into service, the project’s accumulated costs will be removed from the Construction Work-in-Progress account and will be debited to the appropriate plant asset account. Join PRO to Track Progress Mark the Question as...
into service, the project’s accumulated costs will be removed from the Construction Work-in-Progress account and will be debited to the appropriate plant asset account. Join PRO to Track Progress Mark the Question as...
What is the difference between paid-in capital and retained earnings? Definition of Paid-in Capital Paid-in capital is one of the major categories of stockholders’ equity. Generally, paid-in capital reports the amount...
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
What is a cash cow? A cash cow is often a profitable product or service that dominates a market and generates far more cash than is needed to maintain its market position. Companies may use the money from the cash cow to...
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
Also referred to as illusory profits. Occurs because accountants use past costs rather than replacement costs. For example, in computing the cost of goods sold accountants often use the FIFO cost flow assumption. This...
of credit? Note that the irrevocable letter of credit is different from a line of credit. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
The systematic allocation of the cost of an asset from the balance sheet to Depreciation Expense on the income statement over the useful life of the asset. (The depreciation journal entry includes a debit to Depreciation...
A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
What is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
Where is treasury stock reported on the balance sheet? Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet....
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:...
details. The $50,000 is a lump sum payment. Sometimes the term lump sum payment merely indicates a single payment. For example, the maturity value of a bond might be referred to as a lump sum payment in order to...
A contra revenue account that reports the discounts allowed by the seller if the customer pays the amount owed within a specified time period. For example, terms of “1/10, n/30” indicates that the buyer can...
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
What is the difference between assets and fixed assets? Assets are resources owned by a company as the result of transactions. Examples of assets are cash, accounts receivable, inventory, prepaid insurance, land,...
The ABC inventory system is different from activity-based costing. The ABC inventory system is used in order to focus on the most important items in inventory. Usually a relatively few items will account for a very...
as a limited liability company, or LLC. This process is often done online with the proprietor’s state of residence. The fee to originate the LLC status and the annual renewal fee vary from state to state. If you are...
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
This could be the difference between cost and the selling price. For example, a retailer may markup its cost by 50% to arrive at a selling price. In the retail method of costing inventory, markup is used to mean the...
is a person, bank, or other enterprise that has lent money or extended credit to another party. The party to whom the credit has been granted is the debtor. Examples of a Debtor and a Creditor Assume that a company...
value and internal rate of return. While the discounted cash flow models are the ideal, I would also want to forecast or project the impact on the company’s future financial statements. Therefore, I would also...
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...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
have used its cash to acquire new facilities, add more efficient equipment, expand its sales territory, etc. Also, a new venture may have recently raised a large amount of cash from investors, but it has negative...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
this topic by reading our Working Capital and Liquidity (Explanation). 1. Working capital is __________ net working capital. The Same As Right! Different From Wrong. 2. The amounts needed to compute a company's...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Payroll Accounting Payroll Accounting Payroll accounting involves the recording of a company’s: Gross wages, salaries, commissions, bonuses, overtime premium, sick pay, holiday pay, and vacation pay that are earned by...
, Products X & Y cause very little overhead cost in relation to the main, complicated, lower volume products.) If management responds to the high allocated overhead costs for Products X & Y by seeking price...
remain in inventory at the end of the year. Using FIFO the company assumes that first costs (the oldest costs) for 70 units will be removed from inventory and will become the cost of goods sold. Therefore, the FIFO cost...
to the company’s balance sheet where it will be reported as a liability. The title of the general ledger liability account may have the title of Unearned Revenues, Deferred Revenues, or Customer Deposits. As the...
. (It was $147,000 for 2022.) This means that in the year 2023, only the first $160,200 of an employee’s gross wages, salaries, bonuses, etc. (or self-employed’s business earnings) will be subject to the Social...
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