What is discount on bonds payable? Definition of Discount on Bonds Payable Discount on bonds payable (or bond discount) occurs when a corporation issues bonds and receives less than the bonds’ face or maturity amount....
What is discount on bonds payable? Definition of Discount on Bonds Payable Discount on bonds payable (or bond discount) occurs when a corporation issues bonds and receives less than the bonds’ face or maturity amount....
What is a temporary account? Definition of Temporary Account A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is...
Why does a bond's price decrease when interest rates increase? Definition of Bond’s Price A bond’s price is the present value of the following future cash amounts: The cash interest payments that occur every six...
Where does the interest paid on bank loans get reported on the statement of cash flows. Definition of Interest on Bank Loans The interest on bank loans is usually an expense of the accounting period in which the interest...
What is income smoothing? Definition of Income Smoothing Income smoothing involves reducing the fluctuations in a corporation’s earnings. The reductions in fluctuations can result from some legitimate business methods...
How many days after a month ends should the bank reconciliation be done? Definition Bank Reconciliation The bank reconciliation (if prepared or reviewed by someone other than the person with access to the checking...
What is a/c? Definition of a/c In accounting, a/c is the abbreviation for account. Example of a/c An accountant might leave the following note for a subordinate: “Please review the balance in the a/c Interest...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
In accounting, are debit balances good? It is best if you accept the meaning that the word debit has had for 500 years: a debit is an amount entered on the left-side of an account. Don’t add “good” or “bad” or...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
How do I learn more about the CPA Exam? You can learn more about the Uniform CPA Exam at our free Accounting Career Center. Within our Accounting Career Center are direct links to the state boards of accountancy, CPA...
What is the face value of a bond payable? Definition of Face Value of a Bond Payable The face value of a bond payable is the amount printed on the bond. The face value is also referred to as the following: Face amount...
Why doesn't the balance sheet equal the post-closing trial balance? Definition of Balance Sheet The total amounts on a balance sheet show that a company’s assets = liabilities + owner’s (stockholders’) equity....
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
What is the days' sales in inventory ratio? Definition of Days’ Sales in Inventory The financial ratio days’ sales in inventory tells you the number of days it took a company to sell its inventory during a recent...
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
What is accounts receivable? Definition of Accounts Receivable Accounts receivable is the amount owed to a company resulting from the company providing goods and/or services on credit. The term trade receivable is...
Why are some expenses deferred? Definition of Deferred Expenses Under the accrual basis of accounting, an expense is a cost that is used up, has expired, or is directly related to revenues reported on a company’s...
What does it mean to replenish the petty cash fund? Definition of Replenishing Petty Cash Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking...
What are sundry expenses? Definition of Sundry Expenses In accounting and bookkeeping, sundry expenses are expenses that are small in amount and rare in occurrence. For these rare and insignificant expenses, a company...
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...
What is the effect on the income statement when the allowance for uncollectible accounts is not established? Definition of Allowance for Uncollectible Accounts The Allowance for Uncollectible Accounts or Allowance for...
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
Is there a difference between the accounts Purchases and Inventory? Purchases Account Under the Periodic Inventory System The general ledger account Purchases is used to record the purchases of inventory items under the...
Why is Rent Expense a debit and Service Revenues a credit? Why Rent Expense is a Debit Rent expense (and any other expense) will reduce a company’s owner’s equity (or stockholders’ equity). Owner’s equity which...
Will the adjusting entry amounts appear in the balance sheet and income statement? Absolutely. The adjusting entry amounts must be included on the income statement in order to report all revenues earned and all expenses...
Is it a requirement for a small business to have a CPA? Generally, a small business is not required to have a CPA or certified public accountant. A CPA would be needed if the small business must have its financial...
How, when and why do you prepare closing entries? Definition of Closing Entries Closing entries transfer the balances from the temporary accounts to a permanent or real account at the end of the accounting year. As a...
What is the difference between vertical analysis and horizontal analysis? Definition of Vertical Analysis Vertical analysis expresses each amount on a financial statement as a percentage of another amount. The vertical...
What is the cash flow statement? Definition of Cash Flow Statement The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by...
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
What is the difference between unearned revenue and unrecorded revenue? Definition of Unearned Revenue In financial accounting, unearned revenue refers to money received prior to being earned. It is also referred to as...
What is FIFO? Definition of FIFO In accounting, FIFO is the acronym for First-In, First-Out. It is a cost flow assumption usually associated with the valuation of inventory and the cost of goods sold. Under FIFO, the...
If a company earns a profit, which balance sheet items change? Definition of Profit Profit is the result of revenues minus expenses. How Profits Change the Balance Sheet Since all business transactions affect at least...
If I want a gross margin of 25%, what percent should I mark up my product? Definition of Gross Margin Gross margin as a percentage is the gross profit divided by the selling price. For example, if a product sells for...
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...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
Why are revenues credited? Why Revenues are Credited Revenues cause owner’s equity to increase. Since the normal balance for owner’s equity is a credit balance, revenues must be recorded as a credit. At the end of...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
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