, and an accountant might add “…and charge Advertising Expense for $300.” Another accountant might say “…and debit Advertising Expense for $300.” Join PRO to Track Progress Mark the Question as Read...
, and an accountant might add “…and charge Advertising Expense for $300.” Another accountant might say “…and debit Advertising Expense for $300.” Join PRO to Track Progress Mark the Question as Read...
statements. I reported on the impact on the company’s expenses in great detail. I thought I was done until the controller drew two T-accounts on a piece of paper and noted my comments in the expense T-account, and...
will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
of another account. Accountants often use T-accounts to visualize the debit and credit effects on the accounts’ balances. It may take some time to learn which general ledger accounts will be debited and credited, but...
. If the general office worker comp rates are 0.2% of the general office wages and salaries, then 0.2% of January’s general office wages and salaries will be expensed as worker comp insurance expense. If the employer...
What is the entry to remove equipment that is sold before it is fully depreciated? Entries To Record a Sale of Equipment When equipment that is used in a business is disposed of (sold) for cash before it is fully...
.] Under the accrual method of accounting the tenant should report: Rent Expense during the period of time that the space was occupied but was not paid, and A current liability Rent Payable for the amount owed to the...
. This journal entry will debit Depreciation Expense and will credit Accumulated Depreciation. Another example of a general journal entry is the adjusting entry to accrue interest on a bank loan. This journal entry will...
: It is a note payable for the borrower who reports the note on its balance sheet as a liability It is a note receivable for the lender who reports the note on its balance sheet as an asset The interest promised in the...
by reading our Nonmanufacturing Overhead (Explanation). 1. Selling expenses should be allocated to the cost of goods sold for external financial reporting. True Wrong. False Right! 2. According to U.S. accounting...
revenues and the related liabilities that were included in a previously recorded transaction To record depreciation expense and/or bad debts expense and the change in the related contra asset account Definition of...
with accrual adjusting entries by the borrower and the lender before issuing their financial statements. The borrower’s adjusting entry will debit Interest Expense and credit Accrued Interest Payable (a current...
when Depreciation Expense is recorded. The credit balance in Accumulated Depreciation means that the cost of the property, plant and equipment will continue to be reported. Looking at the cost of the plant assets and...
to as a contra-liability account. Examples of Contra-Liability Accounts Some contra-liability accounts include: Discount on Bonds Payable Bond Issue Costs Discount on Notes Payable The debit balances in the above...
that are reported on the statement of cash flows in the section entitled cash flows from investing activities. When the equipment is placed into service, the company will begin to report depreciation expense on the...
the depreciation expense of an asset, the expected amount of the salvage value is not included. Example of Salvage Value Assume that a plant asset has a cost of $325,000 and is expected to have a salvage value of...
What is a deferral? Definition of Deferral A deferral often refers to an amount that was paid or received, but the amount cannot be reported on the current income statement since it will be an expense or revenue of a...
by a company’s liabilities will generally have a lower cost than money raised from stockholders’ equity for the following reasons: Some liabilities such as accounts payable have no interest expense associated with...
Assume that for the most recent year a corporation had net sales of $410,000; cost of goods sold $230,000; SG&A $120,000; interest expense $10,000; income tax expense $9,000. For the recent year the corporation’s...
is less than $100,000. Let’s assume that the note’s present value is computed to be $90,000. This means that the asset’s cost will be $140,000?the cash of $50,000 plus the note’s $90,000 of present value....
A classic example of the materiality concept is a company expensing a $20 wastebasket in the year it is acquired instead of depreciating it over its useful life of 10 years. The matching principle directs you to record...
been recorded. If the fully depreciated asset continues to be used without improvement expenditures, there will be no further depreciation expense. The asset’s cost and its accumulated depreciation will continue to be...
methods: Indirect method (almost always used) Direct method (rarely used) The indirect method begins with the company’s net income based on the accrual method. That amount is then converted to the cash from operating...
, they are part of comprehensive income). Net income is also known as net earnings. The details of the net income calculation are reported in the business’s income statement. The net income of a regular U.S....
owner’s equity increases. When the company pays cash for an advertisement expense, its assets decrease and its owner’s equity decreases. In accounting and bookkeeping there is a separate financial statement known as...
which is lower than the market interest rate for similar bonds. The difference between the amount received and the face or maturity amount is recorded in the corporation’s general ledger contra liability account...
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...
, this employee will earn vacation pay of $3,120 (120 hours x $26), or $60 per week ($3,120 per year divided by 52 weeks). This means that in the current year the company must record vacation pay expense and a related...
or covenants regarding interest and principal payments, maintaining certain financial ratios, and more. Failure to meet those conditions can result in severe consequences. In the U.S., a benefit of debt financing is...
of depreciation. The entry debits Depreciation Expense for $3,000 and credits Accumulated Depreciation for $3,000 each and every month. A company may also have recurring journal entries in which the accounts are...
), a profitable corporation will use accelerated depreciation expense (150% declining balance, 200% declining balance, sum of the years' digits, etc.) on its U.S. income tax return. This is allowed even though the...
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...
Expense, Wages Expense, and Advertising Expense are expected to have __________ balances. Select... debit credit 8. A sole proprietor’s Drawing Account will likely have a __________ balance. Select... debit credit 9....
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...
as the year progresses instead of being surprised at the end of the year. Let’s illustrate the benefits of a church’s revenue budget. A church’s annual revenue budget should be prepared independently of 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 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...
be reported as __________. Select... an asset an expense a liability 10. Which word indicates the right side of a general ledger account? Select... debit credit 11. When an accounting entry is recorded in a general...
by $4,000. Since both sides of the accounting equation increase by $4,000, the accounting equation remains in balance: Expenses Decrease Owner’s Equity and Affects Another Account Owner’s equity will decrease when a...
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