by the bank.) Company X then has the obligation or liability to repay the bank for the courtesy extended to Company X. 2. If Company X’s bank does not pay the checks because the account has insufficient funds, the...
by the bank.) Company X then has the obligation or liability to repay the bank for the courtesy extended to Company X. 2. If Company X’s bank does not pay the checks because the account has insufficient funds, the...
to provide the goods or services to the customer or to return the money. Hence, the current liability account Customer Deposits is credited. When the company earns the deposit amount, the current liability will be...
ratio, here are some additional accounting/financial ratios: Quick ratio Debt to equity ratio Accounts receivable turnover ratio Days’ sales in inventory Interest coverage ratio Gross margin ratio Return on...
tax are found on the corporation’s income tax return. (The corporation’s taxable income is based on the income tax laws and regulations of the various governments.) The accounting and financial reporting of a...
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
in the goods, etc. In the case of a purchase allowance, the buyer does not return the merchandise to the supplier. Example of a Purchase Allowance A retailer ordered 10 items at a cost of $15 each from one of its...
such as Deferred Revenue, Deferred Income, Unearned Revenue The credit to the liability account is made because the company has not yet earned the money and the company has an obligation to deliver the goods or services...
and it will not have to be disclosed in the notes to the financial statements. An example is a nuisance lawsuit where there is no similar case that was ever successful. Example of Recording a Contingent Liability...
What is carriage inwards? Definition of Carriage Inwards Carriage inwards refers to the transportation costs required to be paid by the purchaser when it receives merchandise it ordered with terms FOB shipping point....
of a company’s financial position at the end of the accounting year. The reason is that all assets that were earned are reported and all liabilities that were incurred will be reported on the balance sheet. The...
What is a certified public accountant? Definition of Certified Public Accountant A certified public accountant (CPA) is a person who has completed the required accounting degree, passed the very difficult CPA Exam, has...
How do you record a dividend payment to stockholders? Definition of Dividend Payment to Stockholders A dividend payment to stockholders is usually a cash payment which reduces the corporation’s asset cash and the...
the following costs: direct materials direct labor variable manufacturing overhead fixed manufacturing overhead Absorption costing is required for external financial reporting and for income tax reporting. Another...
A term used in accounting that refers to employees’ time off with pay for vacations, holidays, and sick days. Companies that are obligated to pay for these days off are required by the matching principle to record...
is required by SellerCo. Under the accrual basis of accounting, SellerCo will report $5,000 in its income statement accounts Sales and will report $5,000 in its current asset account Accounts Receivable. Assume that on...
to practice management by exception. That is, if the actual costs are what they should be, management action is not required. If the actual costs are more than the standard costs, management must take action or it will...
What is Form 10-K? Definition of Form 10-K Form 10-K is a required annual report filed with the U.S. Securities and Exchange Commission (SEC) by U.S. corporations whose common stock is publicly traded. It is common for a...
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...
receives cash of $500 but cannot readily determine the reason why it received the $500. Obviously, the company’s asset Cash is to be debited, but the account to be credited (required by the double-entry system) for...
Also referred to as a subsequent event. An event occurring after the date of the balance sheet, but prior to the date that the balance sheet is actually released. For example, a balance sheet dated December 31 might be...
debit card, the bank’s liability account such as Customer Checking Accounts or Demand Deposits will be reduced. To reduce the normal credit balance in the bank’s liability account, a debit entry is required. The...
offered and required at a specific U.S. college or university by using our Career Center’s links to college accounting departments. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
manufacturing and increased demands from customers, direct labor is no longer the main cost driver of indirect manufacturing overhead. In addition to direct labor, today’s drivers of indirect manufacturing costs...
the heading income statements. Seasoned business owners often refer to this financial statement as the P&L, which is short for profit and loss statement. The word statements (instead of statement) is used in the...
Are payroll withholding taxes an expense or a liability? Definition of Payroll Withholding Taxes Payroll withholding taxes are amounts withheld from employees’ wages and salaries. The amounts withheld are actually the...
What journal entries are prepared in a bank reconciliation? Definition of Journal Entries in a Bank Reconciliation Journal entries are required in a bank reconciliation when there are adjustments to the balance per...
is guaranteeing that it will pay up to $500,000 if the insured company does not make its required payments for its purchases. We also use bond to mean that a company purchases insurance to protect itself from dishonest...
and stockholders’ equity. The dividends are reported on the corporation’s statement of stockholders’ equity, one of the required financial statements which summarizes the changes in stockholders’ equity. Join...
worked multiplied by an hourly rate of pay. Generally, the employees earning hourly wages will be paid in the week that follows the hours worked. Example of Wages For example, a warehouse employee works 40 hours during...
, the business will have a credit card expense of $300. If July’s sales are $30,000 the credit card expense will be $900. The total credit card expense varies with sales because the fee has a constant rate of 3% of...
there are expected to be 560,000 MHs. Using normal costing, the company applies the manufacturing overhead to products at a rate of $22.50 per MH ($12,600,000/560,000 MH) throughout the year. Using actual costing,...
issue costs to Interest Expense over the remaining life of the bonds. (Bonds are likely to mature 10 years or more after they are issued.) The most precise way to amortize these amounts is to use the effective interest...
rate. For instance, in some states unprepared grocery items are not subject to a sales tax. Items purchased for resale are not subject to the sales tax when purchased by the retailer, but will be subject to the sales...
tax return (TAX)? Select... Straight line on both FS and TAX Accelerated on FS and straight line on TAX Straight line on FS and accelerated on TAX Accelerated on both FS and TAX View Coaching To optimize its cash flows...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
) 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 revenues and expenses reported on the tax return will be...
. If the company wants to earn $60,000 of net income before income taxes, it must sell __________ units of product. Use the following information for answering Questions 18 - 21: A consulting firm has a billing rate of...
= a + bx, “b” is the __________ cost rate. Select... fixed total variable 10. In the equation of the line, y = a + bx, “y” is the __________. Select... dependent variable independent variable volume 11. Multiple...
time it takes for a retailer’s cash to go into inventory and then return to cash is known as the __________ cycle. 4. The amount of credit sales for a year divided by the average balance of accounts receivable is the...
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