Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Financial Statements(Quick Test #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of...
Adjusting Entries Why Adjusting Entries Are Necessary Adjusting entries are required at the end of each accounting period so that a company’s financial statements reflect the accrual method of accounting. Without...
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...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Adjusting Entries For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Adjusting Entries(Quick Test #4 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
The combined amount of the debit balance in the current asset account Accounts Receivable and the credit balance in the contra asset account Allowance for Doubtful Accounts. The difference between the balances in these...
This contra owner’s equity account has a debit balance that represents the current year draws made by the sole proprietor, R. Smith. After the year’s financial statements have been prepared, the balance in...
Assets = Liabilities + Owner’s Equity. For a corporation the equation is Assets = Liabilities + Stockholders’ Equity. For a nonprofit organization the accounting equation is Assets = Liabilities + Net Assets....
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
A major classification on the balance sheet. It is the second long term asset section after current assets. Included are land, buildings, leasehold improvements, equipment, furniture, fixtures, delivery trucks,...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
A multicolumn listing of each payment required during the period of a loan. Each payment is detailed by the amount of interest, the principal payment, and the remaining unpaid principal balance. The interest portion of...
A liability account that reports the amount payable as of the balance sheet date. For the account to show a balance, a loss/obligation must be probable and the amount can be estimated. If the lawsuit is remote or only...
A current liability account that reports the amounts owed to the utility companies for electricity, gas, water, phone as of the date of the balance sheet. If a utility bill has not been received, the company will have to...
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
An asset representing the right to receive the principal amount contained in a written promissory note. Principal that is to be received within one year of the balance sheet date is reported as a current asset. Any...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
A financial statement that reports the current year information contained in the general ledger account Retained Earnings. The statement will include the beginning balance, prior period adjustments, net income for the...
What is the difference between liquidity and liquidation? Definition of Liquidity Liquidity usually refers to a company’s ability to pay its bills when they become due. Liquidity is often evaluated by comparing a...
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...
What is the carrying amount? Definition of Carrying Amount The term carrying amount is also known as book value or carrying value. The term carrying amount is often used when there is a valuation account associated with...
What adjustment is needed when a check that was written in a previous month appears on the current month's bank statement? A check written in any previous month but not appearing on previous bank statements, should have...
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
What are prepaid expenses? Definition of Prepaid Expenses Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
In a bank reconciliation, what happens to the outstanding checks of the previous month? Definition of Outstanding Checks Outstanding checks are checks written by a company, but the checks have not cleared the bank...
Are retained earnings an asset? Definition of Retained Earnings Usually, retained earnings consists of a corporation’s earnings since the corporation was formed minus the amount that was distributed to the stockholders...
Where do worker compensation insurance costs get reported on the financial statements? Worker compensation insurance costs (also referred to as worker comp) should appear on the income statement and also on the balance...
What is the difference between Rent Receivable and Rent Payable? Definition of Rent Receivable Rent Receivable is an asset account in the general ledger of a landlord which reports the amount of rent that has been earned...
What is the difference between loan interest and bank loan repayment? Definition of Loan Interest Loan interest is the expense a borrower incurs for using a lender’s money. Loan interest is also the income earned by a...
What is the entry for a loan to an employee? Definition of Loan to Employee A loan to an employee is money advanced by the company to assist the employee. If the employee is expected to repay the loan within one year of...
Is an entry made for outstanding checks when preparing a bank reconciliation? Definition of Outstanding Checks Outstanding checks are checks written by the company, recorded in the company accounts, but not yet appearing...
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 +...
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