asset) and credit Interest Revenue (or Income). Example of Accrued Interest Let’s assume that on December 16, a company borrows $20,000 from its bank at an annual interest rate of 6%. The first interest payment is due...
asset) and credit Interest Revenue (or Income). Example of Accrued Interest Let’s assume that on December 16, a company borrows $20,000 from its bank at an annual interest rate of 6%. The first interest payment is due...
on December 31 pays a six-month insurance premium of $12,000 on December 1 with insurance coverage beginning on December 1. One-sixth of the $12,000, or $2,000, should be reported as insurance expense on the December...
with the accrual basis of accounting Fixed asset accounting Cost accounting Budgeting and profit planning, and more Common titles for accountants include corporate accountant, chief accountant, controller, assistant...
in the bank’s liability account is reduced by a debit. In the company’s general ledger, the bank debit memo will reduce the company’s checking account (which is an asset) and will require the company to credit its...
When do you adjust the amount of prepaid expenses? Definition of Adjusting Prepaid Expenses The balance in the current asset account Prepaid Expenses should be adjusted prior to a company issuing its financial...
Why aren't retained earnings distributed as dividends to the stockholders? Definition of Retained Earnings Retained earnings is one component of the stockholders’ equity section of a corporation’s balance sheet. Some...
What is disinvestment? In business, disinvestment means to sell off certain assets such as a manufacturing plant, a division or subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital...
What is separation of duties? What is Separation of Duties The separation of duties is one of various internal control techniques for safeguarding a company’s assets. By separating employee’s duties, the likelihood...
What is the difference between receivables and accounts receivable? Definition of Accounts Receivables Accounts receivable are usually current assets that result from selling goods or providing services to customers on...
Which financial statement shows a corporation's worth? Not one of the financial statements will show a corporation’s worth. The balance sheet, income statement, statement of cash flows, and stockholders’ equity...
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
Is it possible for owner's equity to be a negative amount? Definition of Negative Owner’s Equity Negative owner’s equity means the amount of a sole proprietorship’s liabilities exceeds the amount of its assets....
What is the 13-point average for inventory? The 13-point average for inventory for the calendar year 2023 would be the sum of the following: (the inventory amount at December 31, 2022 plus the 12 end-of-the-month amounts...
What is the segregation of duties? Definition of Segregation of Duties The segregation of duties involves dividing a task so that more than one person is involve in the company’s transactions. By segregating duties, it...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
How do cash dividends affect the financial statements? Definition of Cash Dividends Cash dividends are a distribution of a corporation’s earnings to its stockholders or shareholders. For cash dividends to occur, the...
What is cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
What is included in cash and cash equivalents? Examples of Cash In accounting, a company’s cash includes the following: currency and coins checks received from customers but not yet deposited checking accounts petty...
sales on credit that are not yet collected. The balance in the Allowance for Doubtful Accounts is an estimate of the accounts receivable amounts that will not be collected. Accounts receivable, net is often a line item...
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...
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...
If inventory is understated at the end of the year, what is the effect on net income? Definition of Inventory is Understated If inventory is understated at the end of the year, it means that the amount of inventory being...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Stockholders' Equity (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. If you have difficulty answering the following questions, learn more about this topic by reading our...
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 Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
from disposing of an old asset, etc. The net cash flows also include the cash outflows such as paying for new equipment, paying for goods and services from the last accounting period, repaying bank loans, making a...
is not an expense and it is not part of the company’s sales revenues. If a company purchases a new delivery van for $50,000 plus $3,500 of sales tax, the company will record the truck as an asset at its total cost of...
inventory system in which the purchases of goods are recorded in the general ledger balance sheet asset account Inventory. When goods are sold, the Inventory account is reduced and the amount is recorded in the general...
4. The accounting equation remains in balance due to ________-entry bookkeeping. DOUBLE BLDEUO Unscramble DOUBLE DOEBUL Unscramble 5. Debits are entered on the ______ side of a T-account. LEFT EFLT Unscramble LEFT FLET...
will have the accounts arranged in the same order as the general ledger. A common order for a business corporation is: Account Numbers It is common for the first digit of each account number to indicate the type of...
, a company records an adjusting entry at the end of each accounting period for the amount of the losses it anticipates as the result of extending credit to its customers. The entry will involve the operating expense...
of fertilizers and weed treatments for $300. However, the customer must prepay in December for the five treatments that will be done between April and September. When the company receives the $300 in December, it will...
. For example, an account number beginning with a "1" might signify that the account is an asset account, a "6" might signify an operating expense, etc. True Right! Generally, the larger and more...
Stockholders' Equity (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (39) Marked Wrong (0) Marked Right (0) stockholders' equity (or) shareholders' equity The total of this section of a...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
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