to the checking...
Often a 1% or 2% discount that a buyer may deduct from the amount owed to a supplier (if stated on the supplier’s invoice) for paying in 10 days instead of the customary 30 days. The purchase discount is also...
A general ledger account containing the correct total amount without containing the details. For example, Accounts Receivable could be a control account in the general ledger. Each day the total of the day’s credit...
of products and its credit terms are 1/10, n/30. This means that the buyer can satisfy the $900 obligation if it pays $891 ($900 minus $9 of sales discount) within 10 days. The alternative is for the buyer to...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
into perhaps four columns: Column 1 lists the invoice amounts that are not yet due Column 2 lists the invoice amounts that are 1-30 days past due Column 3 lists the invoice amounts that are 31-60 days past due Column 4...
of accounting services. Since I allow clients to pay in 30 days, none of the $10,000 of fees that I earned in December were received in December. Rather, my clients paid the $10,000 in January. Under the accrual basis...
Where does the interest paid on bank loans get reported on the statement of cash flows. Definition of Interest on Bank Loans The interest on bank loans is usually an expense of the accounting period in which the interest...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
Is contributed capital a noncurrent asset or a current asset, and is it a debit or credit? Definition of Contributed Capital Contributed capital is one of the major components of a corporation’s stockholders’ equity....
need to report the expense for the 30 or 31 days during the calendar month that the utilities were used. To have the correct liability amount reported on the balance sheet, you need to report the cost of the utilities...
, a vendor might offer terms of “1/10, n/30” which means that the buyer can deduct 1% of the net amount owed if the amount is paid within 10 days. If the buyer does not pay within 10 days no discount is...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
with compensation paid to __________. Select... an employee an independent contractor 39. An employee has a pay rate of $10 per hour and is paid weekly. During one week the employee worked 8 hours per day for 4 days and...
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.
The financial ratio which indicates the speed at which a company collects its accounts receivable. If a company’s turnover is 10, this means the company’s accounts receivable are turning over 10 times per...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
, the written note specifies the principal amount, the date due, and the interest to be paid. For most companies, if the note will be due within one year, the borrower will classify the note payable as a current...
What is an unsecured creditor? Definition of Unsecured Creditor An unsecured creditor is often a vendor or supplier that: Shipped goods to a customer as part of a sale on credit Has not been paid Does not have a lien on...
customers. The contract requires the customer to pay TOPCO $5,000 when the contract is signed and the remainder of $20,000 to be paid when TOPCO delivers the machine within 30 days of the signing. When TOPCO receives...
. On August 31 the corporation receives an invoice from Joe’s for $900. The invoice states that the $900 is due within 30 days. After reviewing and approving the invoice, the corporation enters Joe’s invoice into its...
TDINTASNEOI Unscramble 3. The valuation account associated with Accounts Receivable is the _____________ for Doubtful Accounts. ALLOWANCE EAOLNWACL Unscramble ALLOWANCE NLWACLOAE Unscramble 4. When terms are 2/10,...
. Let’s assume that a company writes checks for $100,000 and mails them at the end of the day to suppliers in another state. Those checks might not clear the company’s bank account until three or four days later....
What is accrued interest? Definition of Accrued Interest Accrued interest is the amount of loan interest that has already occurred, but has not yet been paid by the borrower and not yet received by the lender. Under the...
more, see Explanation of Inventory and Cost of Goods Sold. A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that...
liabilities are the obligations that will come due within the operating cycle.) Current liabilities are not listed in the order in which they need to be paid. However, it is common to see the current liabilities...
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