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...
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...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
and has also used many supplies during the accounting period, both the asset account Supplies and the account Supplies Expense should have debit balances. Select... True False 8. The account balances for revenues and...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
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...
Is a security deposit for a rental agreement recorded in a liability account? The person paying the security deposit would credit the asset account Cash and would debit the asset account Security Deposits. The person...
to as journalizing. After journalizing a transaction, the process of recording those amounts in the appropriate general ledger accounts is known as posting. 7. What is the normal balance for an asset account? Select......
is calculated using this category or classification of assets and liabilities. CURRENT RURNTEC Unscramble CURRENT TUERNRC Unscramble 2. The word pertaining to a company's ability to pay its obligations when due....
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...
. When doubt exists between two alternatives, the accountant should select the one with the lesser asset amount or the one resulting in less profit. Select... conservatism cost economic entity full disclosure going...
to the owner’s capital account at the end of each accounting year. Select... True False 3. The closing entries will include a __________ to the Sales account. Select... debit credit 4. Prepaid Insurance is a temporary...
which are the amounts owed to vendors who have supplied goods or services. The amount of accounts payable is documented by the vendor invoices that have been approved and processed, but have not yet been paid. Deferred...
A major repair such as an engine overhaul, which will extend the useful life of the asset. The amount should be recorded in the asset account and then depreciated over the remaining life of the asset.
is the __________ __________. 3. Generally a __________ asset is one that will turn to cash or will be used up within one year of the balance sheet date. 4. Plant assets used in the business are reported under the...
How do you account for a project under construction? Accounting for a Project Under Construction If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
, the balance sheet reflects the accounting equation: assets = liabilities + stockholders’ equity. Assets are resources such as cash, inventory, investments, buildings, equipment, and prepaid or deferred expenses....
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...
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 book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. The book value of a company is the amount of owner’s or stockholders’ equity....
and administrative expenses Nonoperating expenses (or other expenses) which were incurred but were outside of the corporation’s main activities. An example is the interest expense incurred by a retailer. Gains An...
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...
amount if it is paid within 10 days instead of the required 30 days) the amount of the discount is recorded in the contra revenue account Sales Discounts. Again, the company’s management will see the original amount...
that the net amount will also be reported. The net amount is often referred to as the carrying amount or perhaps the net realizable amount. Examples of Contra Accounts To illustrate, let’s use the contra asset account...
a year by the company’s average total assets during the same year. Mark as wrong Mark as right total asset turnover This ratio is the result of dividing the net revenues (or net sales) of a year by the average total...
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed...
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
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...
What does amortization mean? Definition of Amortization In general, the word amortization means to systematically reduce a balance over time. In accounting, amortization is conceptually similar to the depreciation of a...
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...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
This is a long term asset account that accumulates the cost of a project that has not yet been placed into service. When the project is finished and placed into the service, the cost is removed from this account and is...
Work-in-progress is the long-term asset account that is used to report the amounts spent on the construction of buildings and equipment until the asset is completed and put into service.
An example is the major overhaul of a truck’s engine that will extend the useful life of the truck. This expenditure is recorded on the balance sheet in an asset (or in a contra asset) account and then depreciated...
A rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance...
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
Operating expenses made to return an asset to its previous condition (rather than to make the asset more than it was originally). The amount is charged to an account such as Repairs and Maintenance Expense in the period...
A lease that “in substance” is a purchase and financing arrangement. When a lease meets certain criteria, the asset being “rented” is recorded as an asset and a liability is also recorded. A lease...
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