How can I learn bookkeeping at a low cost? You can use the Internet to learn bookkeeping at little or no cost. For example, at no cost you can read clear explanations of debits and credits, adjusting entries, financial...
How can I learn bookkeeping at a low cost? You can use the Internet to learn bookkeeping at little or no cost. For example, at no cost you can read clear explanations of debits and credits, adjusting entries, financial...
What is revenue? Definition of Revenue Revenue is the amount a company receives from selling goods and/or providing services to its customers and clients. A company’s revenue, which is reported on the first line of its...
What is the difference between adjusting entries and correcting entries? Definition of Adjusting Entries Generally, adjusting entries are required at the end of every accounting period so that a company’s financial...
Reducing the Need for Accruing Expenses One day I was explaining to the owner of a small business that I would have to accrue for the shipping expenses associated with his company’s sales. Since the shipping company...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
What is the difference between a balance sheet of a nonprofit organization and a for-profit business? Definition of Balance Sheet The balance sheet is one of the main financial statements issued organizations. The...
What is accrued income? Definition of Accrued Income Accrued income is an amount that: A company has earned The company has a right to receive The collection is probable Has not yet been recorded in the general ledger...
What is income smoothing? Definition of Income Smoothing Income smoothing involves reducing the fluctuations in a corporation’s earnings. The reductions in fluctuations can result from some legitimate business methods...
What is a capital account? Definition of Capital Account In accounting and bookkeeping, a capital account is a general ledger account that is part of the balance sheet classification: Owner’s equity (in a sole...
What is the effect on the income statement when the allowance for uncollectible accounts is not established? Definition of Allowance for Uncollectible Accounts The Allowance for Uncollectible Accounts or Allowance for...
Is the drawing account a capital account? Definition of Drawing Account A sole proprietorship will have a drawing account in which the owner’s withdrawals or draws of cash or other assets are recorded. The amounts of...
Why are the amounts on the financial statements rounded to thousands or millions? Definition of Rounding Amounts on Financial Statements Rounding the amounts on a company’s financial statements means dropping the less...
How do I learn more about the CPA Exam? You can learn more about the Uniform CPA Exam at our free Accounting Career Center. Within our Accounting Career Center are direct links to the state boards of accountancy, CPA...
What is "deficit" appearing in stockholders' equity? Definition of Deficit Within Stockholders’ Equity The term deficit is used within the stockholders’ equity section of a corporation’s balance sheet in place of...
How do I write off old outstanding checks? Definition of an Old Outstanding Check We will assume that an outstanding check has appeared on the outstanding check list that is part of the company’s bank reconciliation...
How do you calculate the payroll accrual? Definition of Payroll Accrual The payroll accrual is the amounts a company owes for work done by employees, but the amounts have not yet been recorded in the company’s general...
What is a contra account? Definition of Contra Account A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account...
What is a controller's cushion? A controller’s cushion or controller’s reserve involves temporarily recording too much expense for an item that the controller calculates. For example, the controller might budget...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
Why would Prepaid Insurance have a credit balance? Definition of Prepaid Insurance Generally, Prepaid Insurance is a current asset account that has a debit balance. The debit balance indicates the amount that remains...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
What is the return on assets ratio? Definition of Return on Assets Ratio The return on assets ratio, or return on total assets ratio, relates a company’s net income during a specific year, to the company’s average...
What is an impairment? Definition of Impairment The term impairment is associated with an asset currently having a market value that is less than the asset’s book value . A test is done to determine whether the...
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
What is operating income? Definition of Operating Income Operating income is defined as a corporation’s operating revenues minus its operating expenses. Operating income will be shown as a subtotal on many...
What is materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....
What is the difference between revenues and earnings? Definition of Revenues and Earnings Revenues are the amounts earned from providing goods or services to customers during the period shown in the heading of the income...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
What is carriage outwards? Definition of Carriage Outwards Carriage outwards refers to the transportation costs that a seller must pay when it sells merchandise with the terms FOB Destination. Carriage outwards is also...
What is the employee's Social Security tax rate for 2022 and 2023? Social Security Payroll Tax for 2022 The employee’s Social Security payroll tax rate for 2022 (January 1 through December 31, 2022) is 6.2% of the...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings, profits). The...
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
What is a lease? Definition of a Lease Typically, a lease is a written agreement between an owner of property (land, building, equipment, vehicle, etc.) and a person or business that will use the property for a stated...
What is an asset's useful life? Definition of Asset’s Useful Life An asset’s useful life is the estimated period of time (or total amount of activity) that a long-lived asset will be economically feasible for use in...
What is float? Definition of Float In accounting and bookkeeping, float is the time between the writing of a check and the time that the check clears the bank account on which it is drawn. Examples of Float Payer...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
What is the difference between gross margin and contribution margin? Definition of Gross Margin Some use the term gross margin to mean the same as gross profit, which is: net sales minus the cost of goods sold. Others...
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