(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
the credit memo, the following will occur in its accounting records: 1) a debit of $8 to Accounts Payable, and 2) a credit of $8 to Purchases Returns and Allowances (or to Inventory). Join PRO to Track Progress Mark the...
: Asset accounts such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Buildings, Equipment, etc. For example, a debit balance in the Cash account indicates a positive amount of cash. (Therefore, a credit...
in the control account. To find the amount that a specific customer owes, its recent payments, and its recent purchases on credit, you will quickly get that information from the Accounts Receivable Subsidiary Ledger....
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...
.) 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...
sales revenues (quantity and prices) to cover both the product costs of the units sold and the other expenses of the accounting period. Example of Product Cost per Unit The product cost per unit is used for valuing a...
in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold from the sale of inventory items...
on the balance sheet are the company’s resources such as cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets . Generally assets are reported at their cost or a lower...
What is safety stock? Definition of Safety Stock Safety stock is an additional quantity of an item held by a company in inventory in order to reduce the risk that the item will be out of stock. Safety stock acts as a...
in the following situations: There is one root cause of the inventory However, if the company manufactures diverse products, some of which use expensive equipment while some use only inexpensive equipment, or the...
sheet, statement of cash flows, and statement of stockholders’ equity. Mark as wrong Mark as right balance sheet (or) statement of financial position This financial statement reports a corporation’s assets,...
amount that the company received in advance of earning it The amount received that has not yet been earned 10. A credit balance in a company’s Accumulated Depreciation account usually indicates which of the following?...
Our Explanation of Financial Accounting introduces some of the basic accounting concepts and how they affect the income statement, balance sheet, and other financial statements.
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
. Which type of journal entries are made at the end of each accounting period so that the financial statements better reflect the accrual method of accounting? Adjusting Right! Closing Wrong. Reversing Wrong. 3. The...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
accounts as of the final moment of the date shown in the heading. Note: Typically the final moment of the balance sheet is the last instant of the last day of an accounting period, such as midnight of December 31, June...
What are phantom profits? The terms phantom profits or illusory profits are often used in the context of inventory (but can also pertain to depreciation) during periods of rising costs. The amount of phantom or illusory...
and crediting Purchase Returns and Allowances (or Inventory) for $60. If GoodCorp pays SalesMax by June 25, GoodCorp will record the payment as follows: Debit Accounts Payable for $1,140 ($1,200 – $60) Credit Sales...
($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...
liabilities when they come due. For example, if a company’s current assets consist mainly of slow-moving inventory and some slow-paying accounts receivable, the company may not be able to convert its current assets to...
. Perhaps a U.S. manufacturer using LIFO will deliberately reduce its inventory quantities in low profit years in order to liquidate the old LIFO layers containing low unit costs. Another manufacturer might increase its...
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...
on the income statement in the period in which they are earned? Select... Accrual basis Cash basis 12. Under the accounting or bookkeeping system known as double entry, how many general ledger accounts will be involved...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Entity Wrong. The economic entity assumption involves keeping the owner's personal transactions separate from the business transactions. Going Concern Right! This is the correct answer. Time Period Wrong. The time...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
that under the accrual basis of accounting: Revenues are reported in the accounting period in which they are earned (as opposed to when cash is collected) Expenses are reported in the accounting period when they best...
A phrase used in depreciation and amortization to indicate that the expense is being allocated on a logical basis (because a cause and effect relationship does not exist).
as a positive amount after net income because depreciation is __________ expense. Select... an out-of-pocket a cash a noncash 41. If inventory increases during the period of the statement of cash flows, the amount of...
, __________ activities, and __________ activities. 2. The exchange of bonds for stock shall be reported as __________ information. 3. A corporation is required to disclose the amount of interest and income taxes that it...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
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