How does one prepare a company's first bank statement reconciliation? To prepare a bank reconciliation for a company that never prepared one previously, I would first make a list of outstanding checks. For example,...
How does one prepare a company's first bank statement reconciliation? To prepare a bank reconciliation for a company that never prepared one previously, I would first make a list of outstanding checks. For example,...
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,...
Where do you account for payroll taxes on the income statement? Definition of Payroll Taxes Payroll taxes are based on the wages (salaries, commissions, bonuses, etc.) of a company’s employees and on a self-employed...
Why is an increase in inventory shown as a negative amount in the statement of cash flows? Meaning of a Negative Amount on Statement of Cash Flows A negative amount on the statement of cash flows (SCF) indicates that the...
to $1,000 in two years. If all amounts are certain, you will be in the same position whether you have $826 today or you receive $1,000 in two years. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
What are the various types of adjusting entries? Types of Adjusting Entries Adjusting entries, which are required in order to have a company’s financial statements comply with the accrual method of accounting, are...
. Definition of Closing Entries Closing entries are dated as of the last day of the accounting period, but are entered into the accounts after the financial statements are prepared. Closing entries involve the temporary...
to be “condensed” into a single amount. The financial statement would then display only the condensed total amount. It also prepared a separate page or schedule to show the detailed amounts. Mark the Cheat Sheet as...
of an income statement that reports expenses in excess of revenues. The FASB’s Statement of Financial Accounting Concepts No. 6 (December 1985) discusses expenses and losses in paragraphs 80-89. You can access this...
What are adjusting entries? Definition of Adjusting Entries Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that a company’s financial statements comply with the...
mean a corporation’s net income after income tax expense. Many business owners refer to the company’s income statement as the profit and loss statement or the P&L. A company reporting a positive amount of net...
. For financial statement purposes the graphic artist will correctly use a USEFUL life of two years while the accountant will correctly use a USEFUL life of five years. (Income tax depreciation is not covered in the...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
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...
or as an asset, the amounts must be adjusted so that the financial statements report the expense (reported as the cost of goods sold on the income statement for the year) at $6,900 and the asset inventory (reported on...
to the company on January 10; however, the bill will be approximately $6,000. Under the accrual method of accounting, the company must accrue this expense and liability prior to issuing its December 31 financial...
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...
purchasing power is assumed to be constant or stable over time. Select... conservatism cost economic entity full disclosure going concern industry practices matching materiality monetary unit time period 7. Allows...
Unscramble 7. Full __________ is achieved through the notes to the financial statements. DISCLOSURE COSRISEULD Unscramble DISCLOSURE RELUIDSOSC Unscramble 8. Results in the reporting of contingent losses, but not...
prepares monthly financial statements. When the $2,400 payment is made on January 1, the company debits Prepaid Insurance and credits Cash. It also sets up automatic monthly adjusting entries to debit Insurance Expense...
with the heading “Debit balances” and the credit balance amounts are listed in another column with the heading “Credit balances.” The total of each of these two columns should be identical. Examples of the Trial...
in the company’s general ledger accounts. If it is the end of the accounting period, these amounts must be recorded to comply with the accrual method of accounting. By entering these on an adjusting entry dated for...
Accounting Principles Accounting Principles The financial statements distributed to people outside of a U.S. corporation must be in compliance with generally accepted accounting principles (GAAP or US GAAP). US GAAP...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
that during a recent year a company’s income statement reported net sales of $2,100,000. During the same period, the company’s total assets reported on its 12 monthly balance sheets averaged $1,400,000. The...
card means that the bank (or other financial institution) is making a loan or providing credit to the cardholder. Usually the cardholder will receive a monthly statement showing the credit card transactions and must...
What is meant by reconciling an account? Definition of Reconciling an Account Reconciling an account is likely to mean proving or documenting that an account balance is correct. Examples of Reconciling an Account When a...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
that will be turning to cash.) For financial statement purposes the allowance method is the better method since 1) the balance sheet will be reporting a more realistic amount that will be collected from the company’s...
of significant noncash changes in the above sections Definition of Free Cash Flow Free cash flow is a metric often used by financial analysts. It is calculated by using two amounts reported on a company’s statement of...
of the amount of the accounts receivable that will be turning to cash, since some customers may not pay the full amount owed to the company. The credit balance in the allowance account is an estimate amount in an...
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...
in Allowance for Doubtful Accounts reduces the amount reported on a company’s balance sheet for accounts receivable to the amount that is expected to be collected. The balance sheet account Allowance for Doubtful...
What is the difference between unearned revenue and unrecorded revenue? Definition of Unearned Revenue In financial accounting, unearned revenue refers to money received prior to being earned. It is also referred to as...
of Long-term Assets Long-term assets include long-term investments in financial securities, property, plant, equipment, and intangible assets. Definition of Proceeds from Long-term Assets The money a company receives...
What is the interest coverage ratio? Definition of Interest Coverage Ratio The interest coverage ratio is a financial ratio used as an indicator of a company’s ability to pay the interest on its debt. (The required...
that is used up or expires in the accounting period. As a result, the cost is reported as an expense on the income statement. Definition of a Product Cost A product cost is a cost that is either directly or indirectly...
Featured Review
"I have a small bookkeeping company. Being a PRO user on AccountingCoach has been transformative for my bookkeeping and accounting skills. The comprehensive lessons and interactive quizzes provide a structured learning experience, demystifying complex accounting concepts. The clear explanations, coupled with real-world examples, have significantly improved my proficiency in my business. The platform's intuitive interface enhances accessibility, allowing me to seamlessly navigate through various topics. The PRO features, including in-depth Q&A sessions and additional resources, ensure I stay ahead in my financial endeavors. AccountingCoach is an indispensable tool for anyone seeking a profound grasp of accounting principles, and its PRO membership is worth every penny for the enriched learning journey." - Jonathon P.
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: