A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
The paid-in (or contributed) capital account that is credited $100 for each share of $100 par preferred stock that is issued. If the proceeds from the issuance or sale of one of the shares is greater than $100, the...
Under the accrual method of accounting, this account reports the amount of wages that the warehouse employees have earned during the accounting period indicated in the heading of the income statement. Because wages are...
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
A check that is not paid by the bank on which it is written (drawn). Often the reason a check is not paid is that the account on which the check was drawn did not have a sufficient balance. In that case the check is...
of the voucher used in accounts payable as a cover sheet to which necessary supporting documents and approvals are attached. Some of the supporting documents include: The vendor’s invoice The company’s purchase...
on common stock may appear on the balance sheet as paid-in capital in excess of par value–common stock or additional paid-in capital. Example of Premium on Common Stock Assume that a corporation’s common stock has a...
What is a rubber check? A rubber check is a check that is not paid (or honored) by the bank on which it is drawn. The reason the check is not paid is the maker’s account had insufficient funds or not sufficient funds...
This is another term used for the 1% or 2% sales discount or purchase discount. Mark as wrong Mark as right 1/10, net 30 This invoice term indicates that the net amount (after any return or allowance) is due within...
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...
suppliers sell goods to customers and grant credit terms such as net 10 days. In those situations, a supplier is selling goods on account and the customer has purchased goods on account. The supplier has also increased...
The estimated number of days between ordering and receiving the units being ordered The number of units of safety stock The reorder point indicates when to place an order. The economic order quantity indicates the...
machine hours needed to meet the company’s production schedules. Normal capacity is the annual machine hours that have occurred over a span of several years. Example of Practical Capacity Assume that a manufacturer...
an accounting firm for tax advice. Two tax experts have lunch with the owner and inform her how to process transactions so that she will enjoy tax savings of $40,000. The owner was grateful for the enjoyable lunch and...
balance could begin by comparing the balance with an aging of the accounts receivable. Another example is reconciling the balance in the general ledger account Utilities Payable. This might be accomplished by computing...
What is cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
of a company’s customers who were given 30 days in which to pay has filed for bankruptcy and the customer’s assets are close to $0. Therefore, there will be no amount left to pay any of the $4,000 it owes to the...
of a Sale on Credit Assume that a company is in an industry where it is necessary to give customers invoice payment terms of net 30 days. If the company sells $10,000 of goods to a customer with those terms, the company...
, but we expect to have the item in stock within 5 working days.” A recently organized, regular U.S. corporation will be issuing 100,000 new shares of stock for $100 per share. All of the shares being issued are common...
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This activity, which involves playing the float, is sometimes used when a company is facing an overdrawn checking account. Assume that a company has a checking account at NY Bank that is about to overdraw. To prevent the...
remitted more than the amount needed. During the first few days of the accounting period in which reversing entries are recorded to reverse the accrual adjusting entries for expenses and liabilities of the previous...
ratio This ratio results when total credit sales for a year are divided by the average amount of accounts receivable during the year. Mark as wrong Mark as right days' sales in accounts receivable (or) average...
in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold from the sale of inventory items...
What are dividends? In accounting, dividends often refers to the cash dividends that a corporation pays to its stockholders (or shareholders). Dividends are often paid quarterly, but could be paid at other times. For a...
statements that it has dividends in arrears. Dividends in arrears (and their current dividend) must be paid to the preferred stockholders before the common stockholders can be paid a dividend. When an annuity consists...
by the employer. The matching amount is an additional expense of the employer Withheld from employees’ wages but are not matched by the employer. Paid solely by the employer. The amount is additional expense of the...
Where is interest on a note payable reported on the cash flow statement? Definition of Interest on a Note Payable The interest on a note payable is reported on the income statement as Interest Expense. Usually this means...
and paid by the corporation. Here are a few of the more common descriptions that will be seen under the direct method: Cash from customers Cash paid to employees Cash paid to suppliers Cash paid for interest The direct...
usually accept a fixed cash dividend that will be paid by the corporation before the common stockholders are paid a dividend. In exchange for this preferential treatment of dividends, the preferred stockholders...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
What is capital surplus? Definition of Capital Surplus In the past, capital surplus was used to describe what is now referred to as paid-in capital in excess of par or Premium on Common Stock. Example of Capital Surplus...
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
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...
value or legal capital of these issued shares. common stock This type of capital stock is present at every U.S. corporation. It is also the title of the general ledger account that reports the total par value or legal...
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...
. Exempt salaried employees are often paid for their work right up to payday. Hence, no need to accrue any salaries. Hourly Employees Paid Weekly Right! Hourly-paid employees have their paydays approximately one week...
worked multiplied by an hourly rate of pay. Generally, the employees earning hourly wages will be paid in the week that follows the hours worked. Example of Wages For example, a warehouse employee works 40 hours during...
for the accounting period. If the income statement was prepared using the accrual method of accounting, the net income must be adjusted for expenses that were not paid during the current accounting period revenues which...
What is the difference between an accrual and a deferral? Definition of an Accrual An accrual pertains to: expenses that should be reported now, but have not yet been recorded or paid, and revenues that should be...
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