automatically and only require information on the other account. Examples of Double Entry When a company borrows money from a bank, the company’s asset Cash is increased and the company’s liability Notes Payable or...
automatically and only require information on the other account. Examples of Double Entry When a company borrows money from a bank, the company’s asset Cash is increased and the company’s liability Notes Payable or...
A liability account containing the amount of premium on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
A liability account with a debit balance. Discount on Bonds Payable is a contra account associated with the liability account Bonds Payable.
A contra liability account containing the amount of discount on bonds payable that has not yet been amortized to interest expense. To learn more, see Explanation of Bonds Payable.
The interest rate specified or stated in a note payable or in a bond payable. Often this rate is fixed and will not change during the life of the note or bond.
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
The amount of interest expense incurred during the time interval shown in the heading of the income statement that pertains to a company’s bonds payable. Bond interest expense also includes the amortization of the...
An adjunct account is a valuation account that increases the book value or carrying value of a liability account. For example, the account Unamortized Premium on Bonds Payable (or simply Bond Premium) is an adjunct...
An expense that has occurred but the transaction has not been entered in the accounting records. Accordingly an adjusting entry is made to debit the appropriate expense account and to credit a liability account such as...
for the company’s: Financial statements General ledger Cost accounting Payroll Accounts payable Accounts receivable Budgeting Special analyses as well as other duties At larger companies the controller may be assisted...
of Liability Accounts Common liability accounts used with the accrual method of accounting include: Accounts Payable Notes Payable or Loans Payable Accrued Liabilities or Accrued Expenses Unearned Revenues or...
How is a short term bank loan recorded? Definition of Short Term Bank Loan When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its...
liability accounts including Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits stockholders’ equity accounts such as Common Stock, Retained Earnings, Treasury Stock, and Accumulated...
How do you record bonds that are issued? Definition of Bonds Payable Bonds payable is a form of long-term debt often issued by large corporations especially public utilities when constructing large, expensive power...
as the borrower or debtor and records the amount owed in a liability account such as Notes Payable. The person or organization that has the right to receive the money when the promissory note comes due is known as the...
and matching principle. Book value of an asset is: the asset’s cost minus the asset’s accumulated depreciation. Book value of the liability Bonds Payable is the combination of the following: Maturity or par value of...
bookkeeping or accounting system, another general ledger account will also be misstated by the same amount. Example of Understated Assume that a company reports its accounts payable as $210,000. Also assume that the...
. Liabilities are a company’s obligations as of the balance sheet date and will include loans payable, accounts payable, accrued expenses not yet recorded in accounts payable, warranty obligations, taxes payable, and...
similar amounts. The following are common account titles: Cash, Accounts Receivable, Accounts Payable, Loans Payable, Sales, Advertising Expense, Rent Expense, Interest Expense, and perhaps hundreds more. When we use...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
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.
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...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
to be an adjusting entry dated December 31 to debit Interest Expense and to credit Interest payable for the amount of interest owed as of December 31. The principal balance on the mortgage loan already appears in the...
. The payment for the equipment is to be made on February 10. Under the accrual method, on December 29 the company should debit the asset account Equipment and credit the liability account Accounts Payable. (When the...
A common fringe benefit given to employees during a period in which they do not have to work. If an employee earns one week of paid vacation to be taken after working one full year, the employer should recognize this...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
accounts. When a company borrows money, its asset account Cash increases and its liability account Loans Payable increases. When a company pays one of its accounts payable, its Cash account decreases and its liability...
on December 31 for the estimated amount. If the estimated amount is $18,000 the retailer will debit Temp Service Expense for $18,000 and will credit Accrued Expenses Payable for $18,000. This adjusting entry assures...
days. After reviewing and approving the invoice, the retailer will enter the invoice in its accounting records with a debit of $980 ($1,000 minus 2% discount) to Purchases or Inventory and a credit of $980 to Accounts...
are likely to be different from the income tax laws and regulations. Generally, a profitable regular corporation’s financial statements will report both income tax expense and a current liability such as income taxes...
sheets reveals that its accounts receivable decreased by $10,000 and its accounts payable increased by $7,000 during the same year. To keep our illustration simple, let’s assume that except for cash, the reported...
Receivable, Accumulated Depreciation, and allowance accounts used with inventory and investments. Two examples of valuation accounts associated with a liabilities are Bond Issue Costs and Discount on Bonds Payable. The...
. (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...
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