In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
between the asset amounts reported on the balance sheet minus the liability amounts. Next, the accountant’s cost principle requires that only the cost of items purchased can be reported as an asset. This means that...
= Liabilities + Owner’s Equity, to understand why an asset (shown on the left side of the accounting equation) will normally have its account balance on the left side or debit side. Liabilities and owner’s equity...
A classic example of the materiality concept is a company expensing a $20 wastebasket in the year it is acquired instead of depreciating it over its useful life of 10 years. The matching principle directs you to record...
asset. The deferred expenses that will not become expenses within one year of the date of the balance sheet will be reported in the long-term asset section of the balance sheet under the classification of other assets....
report a corporation’s assets as dollar amounts (rather than reporting details of all of the assets). If an asset cannot be expressed as a dollar amount, it cannot be entered in a general ledger account. For example,...
. Therefore, to reduce the credit balance, the expense accounts will require debit entries. Example of Rent Expense as a Debit If a company pays $800 for the current month’s rent, the company’s assets and its...
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...
is the difference between the total amount of assets and the total amount of liabilities as reported on the balance sheet, the corporation’s book value is not the market value of the corporation. Two reasons for the...
. The bookkeeping or accounting equation is Assets = Liabilities + Owner's __________ Equity. 10. The book of original entry is the definition of a __________. Journal Right! Ledger Wrong. 11. When a sale is made on...
, and interest. Example of an Accrual as a Current Asset Assume that during December a company has earned interest of $5,000 on its investment in U.S. Treasury bills. However, all of the interest will be received by the...
This term indicates the left side of a general ledger account and it is the normal balance for asset, expense, and loss accounts. debit This term indicates the left side of a general ledger account and it is the normal...
What are turnover ratios? Definition of Turnover Ratios In accounting, turnover ratios are the financial ratios in which an annual income statement amount is divided by an average asset amount for the same year....
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
will report each asset, liability, and owner equity amount as a percentage of total assets. Common-size financial statements allow you to compare the financial statements of large companies with the financial statements...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
transaction will affect at least two general ledger accounts and the debit amounts must be equal to the credit amounts. Mark as wrong Mark as right accrual This type of adjusting entry is needed prior to issuing...
, the software requires that you enter only the account or accounts to be debited. Accounting Equation May Help You Understand Debits and Credits The accounting equation is: Asset accounts, which are on the left side of...
. There is no regulation that requires the tax depreciation to be the same as the book depreciation in a given year. (However, over the life of an asset, the total depreciation expense for both will be limited to the...
Unscramble 3. Land is an asset that is not ____________________. DEPRECIATED EIEAPECRDTD Unscramble DEPRECIATED EIEEACRDTPD Unscramble 4. An asset's book value is its cost minus its __________________ depreciation....
is deferred to the balance sheet account Prepaid Rent (or Prepaid Expenses,) which is a current asset. During the three months of January 1 through March 31 (when the prepaid rent is expiring) the $3,000 prepayment must...
or the left side of a T-account. Example of Dr. Typically, the general ledger accounts for assets and expenses will have debit (dr.) balances and the balances in the asset accounts will be increased with debit amounts....
amount of stockholders’ equity during the year. If the corporation’s net income was $100,000 and its stockholders’ equity averaged $500,000 during the year, the return on equity was 20%. Asset Turnover Ratio The...
. The sale of inventory on credit will usually cause an increase in the __________ ratio. Select... current quick both current and quick neither current nor quick 8. The return on total assets can be viewed as the profit...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. When a company prepares an adjusting entry to accrue an expense, which type of account is...
is __________ account. Select... an asset a liability a revenue 25. Prepaid Insurance is an example of __________ expense. Select... an accrued a deferred 26. Interest earned on a bank certificate of deposit that pays...
will not be depreciated? Select... Buildings Equipment Land Vehicles 10. The amount of prepaid insurance that has not expired as of the end of an accounting period should be reported as __________. Select... an asset an...
is the __________-test ratio. 6. The numerator in the calculation of the receivable turnover ratio is the net credit __________ for the year. 7. The inventory turnover ratio is best computed with the numerator being the...
Debits and Credits (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (30) Marked Wrong (0) Marked Right (0) debit (or) debit balance This is the left side of an account and also the normal...
, the net asset classifications temporarily restricted and permanently restricted have been combined into a single classification: net assets with donor __________ restrictions. 7. Classifying expenses into program...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
This system requires that every business transaction must affect at least two general ledger accounts, and the debit amounts must be equal to credit amounts. Mark as wrong Mark as right owner's draw (or)...
What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
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