to its holiday season, a retailer borrows $200,000 from its bank and promises to repay the bank in three months plus interest of $3,000. On each of the retailer’s monthly income statements, it will report $1,000 of...
to its holiday season, a retailer borrows $200,000 from its bank and promises to repay the bank in three months plus interest of $3,000. On each of the retailer’s monthly income statements, it will report $1,000 of...
What are the effects of depreciation? Definition of Depreciation Depreciation is the systematic allocation of the cost of a company’s assets used in its business from the balance sheet to the income statement (as an...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
based on historical costs (required by US GAAP) will be less than the depreciation computed by using the higher replacement cost of the plant assets. The additional profit from this difference in depreciation is...
for income tax and before investment income, interest expense, or other non-operating income or expense items. Operating income is also reported as income from operations, operating earnings, or operating profit. Major...
of December, then the interest portion should be accrued as of December 31. To illustrate, let’s assume that the amount of the mortgage loan payment due on January 1 is $1,000 and it consists of $300 of interest from...
increasing from 200,000 shares to 400,000 shares.” Since a stock split does not change the balance in the Common Stock account, a complete journal entry was not required. The memorandum entry merely notes for future...
to acquire and install a new computerized system for controlling its operations. The new system’s general ledger might result in a chart of accounts which is different from the previous chart of accounts. Join PRO to...
of the chart of accounts: Asset section if the cash was from the sale of another asset or the collection of an asset Liability section if the cash was a deposit for future work to be done Revenue section if the cash was...
costs must be reported as Advertising Expense at the time the ads are run. A prepayment of the cost of ads that will air in the future should be recorded in a current asset account such as Prepaid Advertising. When the...
, Sales, will collect all of the amounts from the sale of merchandise. Most accounting systems require that every transaction will affect two or more accounts. For example, a cash sale will increase the Cash account and...
in an expense account When recording a correcting entry to reclassify an amount from the incorrect expense account to the correct account Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How...
solvency is also at risk if it is unable to operate profitably. I suspect that the definition of solvency varies among people in the same country and from country to country. You should check the legal system in your...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
What is a classified balance sheet? Definition of Classified Balance Sheet A classified balance sheet arranges the amounts from a company’s balance sheet accounts into a format that is useful for the readers. For...
internally by a company over time. Since the brand name was not purchased from another entity, there is no past transaction and purchase cost to be recorded. I assume that an entity’s payment made to another...
that did not have an account designated. In order to complete the assignment by the deadline, the accountant recorded the “mystery” amount in the general ledger Suspense account. When the controller is available,...
subscribe to this publication. It contains the financial ratios for 740 industries based on the financial statements of more than 265,000 small and mid-sized companies. Another source for your industry’s financial...
-K. Example of Form 10-K You can review a Form 10-K by doing an online search for a corporation with publicly-traded shares of common stock. On the corporation’s website, select Investor Relations, and from that page...
the company receives the $10,000 from the customer, the company will debit Cash for $10,000 and will credit Accounts Receivable for $10,000. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn...
of the accounting department and are often distributed outside of the company. The balance sheet summarizes and reports the balances from the asset, liability, and stockholders’ equity accounts that are contained in...
Are estimates allowed in bookkeeping? While bookkeeping involves mostly precise amounts from sales and purchase invoices, cash receipts and checks written, etc. there are situations when estimates need to be entered....
financial markets, global commerce, acquisition of U.S. companies by corporations outside of the U.S., multinational corporations having subsidiaries both inside and outside of the U.S., and so on. Since financial...
is paid, the following will occur: Current liabilities (Dividends Payable) will decrease Current assets (Cash) will decrease The income statement is not affected by the declaration and payment of cash dividends on...
software may allow you to go into a previous period’s (as well as the current period’s) activity and remove a voided check or change the amount to zero. This will also increase the balance in the Cash account and...
on the income statement as Bad Debts Expense or Uncollectible Accounts Expense. Examples of Recording Bad Debts There are two methods for recording the bad debts associated with accounts receivable: Direct write-off...
that were provided. This is done with a debit to the liability account Gift Certificates Outstanding and a credit to a revenue account. Our explanation pertains to financial accounting. To learn about the income tax...
. Learn more about Subchapter S corporations at www.IRS.gov or from a tax professional. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
the paperwork for a company’s transactions and getting the information quickly and accurately recorded in the company’s general ledger accounts. Today, this is done best through the use of cost effective software...
, a contingent asset and gain will not be recorded in a general ledger account or reported on the financial statements until they are certain. [This is different from contingent liabilities and contingent losses, which...
+ Revenues – Expenses – Dividends – Treasury Stock. The expanded accounting equation allows you to see separately (1) the impact on equity from net income (increased by revenues, decreased by expenses), and (2)...
. Examples of Petty Cash Payments Some examples of small payments made from petty cash include: Paying the mail carrier 30 cents for the postage due on a letter Reimbursing an employee $9 for supplies purchased...
a profitable division that no longer meets its long range goals. The proceeds from this disinvestment are then used to improve the company’s financial position by reducing its debt. Join PRO to Track Progress Mark the...
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
to as an outstanding check. In the bank reconciliation process an uncleared cheque (or outstanding check) is deducted from the balance shown on the bank statement to arrive at the correct or adjusted balance per bank....
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...
of a corporation’s worth. In the past, some people mistakenly thought that a corporation’s stockholders’ equity was the corporation’s worth. However, stockholders’ equity (or the owner’s equity of a...
costs; what the costs should be) the company is on track to reach the cost part of its profit plan. If the actual costs deviate from the standard costs, management is alerted by the variances that are reported for...
A potential liability dependent upon some future event occurring or not occurring. For example, a company is named as a defendant in a $1 million lawsuit. Does that mean the company automatically has a liability of $1...
What is the purpose of assigning accounts receivable? The purpose of assigning accounts receivable is to provide collateral in order to obtain a loan. To illustrate, let’s assume that a corporation receives a special...
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