The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
Also referred to as peripheral activities. A company’s activities outside of its main activities of buying/producing and selling. Examples include a retailer’s financing function involving interest revenue...
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
An asset account used to record amounts given to an employee with the expectation of repayment. For example, if an employee is given money by a company and the money is expected to be repaid or spent for company...
Is the deposit for a booth at a future trade show an asset? The deposit for a booth at a future trade show is an asset until the trade show occurs. Once the trade show occurs the deposit amount should be moved from the...
Bond Issue Costs is a contra liability accounts reported along with Bonds Payable. Bond Issue Costs include the professional fees and registration fees associated with the issuance of bonds. The amount in the account...
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. To learn more...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
A liability account that reports the estimated amount that a company will have to spend to repair or replace a product during its warranty period. The liability amount is recorded at the time of the sale. (It is also the...
A contract to provide coverage or protection in exchange for a payment or “premium.” Examples of insurance protection include liability, property, business interruption, life, disability, etc. The company...
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
In accounting, what is the meaning of cr.? In accounting, cr. is the abbreviation for credit. In accounting and in bookkeeping, credit or cr. indicates an entry on the right side of a general ledger account. Credit...
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Financial Ratios Financial Ratios Including Limitations Financial ratios are one component of financial analysis. Financial ratios are often calculated by using amounts from previously issued annual financial statements....
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Bank Reconciliation(Quick Test #3 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
Depreciation (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (35) Marked Wrong (0) Marked Right (0) depreciation This is the systematic allocation of the cost of a building, equipment,...
What is a recurring journal entry? Definition of Recurring Journal Entry A recurring journal entry is a journal entry that is recorded in every accounting period. Some recurring journal entries will involve the same...
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
What is a journal entry? Definition of a Journal Entry In manual accounting or bookkeeping systems, business transactions are first recorded in a journal…hence the term journal entry. Journal entries that are recorded...
How do I calculate the after-tax cost of debt? Definition of After-Tax Cost of Debt The after-tax cost of debt is the interest paid on the debt minus the income tax savings as the result of deducting the interest expense...
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 materiality? Definition of Materiality In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while relatively small amounts are not material (or immaterial)....
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
What is the difference between equity financing and debt financing? Definition of Equity Financing Equity financing involves increasing the owner’s equity of a sole proprietorship or increasing the stockholders’...
What is a contra asset account? Definition of Contra Asset Account A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance...
What is the difference between adjusting entries and correcting entries? Definition of Adjusting Entries Generally, adjusting entries are required at the end of every accounting period so that a company’s financial...
Where does the purchase of equipment show up on a profit and loss statement? Reporting the Purchase of Equipment Assuming that the purchase of equipment is a long-term or noncurrent asset that will be used in a business,...
Why is prepaid insurance a short term asset? Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums are rarely billed for periods...
What is the difference between entries in a general journal versus a general ledger? Definition of General Journal The general journal is described as the book of original entry. Today the general journal is used to...
What is the meaning of debit? Definition of Debit The term debit is similar to the term used in Italy more than 500 years ago when the double entry accounting system was documented. What you need to know today is that...
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