The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
is considered to be a better indicator of a company’s ability to meet its current obligations than the current ratio because inventories and prepaid expenses are not included. Example of Acid Test Ratio Let’s...
Supplies Prepaid expenses Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to...
in recording the payment as an asset—a prepaid expense or deferred charge—that will then be amortized to expense over the three year contract. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
on the company’s balance sheet. Generally, the asset account balances are debit balances and are increased with a debit entry and decreased with a credit entry. Examples of Asset Accounts Some examples of asset...
and other lenders for borrowed funds Amounts owed for wages, interest, taxes, and amounts incurred but not yet processed Amounts that customers have prepaid, customers’ deposits, etc. Certain deferred corporate income...
balance sheet since it will report accounts receivable and prepaid expenses plus accounts payable, deferred revenues and other liabilities. 2. Under the accrual method of accounting, in which month should a company...
RRAYUSTE Unscramble 11. The company that has paid insurance premiums in advance should report the unexpired cost in the account __________ Insurance. PREPAID PPRDEIA Unscramble PREPAID PRDIEAP Unscramble 12. A small...
of prepaid insurance that has expired in the accounting period is reported as an _____________. EXPENSE XEPSENE Unscramble EXPENSE SXNPEEE Unscramble 6. A credit entry will cause the Cash account balance to...
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...
be debited. Except for special situations (correcting entries, closing entries, and some adjusting entries) expenses are always debited. Prepaid Insurance Debit Right! Prepaid Insurance is an asset and assets are...
.) 4. Which of the following is an asset account? Accounts Payable Wrong. Accounts Payable is a liability account. Prepaid Insurance Right! Prepaid Insurance is a current asset. Prepaid costs that have not yet expired...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
. corporations are researched and developed by which organization? American Accounting Association (AAA) Wrong. Financial Accounting Standards Board (FASB) Right! Internal Revenue Service (IRS) Wrong. 4. Which financial...
of the revenue and/or expense amounts in the general ledger pertain to a future accounting period. Mark as wrong Mark as right prepaid expense This is a cost that has been paid but it has not yet expired. An...
revenue that had been prepaid by a customer, the company’s balance sheet’s liability deferred revenue will decrease and retained earnings will increase. Examples of the Effect of Revenue on the Balance Sheet...
of $20,000 per year ($500,000 divided by 25 years). Another example of a deferred expense is a $12,000 insurance premium paid by a company on December 27 for insurance protection during the upcoming January 1 through...
: 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...
such as prepaid insurance, on its December 31 balance sheet. A deferral also occurs with revenues. The insurance company receiving the $12,000 for the six-month insurance premium beginning December 1 should report...
. (For companies with operating cycles greater than one year, their current liabilities are the obligations due within the operating cycle.) Typical Current Liabilities Some common examples of current liabilities that...
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...
should be systematically recognized/reported as an expense on the appropriate income statements. Some examples include the expensing of prepaid insurance premiums and the depreciation of assets used in the...
. (This means that 5/6 of the payment is a prepaid asset and only 1/6 of the payment should be reported as an expense on each of the monthly income statements.) A company’s customer paid in advance for...
What is liquidity? Definition of Liquidity Liquidity is a company’s ability to convert its assets to cash in order to pay its liabilities when they are due. Current Assets Generally, the assets that are expected to...
asset Accounts Receivable will decrease and its asset Notes Receivable will increase. 2) A company prepays its insurance. As a result its asset Cash decreases and its asset Prepaid Insurance increases. 3) A company buys...
If a mortgage payment is due by December 31, but the payment is not made until the following month, should the loan payment be accrued at December 31? The interest portion of the mortgage payment should be accrued as of...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
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...
will not be depreciated? Select... Buildings Equipment Land Vehicles 10. The amount of prepaid insurance that has not expired as of the end of an accounting period should be reported as __________. Select... an asset an...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
temporary 31. Which of the following is not an asset account? Select... Goodwill Prepaid Expense Unearned Revenue 32. Which of the following is more likely to appear as the first current liability? Select... Accrued...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Generally an __________-type adjusting entry will cause revenues to be reported on the...
drawing account is closed directly to the owner’s capital account. Select... True False 28. The unexpired portion of a prepaid property insurance premium should be reported as __________. Select... an asset an expense...
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...
accounts.) Repaying a long-term loan will decrease cash and will decrease a long-term liability account. (Prepaying 6 months of property insurance is not the correct answer because Cash and Prepaid Insurance are both...
accounting __________ principles. 15. The profitability of a company for a specified period of time is reported on the __________ income statement. 16. The main components or elements of the income statement are...
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