Inventory Prepaid Expenses Investments Land Buildings Furniture and Fixtures Vehicles, and more Generally, asset accounts will have debit balances and their account balances will be increased with a debit entry....
Inventory Prepaid Expenses Investments Land Buildings Furniture and Fixtures Vehicles, and more Generally, asset accounts will have debit balances and their account balances will be increased with a debit entry....
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...
What is goodwill? Definition of Goodwill In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
Also referred to as book value or carrying value; the cost of a plant asset minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value....
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. When an asset has the same amount of depreciation expense each full year, it is being depreciated under...
Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
statement accounts (revenues, expenses, gains, losses) A few examples of the balance sheet accounts include Cash, Accounts Receivables, Prepaid Expenses, Equipment, Accounts Payable, Notes Payable, Accrued Expenses...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
What is the units of activity depreciation? Definition of Units-of-Activity Depreciation The units-of-activity depreciation is unique among the common methods of depreciation in that the useful life of the asset being...
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...
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 action by a nonprofit organization’s board of directors to earmark an asset for a specified purpose. Since this is not a donor-imposed restriction, the designated asset is classified and reported as part of...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
Repairs that do not improve an asset or extend the asset’s life. These repairs are charged to Repairs Expense or Maintenance Expense when incurred. Major repairs such as a complete engine overhaul that extends the...
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...
Bookkeeping Video Training Part 6 Adjusting entries: recorded in the general journal, deferral of prepaid expenses Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
What is the debt ratio? Definition of Debt Ratio The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio. Hence, the formula for the debt ratio is: total liabilities divided by...
proprietorship business is Assets = Liabilities + _____________________. Select... Owner's equity Stockholders' equity 3. Assets = Liabilities + Stockholders’ Equity is the accounting equation for which type...
: Asset accounts such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Buildings, Equipment, etc. For example, a debit balance in the Cash account indicates a positive amount of cash. (Therefore, a credit...
Kindly illustrate various depreciation methods. Definition of Depreciation Depreciation is the systematic allocation of the cost of an asset to Depreciation Expenses over the asset’s useful life. If an asset will have...
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...
a fixed asset had been put into service and simply keeps the asset in working order. (The amount spent to acquire a fixed asset is referred to as a capital expenditure. The amount of the capital expenditure will be...
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
Which financial ratios are considered to be efficiency ratios? I consider the efficiency ratios to be the ratios also known as asset turnover ratios, activity ratios, or asset management ratios. These efficiency ratios...
Temporary investments Accounts receivable Inventory Supplies Prepaid expenses Current Liabilities Current liabilities are the company’s obligations that will come due for payment within one year of the balance...
the asset Cash to increase by $10,000 and it will cause the liability Notes Payable or Loans Payable to increase by $10,000. The accounting equation remains in balance because both sides of the equation increased by...
of prepaid premiums for property insurance should be reported as __________. Select... an asset an expense a loss 21. Management’s Discussion and Analysis provides valuable information on the company’s operations...
. There will be adjustments for most of the changes in current asset and current liability accounts, including inventory, prepaid expenses, accounts payable, deferred revenues, etc. (However, the change in a company’s...
The allocation of the cost of a plant asset to expense in an accelerated manner. This means that the amount of depreciation in the earlier years of an asset’s life is greater than the straight-line amount, but will...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
What is the difference between depreciation expense and accumulated depreciation? Definition of Depreciation Expense Depreciation expense is the amount of depreciation that is reported on the income statement. In other...
How do I compute the units of production method of depreciation? Definition of Units of Production Depreciation The units of production method of depreciation (which is also referred to as the units of activity method)...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
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...
the balance sheet report the current value of an asset. True Wrong. The purpose of depreciation is to match the cost of the asset to revenues derived from using the asset or to the periods benefiting from the asset. The...
An estimate of an asset’s market value
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