A liability account that reports an insurance company’s premiums received from its insured that have not yet been earned. For example, if the insurance company receives $600 on January 27 for an insured’s...
A liability account that reports an insurance company’s premiums received from its insured that have not yet been earned. For example, if the insurance company receives $600 on January 27 for an insured’s...
Where do worker compensation insurance costs get reported on the financial statements? Worker compensation insurance costs (also referred to as worker comp) should appear on the income statement and also on the balance...
on December 31 pays a six-month insurance premium of $12,000 on December 1 with insurance coverage beginning on December 1. One-sixth of the $12,000, or $2,000, should be reported as insurance expense on the December...
Under accrual accounting, how are worker comp premiums handled? Worker comp insurance premiums should be charged to the areas where the related wages and salaries are charged. Let’s assume that the net cost of worker...
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.
in advance of the accounting period(s) in which it will become an expense. An example is a payment made in December for property insurance covering the next six months of January through June. The amount that is not yet...
up within one year are reported on a company’s balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement....
an incorrect amount. Example of Overstated If a company reports that its prepaid insurance is $8,000, but the true or correct amount of prepaid insurance is only $7,000, the accountant will say that the reported amount...
are likely to be paid a __________ instead of an hourly rate of pay. 4. The usual rate (net of state credits) for federal unemployment tax is__________% on the first $__________ of each employee’s annual wages. 5. A...
of $20,000 per year ($500,000 divided by 25 years). Another example of a deferred expense is a $12,000 insurance premium paid by a company on December 27 for insurance protection during the upcoming January 1 through...
30 for liability insurance for the six months that begins on January 1. For the next two days, none of the $600 will be reported as an expense. Instead, all $600 of cost is being deferred until the new year. Therefore,...
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...
. Credit entries appear on the right side of a T-account.] 3. What type of entry will increase the normal balances of the general ledger accounts Electricity Expense, Insurance Expense, Interest Expense, and Repairs...
pertains to one or more future accounting periods. To illustrate, assume that on December 1, a company recorded its $2,400 payment for six months of property insurance for December through May. At December 31, one month...
expense account to record the amounts that employees paid toward the company’s health insurance costs. For instance, the company might debit its expense account 4210 Employee Health Insurance Expense when recording...
Benefits provided by a company to retirees. Typical examples of potential benefits are pensions, life insurance, and health insurance.
is associated with Accounts Receivable and the Allowance for Doubtful Accounts. 3. Depreciation Expense is associated with the contra-asset account __________ Depreciation. 4. Insurance Expense is associated with the...
A percentage of an hourly wage rate (or salary) that represents the employer’s additional costs of employee benefits such as paid vacation days, paid sick days, insurance (health, dental, life, worker...
on December 31 has a prepaid expense if on December 1, it paid $6,000 for insurance coverage from December 1 through May 31. Recording a Prepaid Expense A prepaid expense can be recorded initially as an expense or as a...
about investing in stocks and bonds. A bond is also used to describe a guarantee of another person’s obligation. For example, an insurance company might issue a $500,000 surety bond needed by a company in order to...
automatically and only require information on the other account. Examples of Double Entry When a company borrows money from a bank, the company’s asset Cash is increased and the company’s liability Notes Payable or...
(general office salaries, rent, utilities, etc.), and interest expense will be reported on the income statement when they are directly related to sales or when they are used up. For example, the insurance premiums that...
amount that is actually prepaid (not yet expired) at the end of the quarter. Example of Adjusting Prepaid Expenses Assume that a company’s only prepaid expense is the prepaid premiums on its liability insurance...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
insurance is known as a __________-type or prepayment-type adjusting entry. 3. Adjusting entries are usually dated as of the __________ day of the accounting period. 4. An adjusting entry usually involves an __________...
and/or revenues that have already been recorded in the general ledger accounts. The reason is that some of the recorded amounts will actually be used up and/or earned in a future accounting period. An example...
taxes, Social Security taxes, Medicare taxes, state income taxes (if applicable) withholding for the employees’ portion of health insurance premiums, employees’ contributions to savings plans, garnishments of...
See Federal Insurance Contribution Act (FICA).
$600 per day). The adjusting entry will debit expenses for $4,200 and will credit accrued liabilities for $4,200. 7. Prepaid insurance, prepaid expenses, and unearned revenues involve which type of adjusting entries?...
of property, plant, and equipment. Depreciation of the Building and Equipment is a Fixed Cost The depreciation expense associated with a company’s buildings and machinery is considered to be a fixed cost or a fixed...
) is 0.6% on the first $7,000 of annual wages and salaries. In addition to the payroll taxes, you may have payroll related liabilities for worker compensation insurance, health insurance, 401-k contributions, pensions,...
What is Additional Medicare Tax? Definition of Additional Medicare Tax The Additional Medicare Tax is one of the U.S. government’s payroll withholding taxes that is paid solely by employees and the self-employed. In...
See old-age, survivor, and disability insurance (OASDI).
The amount of cash that could be received if a whole life insurance policy were canceled.
A lease where the lessee/tenant pays not only rent, but also the property taxes, insurance, and maintenance.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
The cost to hold an item in inventory. Includes the cost of capital tied up in inventory, the cost of space and insurance, and the cost of items becoming obsolete while being held in inventory. This is an important...
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
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