is required, the company borrowing the money will record and report the amount owed as Notes Payable. If the creditor is a vendor or supplier that did not require the company to sign a promissory note, the amount owed...
is required, the company borrowing the money will record and report the amount owed as Notes Payable. If the creditor is a vendor or supplier that did not require the company to sign a promissory note, the amount owed...
account entitled Petty Cash must be opened. (This will be an additional cash account that can be listed separately on the company’s balance sheet or its balance could be included with the balances in the other cash...
’ equity, and statement of changes in equity) is one of the five required financial statements issued by a U.S. corporation whose common stock is publicly traded. This financial statement summarizes on one page all of...
Inventory is dormant and contains only the cost of the prior year’s ending inventory. With the periodic inventory system, the costs of additional purchases of goods are debited to the temporary account Purchases....
will be closed at the end of each year. However, the account’s debit balance is closed directly to the owner’s capital account. (The owner’s draws are not reported as an expense on the company’s income...
spent to acquire or improve a company’s fixed assets. The capital expenditures increase the respective asset accounts which are reported in the noncurrent asset section of the balance sheet entitled property, plant...
(noncurrent) liability account Bonds Payable will be credited with the face value of the bond. Cash will be debited for the cash received, and any difference will be recorded in one or two of the following bond-related...
at the time the computer is shipped, the company will have very little in accounts receivable and will enjoy great cash flow. Another computer company might sell only through retailers. This company will have to...
securities Accounts receivable Difference between Current Ratio and Quick Ratio To illustrate the difference between the current ratio and the quick ratio, assume that a company’s balance sheet reports current assets...
will be recorded with a debit of $4,000 to Accounts Receivable and a credit of $4,000 to Sales Revenues. Definition of Receipts A company’s receipts refers to the cash that the company received. Examples of Receipts...
What is book value? Definition of Book Value In accounting, book value refers to the amounts contained in the company’s general ledger accounts (or books). It is important to realize that the book value is not the same...
a product line from Divesting Company for a single cash payment of $800,000. Your Corporation expects that the product line will result in the following cash flows occurring in each year for 10 years: additional cash...
. The logic is that the company likely issued the checks to reduce its accounts payable. Since the issued checks will not be paid by the company’s bank, the company still has the liability. A negative cash balance in...
include a highly-respected trade name, a valuable patent, a very effective management team and company culture. Example of Assets Examples of assets that are likely to be listed on a company’s balance sheet include:...
of the production equipment Salaries and benefits for production supervisors These actual costs will be recorded in general ledger accounts as the costs are incurred. Definition of Applied Overhead Applied overhead is...
What is the difference between periodic and perpetual inventory systems? Periodic Inventory System In a periodic system the account Inventory: Has only the ending balance from the previous accounting year Excludes the...
. Any insurance premium costs that have not expired as of the balance sheet date should be reported as a current asset such as Prepaid Insurance. The costs that have expired should be reported in income statement...
The composition of the current assets is also an important consideration. If the current assets are predominantly in cash, marketable securities, and collectible accounts receivable, that is likely to provide more...
How do you record an asset that was partially financed? Example of Recording an Asset that was Partially Financed Assume that your company purchased a car for $10,000 by paying cash of $4,000 and signing a promissory...
, and the bank credits its liability account Customer Deposit Accounts. The liability is appropriate since the bank has the obligation to return the customer’s money on demand). The bank’s liability is reduced when...
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 account Materials Purchase Price Variance. The company’s general ledger accounts for inventories (raw materials, work-in-process inventory, finished goods) and the cost of goods sold...
amount to $100 (the amount shown in the Petty Cash account). The petty cash vouchers provide the documentation for the $80 check request. In the process Mary discovers that the vouchers add up to only $79. Mary will...
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...
for the statement of cash flows. Mark as wrong Mark as right cash and cash equivalents This balance sheet line reports a company’s cash, money market accounts and highly liquid investments which had a maturity date of...
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...
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...
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...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
Bookkeeping Video Training Part 8 Adjusting entries: accrued expenses, reversing the accrual of expenses after the accounting period is over Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
Seventeen years ago I earned an accounting degree. How should I proceed to become a CPA? To pass the CPA Exam you will need to review all that you had learned plus get current on accounting and auditing standards that...
Will I be able to pass the CPA Exam after studying the accounting material on AccountingCoach.com? AccountingCoach.com contains introductory accounting material. While you need to master the principles and concepts...
. It is this cost that your company should report as expense on its June income statement. The amount of the utility bills with meter reading dates of June 30 should be reported as a current liability (accounts payable)...
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