Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
30 for liability insurance for the six months that begins on January 1. For the next two days, none of the $600 will be reported as an expense. Instead, all $600 of cost is being deferred until the new year. Therefore,...
accounts and contra expense accounts will also have credit balances. Example of Accounts Where Credit is Not the Normal Balance Accounts where a credit balance is NOT the normal balance include the following: Asset...
but is unpaid should be recorded with a debit to Interest Expense and a credit to the current liability Interest Payable. Example of Recording Unpaid Interest Let’s assume that on December 10, a company made its...
transaction will affect at least two general ledger accounts and the debit amounts must be equal to the credit amounts. Mark as wrong Mark as right accrual This type of adjusting entry is needed prior to issuing...
$120,000; Land Improvement $40,000 Land $120,000; Repairs Expense $40,000 Land $160,000 View Coaching The cost of an asset is defined as all costs necessary to get the asset in place and ready for use. Since the $40,000...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
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 amount of supplies used during the current accounting period should be reported as...
in the __________ ledger. 3. A sole proprietor’s withdrawal of cash for personal use is recorded in the account Salaries Expense. Select... True False 4. Bad Debts Expense is an income statement account used to report...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
amount will not be an expense and therefore will not be reported on the income statement. The principal payment is recorded as a reduction of the liability Notes Payable or Loans Payable. (Both the receipt of the loan...
the amount of money currently on hand.) Expense accounts and loss accounts including Cost of Goods Sold, Wages Expense, Rent Expense, Interest Expense, Loss on Disposal of Equipment, Loss from Lawsuit, etc. (The debit...
When should a product warranty liability be recorded? Definition of Product Warranty Liability A product warranty means the manufacturer or seller has a potential liability and expense if its product or service fails to...
When should costs be expensed and when should costs be capitalized? Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be:...
What is an unfavorable variance? Definition of a Variance In accounting the term variance usually refers to the difference between an actual amount and a planned or budgeted amount. For example, if a company’s budget...
What is the accounting journal entry for depreciation? Definition of Journal Entry for Depreciation The journal entry for depreciation is: Debit to the income statement account Depreciation Expense Credit to the balance...
What is a favorable variance? Definition of a Variance In accounting the term variance usually refers to the difference between an actual amount and a planned or budgeted amount. For example, if a company’s budget for...
cost (had FIFO been used) and the LIFO cost. Definition of Provision The term provision is sometimes used by corporations when reporting an expense that is an estimated or uncertain amount. Two examples include...
account Supplies Expense. When supplies are purchased, the amount will be debited to Supplies. At the end of the accounting period, the balance in the account Supplies will be adjusted to be the amount on hand, and the...
the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
the withholdings is to credit Health Insurance Expense for the $75 withheld from the employee. When the company pays the full cost of the health insurance plan it will debit the amount to Health Insurance Expense. The...
but are not yet recorded in the accounts, and revenues and assets that have been earned but are not yet recorded in the accounts Example of an Accrual of an Expense One example of an accrual of an expense and liability...
Subscription Expense and will credit Cash (or Accounts Payable). If the amount of the subscription is significant, the company should debit the cost of the subscription to the current asset account Prepaid Expenses and...
of depreciation expense and repairs and maintenance expense throughout the life of the asset. In other words, in the early years of the asset’s life, when the repairs and maintenance expenses are low, the depreciation...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
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 Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
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 Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
December income statement as Insurance Expense of $400. The remaining $2,000 of unexpired insurance (5 months X $400) must be reported on the December 31 balance sheet as a current asset such as Prepaid Insurance or...
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...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
statement. (The cost of goods sold is likely the largest operating expense and it is being matched to the related sales revenue to arrive at a company’s gross profit.) The cost of the items that are not yet sold are...
amount that is actually prepaid (not yet expired) at the end of the quarter. Example of Adjusting Prepaid Expenses Assume that a company’s only prepaid expense is the prepaid premiums on its liability insurance...
and related fringe benefits) is part of the cost of the asset (and not an immediate expense of the accounting period). The total cost of the asset, including installation costs, will become an expense when the asset...
What is the difference between accounts payable and accrued expenses payable? Definition of Accounts Payable Accounts Payable is a liability account in which suppliers’ or vendors’ approved invoices are recorded. As...
is required: The income statement must report the estimated uncollectible accounts expense (bad debts expense, doubtful accounts expense) that occurred during the accounting period The balance sheet must report in 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...
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