in the company’s general ledger accounts. If it is the end of the accounting period, these amounts must be recorded to comply with the accrual method of accounting. By entering these on an adjusting entry dated for...
in the company’s general ledger accounts. If it is the end of the accounting period, these amounts must be recorded to comply with the accrual method of accounting. By entering these on an adjusting entry dated for...
cash inflows and cash outflows during the period of the income statement A reconciliation of the change in a company’s cash and cash equivalents from the beginning of the accounting period to the end of the accounting...
What is the cost of goods manufactured? Definition of Cost of Goods Manufactured The cost of goods manufactured is a calculation of the production costs of the goods that were completed during an accounting period. In...
What is the difference between interest expense and interest payable? Definition of Interest Expense Assuming the accrual method of accounting, interest expense is the amount of interest that was incurred on debt during...
What is the purpose of the cash flow statement? Definition of Cash Flow Statement The cash flow statement or statement of cash flows or SCF identifies a company’s major cash inflows and outflows that occurred the same...
Is the reversal of a previous year's accrued expense permanent? Definition of Reversal of Accrued Expense An accrued expense typically requires an accrual adjusting entry recorded at the end of an accounting year...
.) Companies that use the net method will record the vendor’s invoice as follows: credit Accounts Payable for $980 and debit another account (Inventory, Purchases, etc.) for $980. If the company’s policy is to pay...
How do you amortize goodwill? Definition of Amortize Goodwill Prior to 2001, to amortize goodwill meant to consistently and in uniform increments move the reported amount of the intangible asset goodwill from the balance...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
What are out-of-pocket costs? Out-of-pocket costs are those costs or expenses that require a cash payment in the current period or during a project. For example, the wages of the person setting up a machine for a new...
The deferral of a payment to the balance sheet until it becomes an expense in a future accounting period The deferral of a receipt to the balance sheet until it is earned in a future accounting period Adjustments to...
existing equipment Purchasing delivery vehicles Constructing additions to buildings Examples of Capital Budgeting Calculations Capital budgeting usually involves the following calculations for each project: Future...
functions (e.g. selling, general administration, etc.) are part of the expenses reported on the company’s income statement. Under the accrual method of accounting, the amounts are reported in the accounting period in...
What are credit terms? Definition of Credit Terms Credit terms indicate when payment is due for a company’s sales invoice (which the customer will refer to as a purchase invoice). The credit terms also indicate whether...
manufactured during the accounting period minus the cost of finished goods in ending inventory. The cost of sales for a retailer is the cost of merchandise in its beginning inventory plus the net cost of merchandise...
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...
software may allow you to go into a previous period’s (as well as the current period’s) activity and remove a voided check or change the amount to zero. This will also increase the balance in the Cash account and...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services,...
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...
the petty cash fund is replenished. In order to get the expenses entered in the proper accounting period, it is necessary to replenish the petty cash fund at the end of each accounting period. (This is done in addition...
of Accrued Expenses Payable Accrued Expenses Payable is a liability account that records amounts that are owed, but the vendors’ invoices have not yet been received and/or have not yet been recorded in Accounts...
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...
period. The unfavorable volume variance indicates that the period’s output was less than the planned output. The volume variance is also referred to as the production volume variance, the capacity variance, or the...
reported as other comprehensive income on each period’s statement of comprehensive income. It is similar to the amount of retained earnings which is the net cumulative amount of the items reported on each period’s...
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 Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
What are accrual adjusting entries? Definition of Accrual Adjusting Entries Accrual adjusting entries or simply accruals are one of three types of adjusting entries which are prepared at the end of an accounting period...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
This account shows the amount of delivery expense incurred (occurring) during the accounting period shown in the heading of the income statement. The title of this account could also be Freight Out or Transportation...
The amount that a recurring equal amount deposited at the end of each period will grow to under compounded interest. An ordinary annuity is also known as an annuity in arrears.
The amount that a recurring equal amount deposited at the beginning of each period will grow to under compounded interest. An annuity due is also known as an annuity in advance.
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
Operating expenses made to return an asset to its previous condition (rather than to make the asset more than it was originally). The amount is charged to an account such as Repairs and Maintenance Expense in the period...
Advertising Expense is the income statement account which reports the dollar amount of ads run during the period shown in the income statement. Advertising Expense will be reported under selling expenses on the income...
The cost of telephone service that was used during the period shown on the income statement.
The estimated volume in a future period that will be used for allocating indirect manufacturing costs.
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
Under accrual accounting it is the rent earned during the period indicated in the heading of the income statement, regardless of when the money is received from the tenant.
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