In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
of comprehensive income, balance sheet, statement of cash flows, and statement of stockholders’ equity. financial statements These are part of the accounting cycle and part of a corporation’s external financial...
income. The retailer’s main operations are purchasing and selling merchandise. Investing its idle cash in interest-bearing investments is outside of its main or central operations. Gains often involve the disposal of...
What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
How do you record a check that clears the bank months after it was voided? Since you had voided the check months earlier, your general ledger no longer reflects 1) the original credit to the cash account, and 2) the...
When a company writes a check, the company records it with a credit to the Cash account in the company’s general ledger. Whether the check has or hasn’t cleared the bank account, the company’s Cash account...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
Where do I record the refund of a registration fee? If the registration fee refers to a fee expense that you had originally paid but the amount is now being refunded to you, I would credit the same expense account that...
with an investment of $5,000. The entry to business accounts will include a debit to Cash for $5,000. On the next day, the business spends $1,000 to purchase office equipment. Part of this entry will include a credit to...
What is the entry when a company lends money to an employee? Definition of Employee Loan When a company lends money to one of its employees, the company is reducing its Cash and increasing another asset such as Other...
, the payback reciprocal is 1 divided by 4 = 0.25 = 25%. The payback reciprocal overstates the true rate of return because it assumes that the annual cash flows will continue forever. It also assumes that the annual cash...
. Bank interest earned Loan payments Electronic charges or remittances from suppliers and others Customer’s checks that were deposited but are now being returned because of insufficient funds The journal entries for...
the following: Debit Cash Credit the account(s) that was debited when the check was originally recorded This entry increases the general ledger account Cash (that contains the company’s checking account). It also...
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...
. Mark as wrong Mark as right current assets This section of the balance sheet reports the company’s cash plus resources which are usually expected to turn to cash within one year of the balance sheet date (or within...
What is the difference between dividends and interest expense? Definition of Dividends Dividends are a distribution of a corporation’s earnings to its stockholders. Dividends are not an expense of the corporation and...
additional debit amounts are entered, and will be decreased when credit amounts are entered. Examples of Debit To illustrate the term debit, let’s assume that a company has cash of $500. Therefore, the company’s...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
, June 30, etc.) Statement of cash flows. This statement reports the major causes for the change in cash and cash equivalents during the accounting period. The cash flows are presented as operating, investing, or...
they are depreciated over their useful lives. The accumulated depreciation for these assets is also reported as part of the property, plant and equipment. The amount of capital expenditures for an accounting period is...
its liability Accounts Payable and will credit Cash. Company A will debit Cash and will credit its current asset Accounts Receivable. Symmetry with Accounts Receivable and Accounts Payable Our examples show that there...
automatically and only require information on the other account. Examples of Double Entry When a company borrows money from a bank, the company’s asset Cash is increased and the company’s liability Notes Payable or...
. Examples of Inventory Turnover If a company’s cost of goods sold for the most recent year was $600,000 and its inventory during that year was $150,000 the inventory turnover was 4 times. This mean the inventory on...
’ equity usually have credit balances. When a company provides services for cash, its asset Cash is increased by a debit and its owner’s equity is increased by a credit. The credit is initially recorded in a revenue...
is the expected number of years it will take for a company to receive net cash inflows that add up to the amount of its initial cash investment. Note that the payback period focuses on future cash flows over many years...
many income statements in the form of depreciation expense and/or as part of a manufacturer’s cost of goods sold. The total capex amount that was spent in a recent accounting period is reported in the statement...
: 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...
and divides their total by the total amount of current liabilities. Definition of Acid Test Ratio The acid test ratio uses only the following current assets (which are considered to be the “quick assets”) and...
. Examples of Double-Entry Bookkeeping Let’s assume that a company borrows $10,000 from its bank. The company’s asset account Cash is increased with a debit entry of $10,000 and the company’s liability account...
will include preparing the following projections for the next accounting year: Amounts for sales Amounts for producing goods Amounts for each department’s expenses Summarizing the above budgets into a master budget or...
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...
balance. When a bank credits a company’s checking account, the bank’s liability account Customer Deposits is increased. However, the company must debit its Cash account to increase the company’s asset Cash. Credit...
) effects on the accounting equation of the business or company. 2. The owner invests personal cash in the business. Assets Increase Right! The company's asset account Cash increases. Decrease Wrong. No Effect...
as wrong Mark as right acid test ratio (or) quick ratio This ratio results when the sum of a company’s cash + marketable securities + accounts receivable is divided by the company’s current liabilities. acid test...
Why does a bond's price decrease when interest rates increase? Definition of Bond’s Price A bond’s price is the present value of the following future cash amounts: The cash interest payments that occur every six...
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.
that has a specified dividend rate and the owners generally do not participate in the growth of the corporation is __________ stock. 9. When a corporation declares a cash dividend, it credits the current liability...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Current assets minus current liabilities is __________ capital. 2. The time it takes for a retailer’s...
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
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