A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
A bank account balance that a corporation agrees to maintain with a current or potential lender. For example, a corporation may agree to keep $1 million in its checking account at a bank in exchange for the bank agreeing...
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...
Officers of a corporation are appointed by the board of directors to execute the policies that have been established by the board of directors. The officers include the chief executive officer (CEO), the chief operations...
in the notes to the financial statements. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your...
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
A potential gain that is not recognized by accountants in the financial statements until it actually occurs. For example, Company P is suing Company D over a patent infringement. Company P has a contingent gain. Because...
That part of a manufacturer’s inventory that is in the production process and has not yet been completed and transferred to the finished goods inventory. This account contains the cost of the direct material,...
The products in a manufacturer’s inventory that are completed and are awaiting to be sold. You might view this account as containing the cost of the products in the finished goods warehouse. A manufacturer must...
That component of a product that has not yet been placed into the product or into work-in-process inventory. This account often contains the standard cost of the direct materials on hand. A manufacturer must disclose in...
This contra owner’s equity account has a debit balance that represents the current year draws made by the sole proprietor, R. Smith. After the year’s financial statements have been prepared, the balance in...
A potential loss that is dependent upon some future event occurring or not occurring. If the loss is probable and the amount can be estimated, then the loss and a liability are recorded with a journal entry. If the loss...
This preferred stock feature assures the owner that any omitted dividends on this stock will be made up before the common stockholders will receive a dividend. Any omitted dividends on cumulative preferred stock are...
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
What is the accrual method? Definition of Accrual Method The accrual method of accounting reports revenues on the income statement when they are earned even if the customer will pay 30 days later. The accrual method of...
of $0 on an income statement prepared using the accrual method of accounting. The break-even point expressed in dollars of revenues is calculated by dividing the company’s total fixed expenses for the accounting...
will also be reported on the income statement as an expense in the accounting period when the repair is made. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
account Inventory is reduced through a credit to a contra inventory account, which is referred to as a valuation account. The debit in the entry to write down inventory is recorded in an account such as Loss on...
(and its contra account) is recorded in the account Bad Debts Expense which is reported on the income statement as part of the operating expenses. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
the $800 in its bank account until the morning of November 1. Since the $800 is not on the company’s bank statement as of October 31, the $800 is an outstanding deposit or deposit in transit as of October 31. On the...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
What is the difference between interest expense and interest payable? Definition of Interest Expense Assuming the accrual method of accounting, interest expense is the amount of interest that was incurred on debt during...
of goodwill and a resulting impairment loss reported on the company’s income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
What are some examples of investing activities? Definition of Investing Activities Investing activities often refers to the cash flows from investing activities, which is one of the three main sections of the statement...
will move all the income statement account balances to Retained Earnings. Let’s assume that today a corporation sold goods on credit. The corporation’s current asset Accounts Receivable will increase and the company...
What is the difference between depreciation expense and accumulated depreciation? Definition of Depreciation Expense Depreciation expense is the amount of depreciation that is reported on the income statement. In other...
should be recorded in a __________ account. Select... liability sales 12. Which accounts will have their end-of-the-year balances carried forward to the next accounting year? Select... Balance sheet accounts only Income...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
the information that the bookkeeper had entered into the general ledger, will prepare adjusting entries, will prepare the financial statements, and will analyze them. The accountant will likely supervise the bookkeeper...
method of accounting) begins operations on December 27. The employees working from December 27 through December 31 will receive their first paychecks on January 4. If the employees earn a total of $5,000 of wages during...
/ 3 years). This allocation of the phones’ cost to the accounting periods that benefit from the asset’s use follows the accountant’s matching principle. This makes the company’s financial statements more...
will include preparing the following projections for the next accounting year: Amounts for sales Amounts for producing goods Amounts for each department’s expenses Summarizing the above budgets into a master budget or...
inventory items are moving between operations. As a result, large companies are likely to physically count the inventory items only at the end of the accounting year. Using the Quantities in the Company’s Inventory...
capital is $20,000. This is the remainder after subtracting $40,000 from $60,000. AccountingCoach PRO contains 24 blank forms to guide you in computing and understanding often-used financial ratios. In addition, there...
, the U.S. accounting rules require that the cost of the obsolete inventory items be reduced to their net realizable value. Failure to reduce their cost will mean that the following amounts on the company’s financial...
) by $40,000. AccountingCoach PRO has 24 blank forms to guide you in calculating and understanding financial ratios. Also included are 24 filled-in forms based on two financial statements. Join PRO to Track Progress Mark...
to the financial statements of both the utility and the coal company. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
burden, or burden. US GAAP requires that indirect manufacturing costs be allocated to, assigned to, or absorbed by the manufacturer’s output (in addition to the cost of direct materials and direct labor) for its...
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
in the notes to the financial statements. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your...
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