Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
The original cost incurred to acquire an asset (as opposed to replacement cost, current cost, or cost adjusted by a general price index). If a company purchased land in 1980 for $10,000 and continues to hold that land,...
, and stockholders’ equity accounts. Credit entries will also decrease the debit balances usually found in asset and expense accounts. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
What is illusory profit? Illusory profit, also called phantom profit, is the difference between 1) the profit reported using historical costs required by US GAAP, and 2) the profit computed using replacement costs....
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
Where is a manufacturer's inventory reported in the balance sheet? A manufacturer’s inventory will be reported in the current assets section of the balance sheet and in the notes to the financial statements. In the...
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
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 asset Cash and will __________. Select... increase another asset reduce owner's equity in 2023 23. Recording revenues when they are earned rather than when the money is received is part of which basis or method...
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 net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
Elements of Financial Statements (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. 1. Probable future economic benefits is part of the definition of __________. ASSETS...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
, there is no contra asset account such as Allowance for Doubtful Accounts. Therefore the entire balance in Accounts Receivable will be reported as a current asset on the company’s balance sheet. As a result, the...
What is a bond sinking fund? Definition of Bond Sinking Fund A bond sinking fund is a corporation’s noncurrent asset that is restricted for the purpose of redeeming or buying back its bonds payable. Bonds that require...
: Less profit Less asset amount Greater liability amount The conservatism guideline does not direct the accountant to be super conservative and beat down a company’s profits. The accountant is to be fair and objective....
expenses (cost of a new delivery van), and some costs become expenses immediately (airing a television advertisement). Examples of Costs and Expenses Assume that a company purchases 2,000 units of a supply item each of...
Is the provision for doubtful debts an operating expense? Definition of Provision for Doubtful Debts Some companies use Provision for Doubtful Debts as the name of the contra-asset account which is reported on the...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
What is bad debts expense? Definition of Bad Debts Expense Bad debts expense is related to a company’s current asset accounts receivable. Bad debts expense is also referred to as uncollectible accounts expense or...
. The amount owed by customers are included in the balance of the current asset account Accounts Receivable. In other words, the terms bad debt and doubtful debt have the same meaning. Example of Bad Debt and Doubtful...
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
in a general ledger intangible asset account. If a company designs and registers its trademark, the amount recorded is limited to its cost. Costs incurred to defend a trademark are also recorded in the trademark...
Is depreciation an operating expense? Depreciation Could Be Either an Operating Expense or a Non-operating Expense Depreciation is an operating expense if the asset being depreciated is used in an organization’s main...
: It is a note payable for the borrower who reports the note on its balance sheet as a liability It is a note receivable for the lender who reports the note on its balance sheet as an asset The interest promised in the...
customers. The contract requires the customer to pay TOPCO $5,000 when the contract is signed and the remainder of $20,000 to be paid when TOPCO delivers the machine within 30 days of the signing. When TOPCO receives...
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
of the property is known as the lessor and the person using the property is the lessee. Some leases are for short periods of time with no intention of transferring ownership of the asset in exchange for the rent...
will begin each accounting year with a zero balance and will have its balance at the end of the year closed to an equity account such as a corporation’s retained earnings or a proprietor’s capital account....
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
What is the difference between equity financing and debt financing? Definition of Equity Financing Equity financing involves increasing the owner’s equity of a sole proprietorship or increasing the stockholders’...
. Examples of Double-Entry Bookkeeping Let’s assume that a company borrows $10,000 from its bank. The company’s asset account Cash is increased with a debit entry of $10,000 and the company’s liability account...
Financial Ratios (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...
Accounts Receivable and Bad Debts Expense (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (27) Marked Wrong (0) Marked Right (0) accounts receivable This current asset represents a right to...
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