for the current period’s expense that is reported on the company’s income statement. If Provision for Doubtful Debts is the name of the account used for recording the current period’s expense associated with the...
for the current period’s expense that is reported on the company’s income statement. If Provision for Doubtful Debts is the name of the account used for recording the current period’s expense associated with the...
during the seven months between its busy seasons. Therefore, James Company purchased a six-month certificate of deposit for $100,000 from its local bank. The CD pays an annual rate of 1% compared to 0.4% of the bank’s...
since its debit balance is contrary to the normal credit balance of the owner’s equity or capital account. The title of the account for recording R. Smith’s draws from his or her business is R. Smith, Drawing or R....
focus on the incremental costs of carrying or holding inventory. The cost of carrying inventory will vary from company to company. For instance, if a company has a large cash balance with no attractive investment...
the banking system and eventually the bank of the payee will take the amount of the check from the payee’s checking account. The payee will in turn reinstate the liability amount owed to it by Company X. In essence...
assume that at the end of the accounting year the account Eve Jones, Drawing has a debit balance of $24,000. This balance is the result of Eve withdrawing $2,000 per month from her sole proprietorship for her personal...
. The employee is unable to pay for the repair and has no other means for getting to work. The company agrees to lend the employee $800 and to withhold $100 per week from the employee’s weekly payroll checks until the...
inventory. Example of Importance of Accurate Inventory Here is an example of why accuracy in calculating inventory is important. After accounting for the total cost of 1) the items purchased or produced in the current...
What is a blank check? Definition of Blank Check A blank check often refers to a check that has been signed by an authorized check signer without completing the other information (date, payee, amount). A blank check...
account.) The Income Summary is very temporary since it has a zero balance throughout the year until the year-end closing entries are made. Next, the balance resulting from the closing entries will be moved to Retained...
of contra accounts that will result in the balance sheet totals being different from the post-closing trial balance totals include: Allowance for Doubtful Accounts Discount on Bonds Payable Bond Issue Costs Owner’s...
. Collections of amounts from customers who had purchased on credit are ___________ to Accounts Receivable. CREDITED ICDERDTE Unscramble CREDITED EDTDIRCE Unscramble 2. When sales terms are FOB______________ title passes...
that were withheld from the employees’ paychecks (except that the employer does not match the Additional Medicare Tax). Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
What is the average collection period? Definition of Average Collection Period The average collection period is the average number of days between 1) the dates that credit sales were made, and 2) the dates that the money...
variances and will be recorded in separate variance accounts. Any balance in a variance account indicates that the company is deviating from the amounts in its profit plan. While standard costs can be a useful...
units of Product X is $360,000, or $36 per unit From the above information, we see that the incremental cost of manufacturing the additional 2,000 units (10,000 vs. 8,000) is $40,000 ($360,000 vs. $320,000). Therefore,...
statements should be based on a formula that is: Logical Consistently applied Objective and acceptable to another unbiased accountant The depreciation expense reported on a company’s financial statements is usually...
and interest receivable. Example of a Promissory Note A promissory note is created when a company borrows money from its bank. However, a promissory note could also be used when a company is unable to pay one of its...
, shrink wrap, etc. for preparing products that are being shipped to customers. Manufacturing supplies are items used in the manufacturing facilities, but are not a direct material for the products manufactured. These...
the budget for January 2024 and adds the budget for January 2025. This rolling budget now covers the 12 months from February 1, 2024 through January 31, 2025. At the end of February 2024, the rolling budget will drop...
the periodic inventory system there is no entry to credit the Inventory account or to debit the account Cost of Goods Sold. Hence, the Inventory account contains only the ending balance from the previous year. As a...
certified public accountants or CPAs by earning at least 150 college credits, passing the rigorous CPA Exam, and having several years of experience.) Annual Salary of Accountant The annual salary range for a full-time...
, an accountant will say that the reported amount of accounts payable is understated by $20,000. In a double-entry accounting system, the amount in another account will also be understated by $20,000. If the $20,000...
to the accounts indicated. Definition of General Ledger The general ledger contains the accounts used by the company to sort and store the amounts from all of the company’s transactions (including all of the payments,...
of the accounting year the balances in these accounts are not closed. Instead, the ending balances will be carried forward to become the beginning balances in the next accounting year. (This is different from the income...
deducting the cost of goods sold and all other expenses including income tax expense. The calculation is: Net Income after Tax divided by Net Sales. The profit margin ratio is most useful when it is compared to 1) the...
, a company borrows $100,000 with an annual interest rate of 12%. The interest for each month is to be paid on the last day of the month. No principal payment is required until the loan comes due in two years. On July 1...
be sold without a sales effort. Until that effort is made and an item is actually sold, the company cannot report the $10 increase from $40 to $50. This is referred to as the revenue recognition principle. In other...
hourly-paid employees for the amounts they earned between June 22 and June 30. Prior to issuing its June 30 financial statements, the company must record an accrual adjusting entry dated June 30 to record the amounts...
the robot is whether to spend an additional $70,000 today (the $80,000 cost of the robot minus the $10,000 to be received from the old machine) in order to save $50,000 each year for 10 years. It may be difficult to...
the systematic allocation of an asset or liability amount from the balance sheet to expense (or revenue) on the income statement. Here are a few examples: The debit balance in the contra liability account Discount of...
What is FIFO? Definition of FIFO In accounting, FIFO is the acronym for First-In, First-Out. It is a cost flow assumption usually associated with the valuation of inventory and the cost of goods sold. Under FIFO, the...
-insurance is too risky for an individual and for a small business with one store. The reason is that a huge loss to its one building may be too much to recover from. Every company should review its specific situation...
How do you calculate the average balance in accounts receivable? The average will be more representative if you include additional balances in the computation. For example, if you compute the average balance for the year...
, there will be an occasional 53-week year) School districts typically have fiscal years of July 1 through June 30 to coincide with its natural business year. Large retailers often end their fiscal years on the Saturday...
season is finished, the merchandise returns from holiday sales are completed, and the January clearance sales have taken place. [The 52-53 week periods with 13-week quarters allows for better comparisons than calendar...
. As the amount of prepaid insurance expires, the expired portion is moved from the current asset account Prepaid Insurance to the income statement account Insurance Expense. This is usually done at the end of each...
. The appraised value is an attempt to determine the property’s current market value. The appraisal report for real estate will usually report the appraised value of the land separate from the appraised value of the...
by the investor is 4% per semiannual period or 8% annually. The reason that the bond can be purchased at a discount from its face and maturity amount, is that the current market interest rate is now 8% and the bond is...
, savings and retirement contributions, etc. Gross Pay vs Net Pay Net pay is the amount remaining after payroll taxes and other amounts are deducted from an employee’s gross pay. Net pay is the amount of the...
Featured Review
"I recently purchased one of your accounting products. It is a godsend. I'm an engineer starting a business. I have little to no accounting experience. You can imagine what joy when I stumbled across your product. I don't know how you can afford to offer such a tremendous product so inexpensively, but thanks anyway. I can't say thank you enough. I'm telling all of my associates about your site and product." - F.C.L.
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: