What is the conservatism principle? Definition of Conservatism Principle In accounting, the conservatism principle (or accounting constraint) directs an accountant, who is faced with doubt between two possible...
What is the conservatism principle? Definition of Conservatism Principle In accounting, the conservatism principle (or accounting constraint) directs an accountant, who is faced with doubt between two possible...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
What is a trial balance? Definition of a Trial Balance A trial balance is a bookkeeping or accounting report that lists the balances in each of an organization’s general ledger accounts. (Often the accounts with zero...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to be...
Why are assets and expenses increased with a debit? Definition of Debit In accounting the term debit indicates the left side of a general ledger account or the left side of a T-account. (The right side of an account or a...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
What is depreciation? Definition of Depreciation In accounting, depreciation is the assigning or allocating of the cost of a plant asset (other than land) to expense in the accounting periods that are within the...
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...
Does collecting a customer's accounts receivable affect net income? Definition of Accounts Receivable Accounts receivable is a current asset that results when a company reports revenues from sales of products or the...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
What is work-in-process inventory (WIP)? Definition of Work-in-process Inventory Work-in-process (WIP) inventory pertains to the goods for which the manufacturing has begun, but not yet completed. In other words, WIP is...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
pay rate is $20.50 which means the employee’s gross vacation pay will be $2,460 (120 hours X $20.50). The June 1 journal entry to record the vacation payment is: Debit Vacation Payable $2,400 (to eliminate the...
Subscription Expense and will credit Cash (or Accounts Payable). If the amount of the subscription is significant, the company should debit the cost of the subscription to the current asset account Prepaid Expenses and...
months later, the utility will record the purchase of only the coal that has arrived and the related account payable. Likewise, on the day the contract is signed, the coal company does not have a sale of the coal...
. The logic is that the company likely issued the checks to reduce its accounts payable. Since the issued checks will not be paid by the company’s bank, the company still has the liability. A negative cash balance in...
with your industry. You need to get those receivables turning to cash. Accounts payable should be reviewed to be sure that your company’s cash is not being paid to suppliers prior to the required payment dates. In...
in the control account. To find the amount that a specific customer owes, its recent payments, and its recent purchases on credit, you will quickly get that information from the Accounts Receivable Subsidiary Ledger....
. This journal entry will debit Depreciation Expense and will credit Accumulated Depreciation. Another example of a general journal entry is the adjusting entry to accrue interest on a bank loan. This journal entry will...
paying the credit card bill, the payment to the credit card company might be recorded with a credit to Cash and a single debit to Credit Card Payable (if that account was used when recording the credit card purchases)....
that is reported on the balance sheet is the cash as of the end of the day. For the day, the cash balance may have been $1000 at 8 a.m., $1200 at 9 a.m., $823 at 10 a.m., $3134 at 4 p.m., etc. Similarly, account...
will record an account receivable when it delivers a truckload of goods to a customer on June 1 and the customer is allowed to pay in 30 days. From June 1 until the company receives the money, the company will have an...
of materiality and cost/benefit allow the accountants to ignore the time value of money for the routine accounts receivable and accounts payable having credit terms of 30 or 60 days. Join PRO to Track Progress Mark...
is that the current asset Cash increased by $50,000 and the current liability Loans Payable increased by $50,000. If a company collects $30,000 of its accounts receivable, there is no change in working capital since the...
balances. Example of Using the Dividends Account Assume a corporation declares a cash dividend of $50,000 on its common stock. On the date the dividend is declared, the corporation will credit the current liability...
month of its accounting year, the manufacturer must debit Warranty Expense for $5,000,000 (5,000 cars X $1,000)and will credit Warranty Liability for $5,000,000. When warranty work is done, the manufacturer debits...
account Accrued Expenses (or Accounts Payable). (On June 13, the company will credit Cash and will debit the liability account.) Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
sheet as of the last day of the year must report the related liability To record this accrual, an adjusting entry is made that debits Repairs Expense and credits Accrued Expenses Payable. Example of an Accrual of...
of the areas of accounting in which accounting clerks are employed include: Accounts Receivable Accounts payable Payroll accounting Cost estimation Fixed asset accounting Assist in preparing various reports Salary Range...
What is notes receivable? Definition of Notes Receivable Notes receivable is an asset of a company, bank or other organization that holds a written promissory note from another party. (The other party will have a note...
the collection of the money owed to the company (part of the company’s accounts receivable and the customer’s accounts payable), the company’s invoice may state credit terms such as 2/10, net 30. For example,...
responsibilities are likely to be assigned to an accounts payable clerk, an accounts receivable clerk, and a payroll clerk. Generally, the bookkeeper (or accounting clerks) will not have a four-year accounting degree...
to the condo project. Hence the drop ship allows XYZ to avoid some expensive non-value-added activities. When Premier ships the water heaters, it will bill XYZ and will send the invoice to XYZ. As a result XYZ will have...
31. The adjusting entry will consist of a debit of $2,000 to Interest Expense (an income statement account) and a credit of $2,000 to Interest Payable (a balance sheet account). Balance Sheet: Retail/Wholesale –...
by a company’s liabilities will generally have a lower cost than money raised from stockholders’ equity for the following reasons: Some liabilities such as accounts payable have no interest expense associated with...
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