Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
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...
balance in a contra asset account will violate the cost principle.) Examples of Contra Asset Accounts The most common contra asset account is Accumulated Depreciation. Accumulated Depreciation is associated with...
entries These journal entries are used to accrue and defer amounts and will involve a balance sheet account and an income statement account. Mark as wrong Mark as right matching principle This accounting principle...
. General guidance for determining when revenues are earned can be found in paragraphs 83 and 84 of the FASB’s Statement of Financial Accounting Concepts No. 5, Recognition and Measurement in Financial Statements of...
What is the difference between book depreciation and tax depreciation? Definition of Book Depreciation Book depreciation is the amount recorded in the company’s general ledger accounts and reported on the company’s...
to the financial statements are important because a corporation’s net income is dependent on the accounting policies regarding inventory, depreciation, revenue recognition, and more. There may also be some potential...
Are commissions considered to be revenues or expenses? Definition of Commissions Revenues or Expenses The company or person earning and receiving commissions (such as a percentage of sales) will have commissions revenue....
An income statement account at a financial institution used to record and report the amounts earned from fees charged to customers.
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
The general guidelines and principles, standards and detailed rules, plus industry practices that exist for financial reporting. Often referred to by its acronymn GAAP. To learn more, see Explanation of Accounting...
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...
See full disclosure principle.
, or inflation-adjusted cost. Generally, the cost principle or historical cost principle requires that an asset should be reported at its cash or cash equivalent amount at the time of the transaction and should include...
I don't understand the conservatism principle. Why do losses get recorded but not gains? Conservatism has to do with uncertainty. When uncertainty exists between two alternatives that appear to be reasonable, the...
%. Select... True False 12. Residual income includes __________ cost for the capital employed. Select... the actual interest an imputed Match one of the following centers with items 13 - 18: A center may be used more...
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...
. Example of a Revenue Accrual The accrual of revenues or a revenue accrual refers to the reporting of revenue and the related asset in the period in which they are earned, and which is prior to processing a sales...
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
An accounting principle/guideline that allows the accountant to keep the sole proprietor’s business transactions separate from the owner’s personal transactions even though a sole proprietorship is not...
A decrease in the value of a long term asset to an amount that is less than the amount shown under the cost principle.
Also referred to as footnotes. These provide additional information pertaining to a company’s operations and financial position and are considered to be an integral part of the financial statements. The notes are...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
certificate for merchandise or services. Accounting for the Sale of Gift Certificates The sale of a gift certificate should be recorded with a debit to Cash and a credit to a liability account such as Gift Certificates...
. In other words, it recognizes that receiving $10,000 of cash today is more valuable than receiving $10,000 of cash in the future. Similarly, $10,000 cash receipt in Year 10 is less valuable than a $10,000 cash receipt...
proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The current year net income might be in the temporary revenue and expense accounts and...
an investor for new shares of the company’s common stock Example of Both a Revenue and a Receipt When a company makes a $200 cash sale (or performs services for $200 of cash) the company has earned revenue of $200 and...
What are accrued revenues and when are they recorded? Definition of Accrued Revenues Accrued revenues include service revenues, interest income, sales of goods, etc. which have been earned by a business, but the...
What is the difference between revenues and earnings? Definition of Revenues and Earnings Revenues are the amounts earned from providing goods or services to customers during the period shown in the heading of the income...
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are...
An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
Bookkeeping Video Training Part 7 Adjusting entries: deferred revenues, accrued revenues, reversing accruals to avoid double-counting Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform...
will be increased (with a credit entry). TIP: The accounting equation has owner's equity on the right side. The owner's equity account R. Smith, Capital will normally have its balance on the right side or...
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...
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