If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance? An expense is a temporary account which reduces owner’s equity or stockholders’ equity. The decrease...
If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance? An expense is a temporary account which reduces owner’s equity or stockholders’ equity. The decrease...
Bookkeeping Video Training Part 10 Adjusting entries: recap of accruals, deferrals, one balance sheet account and one income statement account will be affected Must-Watch Video Learn How to Advance Your Accounting and...
Bookkeeping Video Training Part 12 Bank reconciliation: process to determine the true or adjusted amount of cash, journal entries needed for adjustments to book balance Must-Watch Video Learn How to Advance Your...
Financial Statements Video Training Part 8 Balance sheet: working capital, current ratio, financial leverage, notes to financial statements, comparative balance sheets Must-Watch Video Learn How to Advance Your...
What are some reasons that cause the balance on the bank statement to differ from the cash balance on the books? Reasons a Bank Balance Will Differ from a Company’s Balance Some of the reasons for a difference between...
A corporation has a large balance in retained earnings. Does that mean that its dividends to stockholders will be increasing? Definition of Retained Earnings Retained earnings is one part of a corporation’s...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
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...
How are the balance sheet and income statement connected? Connection between Balance Sheet and Income Statement The connection between the balance sheet and the income statement results from: The use of double-entry...
What is "deficit" appearing in stockholders' equity? Definition of Deficit Within Stockholders’ Equity The term deficit is used within the stockholders’ equity section of a corporation’s balance sheet in place of...
What is a post-closing trial balance? Definition of Post-closing Trial Balance A post-closing trial balance is a trial balance which is prepared after all of the temporary accounts in the general ledger have been closed....
What does understated mean? Definition of Understated In accounting, understated means that a reported amount is less than the actual, true amount based on the accounting rules. In other words, the reported amount can be...
What is the difference between stocks and bonds? Definition of Stocks Stocks, or shares of capital stock, represent an ownership interest in a corporation. Every corporation has common stock. Some corporations issue...
What are marketable securities? Marketable securities are unrestricted financial instruments which can be readily sold on a stock exchange or bond exchange. Marketable securities are often classified into two groups:...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
Why is there a difference in the amounts for Bad Debts Expense and Allowance for Doubtful Accounts? Amount Reported as Bad Debts Expense The amount reported in the income statement account Bad Debts Expense pertains to...
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...
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
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 is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
What is the difference in salaries between a bookkeeper and an accountant? I estimate that a bookkeeper’s salary will be less than half of an accountant’s salary. For example, an accountant with a year or two of...
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 a promissory note? Definition of Promissory Note A promissory note is a written promise to pay an amount of money by a specified date (or perhaps on demand). The maker of the promissory note agrees to pay the...
What is LIFO? Definition of LIFO LIFO is the acronym for last-in, first-out, which is a cost flow assumption often used by U.S. corporations in moving costs from inventory to the cost of goods sold. Under LIFO, the most...
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...
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
What is a vendor? Definition of Vendor In the context of accounts payable, a vendor is a person or business that supplies goods or services to the company. Another term for vendor is supplier. The term vendor can also be...
What are capital expenditures? Definition of Capital Expenditures Capital expenditures are the amounts spent for tangible assets that will be used for more than one year in the operations of a business. Capital...
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...
What is the difference between expense and loss? Definition of Expense An expense is a cost that a company incurs or uses up when it earns revenues. Examples of Expenses A few examples of the many expenses that a company...
What is the entry when a company lends money to an employee? Definition of Employee Loan When a company lends money to one of its employees, the company is reducing its Cash and increasing another asset such as Other...
What is Additional Medicare Tax? Definition of Additional Medicare Tax The Additional Medicare Tax is one of the U.S. government’s payroll withholding taxes that is paid solely by employees and the self-employed. In...
What is the difference between public companies and public sector? Definition of Public Companies Public companies are those businesses owned by individuals (and not by a government). Definition of Publicly-Held...
Why will some asset accounts have a credit balance? Definition of Asset Account Balances In accounting, asset accounts normally have debit balances. That is, the general ledger accounts for assets typically have their...
How are dividends paid when there are dividends in arrears? Definition of Dividends in Arrears Dividends in arrears exist when a corporation has: Cumulative preferred stock Omitted past dividends on the cumulative...
Why are bonds payable less costly than common stock? Bonds payable are less costly than common stock because the bonds issued by a corporation contain a formal contract to pay the investor a fixed amount of interest...
What is the employer matching of FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act, which requires employers to withhold the following from each employee’s paycheck: Social Security...
What is a plant asset? What is a Plant Asset A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business’s operations. Plant assets are also known as fixed...
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