What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
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...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
What is retained earnings? Definition of Retained Earnings Retained earnings is the cumulative amount of earnings since the corporation was formed minus the cumulative amount of dividends that were declared. Retained...
30, and will not include the goods in transit as its December 31 inventory. On December 31, the customer (buyer) is the owner of the goods in transit and will need to report a purchase, a payable, and must include the...
What is a mortgage loan? Definition of Mortgage Loan A mortgage loan is a loan associated with the purchase of real estate, such as a home or buildings used in a business. As part of the loan process, the lender files a...
How do I start a petty cash fund? Definition of Petty Cash Fund A petty cash fund is a small amount of money available to pay small amounts without requiring the processing of a business check. Example of Starting a...
the paperwork for a company’s transactions and getting the information quickly and accurately recorded in the company’s general ledger accounts. Today, this is done best through the use of cost effective software...
What is OEM and EOM? OEM is the acronym for original equipment manufacturer. EOM is the acronym for end of month. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
How does the aging of accounts receivable determine bad debts expense? Definition of Aging of Accounts Receivable The aging of accounts receivable sorts the amounts that a company is owed (from customers who had...
If a customer pays for the same invoice twice, should the customer be informed? I say yes. If you become aware of the double payment when posting the customer’s second remittance, I would double check your records...
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
How do you write off a bad account? Definition of the Write-off of a Bad Account The write-off of a bad account usually refers to eliminating an account receivable due to the customer’s inability to pay the amount...
What are the benefits of a revenue budget? The main benefit of a revenue budget is that it requires looking into the future. The revenue budget should contain the assumptions made about the future and the details about...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
What is the difference between correlation and cause and effect? Definition of Correlation Correlation refers to the association between two or more variables. The association is measured by a statistic known as the...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
What is the difference between Notes Payable and Accounts Payable? Definition of Notes Payable The account Notes Payable is a liability account in which a borrower’s written promise to pay a lender is recorded. (The...
the goods on the truck belong to the buyer, the buyer should pay the shipping costs. These shipping costs will be an additional cost of the goods purchased. Example of FOB Destination Now assume that a seller quoted...
and other adjusting entries Providing financial reports Today bookkeeping is done with the use of computer software. For example, QuickBooks (from Intuit) is a low-cost bookkeeping and accounting software package that...
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
Is AccountingCoach.com based on GAAP or IFRS? The materials presented on AccountingCoach.com are based on U.S. GAAP. Since the accounting materials on AccountingCoach.com are generally introductory concepts, the...
of money. The concept is that receiving $1,000 in the future is less valuable than receiving $1,000 today. If we assume that the time value of money is 10% per year, a net receipt of $1,000 one year from today will have...
low. There can also be differences within the same industry. For example, one computer company might assemble and ship computers within hours of receiving the order via its website. Its inventory turnover will be off...
Should receipts be recorded using the date the money was received or the date the money was deposited in the bank accounts? Cash receipts should be recorded with the date the money was received. For example, a church...
What is the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
What is a classified balance sheet? Definition of Classified Balance Sheet A classified balance sheet arranges the amounts from a company’s balance sheet accounts into a format that is useful for the readers. For...
) as of the final moment of an accounting period in accordance with generally accepted accounting principles (GAAP, US GAAP). GAAP’s historical cost principle means that some noncurrent assets are reported at amounts...
Why isn't the direct write off method of uncollectible accounts receivable the preferred method? Definition of Direct Write Off Method Under the direct write off method of accounting for credit losses pertaining to...
What is the difference between a cost center and a profit center? Definition of Cost Center A cost center is a subunit of a company that is responsible only for its costs. A few examples of cost centers are: Production...
be: Revenues (sales, service fees) that were earned during the accounting period Expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
Are there two ABC methods in accounting? Some accountants use ABC to mean Activity Based Costing. Under this ABC a manufacturer will use many cost drivers to assign overhead costs to products. The objective of Activity...
What are inventoriable costs? Definition of Inventoriable Costs Inventoriable costs are: A retailer’s cost of the goods (products) that it purchased for resale, and any additional cost to get the goods in place and...
What are nonmanufacturing overhead costs? Definition of Nonmanufacturing Overhead Costs Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
What is the payback reciprocal? The payback reciprocal is a crude estimate of the rate of return for a project or investment. The payback reciprocal is computed by dividing the digit “1” by a project’s payback...
. Accounting for Office Supplies The cost of office supplies on hand at the end of an accounting period should be the balance in a current asset account such as Supplies or Supplies on Hand. The cost of the office...
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
What is disinvestment? In business, disinvestment means to sell off certain assets such as a manufacturing plant, a division or subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital...
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For the past 52 years, Harold Averkamp (CPA, MBA) has
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