What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
the calculation and recording of depreciation, establishing allowances for uncollectible accounts, etc.). After making the adjusting entries, the accountant prepares the company’s financial statements (income...
from the company’s present cash balance. Also assume that the company’s building materials, labor and overhead will amount to $400,000 during the three months of construction. The capitalized interest is based on...
the positive amount in the Cash account Before issuing the balance sheet, any errors (such as first two items) need to be corrected. The accounts with credit balances such as those in the last 3 items above need to be...
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...
. A nonprofit organization’s financial reporting includes a statement of financial position, a statement of activities, a statement of functional expenses, and a statement of cash flows. Some nonprofits are required to...
will be recorded by the issuing corporation as a debit to Discount on Bonds Payable, a debit to Cash for $9,800,000, and a credit to Bonds Payable for $10,000,000. Over the life of the bonds, the initial debit balance...
of assets minus $1 million of liabilities). When Company A records the transaction, it will: Debit various asset accounts for $4 million Credit various liability accounts for $1 million Credit Cash for $5 million Debit...
%). It also indicates that a company without sufficient cash to pay within the early payment discount period will experience a huge opportunity cost. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows,...
that will be turning to cash.) For financial statement purposes the allowance method is the better method since 1) the balance sheet will be reporting a more realistic amount that will be collected from the company’s...
of the amount of the accounts receivable that will be turning to cash, since some customers may not pay the full amount owed to the company. The credit balance in the allowance account is an estimate amount in an...
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...
in the checking account If there is an error in the company’s cash records, there will be a related error in another account because of the double-entry system of accounting. If a dishonest person is embezzling money...
has a credit balance of $2,000, the readers of the balance sheet will see that customers owe $40,000 for past purchases but the company does not expect to collect $2,000 of the $40,000. Therefore, the net amount of the...
, the merchant will debit Cash for $105 and will credit Sales for $100 and will credit Sales Tax Payable for $5. Sales Tax Payable is a liability account. When the sales taxes are remitted to the state, the merchant will...
to the expense Purchase Discounts Lost. In our example, if the company pays the invoice in 30 days, it is not entitled to the early payment discount and will therefore have to credit Cash for $1,000. The debit amounts...
as an ordinary annuity or an annuity in arrears. Example of Arrears Assume a corporation has 10,000 shares of 6% $100 cumulative preferred stock. Since the corporation has a limited amount of cash available, the board...
when the bill arrives in January The following are a few examples of payments that will never be an expense: A payment of $100,000 to purchase the land adjacent to a company Payments that are cash dividends to...
. Each year, this stockholder must receive dividends on the preferred stock of $800 (8% X $100 = $8 per share X 100 shares) before the common stockholders are allowed to receive any cash dividends for the year. Unless...
will be reported by the bank as a current liability, and will be reported as a short-term investment by the depositor (provided the amount is not restricted by the depositor). Example of a Certificate of Deposit James...
to Cash and a $3,000 credit to the liability account Customer Deposits or Unearned Revenues. With no downpayment or advance payment in December, there is no entry recorded.) The $20,000 contract is not reported as an...
from December 1 through May 31. The company recorded the December 1 payment with a debit of $6,000 to Prepaid Insurance and a credit of $6,000 to Cash. On December 31, the account Prepaid Expenses must be adjusted to...
. Example of Par Value Let’s assume that a share of common stock has a par value of $0.01 and is sold to an investor for $25. The corporation issuing the stock will debit Cash for $25.00 and will credit Common Stock...
How do you compute the selling price of a bond? Definition of Selling Price of Bond The selling price (or the market value) of a bond is the present value of the future contractual cash amounts that are going to be...
. The contract to pay these cash amounts to the investors makes bonds a less risky investment than common stock. Less risk for the investor means the investor will earn a smaller return—and the corporation will have a...
and Deferred Revenues? Select... Asset Expense Liability Revenue 8. On December 20, Jay Corporation received $5,000 from a new customer as a down payment for services that Jay Corporation will provide in January. On...
as current __________. 17. Credit sales that have not been collected are reported in the asset account __________ __________. 18. A negative cash balance should be reported in the balance sheet section current...
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 Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
full disclosure going concern industry practices matching materiality monetary unit time period 13. Defined as the cash or cash equivalent amount at the time an asset was purchased. Select... conservatism cost economic...
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.
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...
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 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...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
minus 1) Sales Discounts, and 2) Sales Returns and Allowances equals __________ sales. 5. The cost of goods sold is the cost of goods available minus the costs in __________ inventory. 6. If a store sells its old...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The accounting equation is similar to the format of which financial statement? Select... balance sheet...
journal Trial Balance 2. The bookkeeping or accounting equation is __________ = liabilities + owner’s equity. 3. When a company pays a bill by writing a check, the company should __________ a Cash account. Select......
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