Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
Does a company have to use the IRS years of useful life for depreciation? For the company’s financial statements, the economic life of the asset should be used—not the years of useful life required for income tax...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
See return on investment (ROI).
See return on capital employed.
See internal rate of return.
Is a security deposit for a rental agreement recorded in a liability account? The person paying the security deposit would credit the asset account Cash and would debit the asset account Security Deposits. The person...
Is it acceptable for companies to use two methods of depreciation? Definition of Depreciation Methods There are various methods of depreciating assets that are used in a business. It is acceptable and common for...
What is the definition of net sales? Definition of Net Sales Net sales is a company’s gross sales of products minus any sales discounts and sales returns and allowances. When a company makes a sale, the general ledger...
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 is the difference between par and no par value stock? Definition of Par Value Stock Some states’ laws require or may have required common stock issued by corporations residing in their states to have a par value....
Adjusting Entries(Quick Test #3) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
Will every transaction affect an income statement account and a balance sheet account? Definition of Income Statement and Balance Sheet Accounts A company’s general ledger accounts are arranged into two categories...
Bookkeeping For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have difficulty...
Debits and Credits (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (30) Marked Wrong (0) Marked Right (0) debit (or) debit balance This is the left side of an account and also the normal...
What is the tax advantage when bonds are issued instead of stock? Definition of Bonds and Stock In this context, bonds refers to bonds payable, a form of long-term debt that typically promises to pay interest every six...
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
A term used to describe the net present value method and the internal rate of return. The model discounts future cash flows back to the present time.
A request by the petty cash custodian for a company check in order to return the amount of currency and coins in the petty cash box to the amount shown in the general ledger account.
Operating expenses made to return an asset to its previous condition (rather than to make the asset more than it was originally). The amount is charged to an account such as Repairs and Maintenance Expense in the period...
An allowance granted to a customer who had purchased merchandise with a pricing error or other problem not involving the return of goods. If the customer purchased on credit, a sales allowance will involve a debit to...
A requirement that the receiving nonprofit organization must return an asset to the donor in the event that some future and uncertain event does or does not occur.
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
A target rate. For example, companies may decide to invest only in projects that generate an internal rate of return that is in excess of 12%. The 12% figure becomes the hurdle rate.
Market interest rate, current return, effective interest rate. Also see yield to maturity.
The depreciation computed on the tax return according to the income tax code and regulations. This amount is usually different from the depreciation used on the financial statements (book depreciation).
A process which discounts future cash flows to the present in order to reflect the time value of money. Examples of the discounted cash flow model are net present value and internal rate of return.
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
What is net present value? Definition of Net Present Value Net present value is the combination of 1) the present value of cash inflows, and 2) the present value of the cash outflows. To arrive at these present value...
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.
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
What are the journal entries for a stock split? Definition of a Stock Split A stock split usually increases the number of shares of a corporation’s common stock with the intention of reducing the market price of each...
What are the effects of overstating inventory? Definition of Overstating Inventory Overstating inventory means that the reported amount for the cost of a company’s inventory is greater than the actual true cost based...
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...
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 causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to be...
What is the debt to total assets ratio? Definition of Debt to Total Assets Ratio The debt to total assets ratio is an indicator of a company’s financial leverage. It tells you the percentage of a company’s total...
What is obsolete inventory? Definition of Obsolete Inventory Obsolete inventory refers to products that a company had purchased or produced which cannot be sold. The obsolete items may be the result of one or more of the...
How does revenue affect the balance sheet? Effect of Revenue on the Balance Sheet Generally, when a corporation earns revenue there is an increase in current assets (cash or accounts receivable) and an increase in the...
Featured Review
"I took an accounting course 30+ years ago but never really used it in my job(s). My job recently expanded into bookkeeping and I want to hone my skills; AccountingCoach is perfect for this - it allows me to move at my own pace, and I love the test quizzes and crossword puzzles - I can really see how I am retaining the information. The price of the course is well worth it!" - Debbie M.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: