How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods sold...
Is the direct method still used in the statement of cash flows? The direct method is one of two methods allowed for preparing the statement of cash flows (or cash flow statement). The direct method is recommended by the...
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, if...
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 do purchases appear as expenses on an income statement? Definition of Purchases In the context of companies that sell merchandise, the term purchases refers to the purchases of goods that are intended to be sold to...
What is the effect on the income statement when the allowance for uncollectible accounts is not established? Definition of Allowance for Uncollectible Accounts The Allowance for Uncollectible Accounts or Allowance for...
Will the adjusting entry amounts appear in the balance sheet and income statement? Absolutely. The adjusting entry amounts must be included on the income statement in order to report all revenues earned and all expenses...
What does debit memo mean on a bank statement? Definition of Bank Debit Memo A debit memo on a company’s bank statement refers to a deduction by the bank from the company’s bank account. In other words, a bank debit...
Where are short-term bank loans reported on the statement of cash flows? Definition of Short-Term Bank Loans Short-term bank loans are generally loans that must be repaid within one year of the date of the balance sheet....
Why is depreciation on the income statement different from the depreciation on the balance sheet? Definition of Depreciation Depreciation is the systematic allocation of an asset’s cost to expense over the useful life...
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...
What is cumulative preferred stock? Definition of Cumulative Preferred Stock Cumulative preferred stock is a type of preferred stock for which any omitted dividends must be paid before the corporation is allowed to pay a...
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...
What are marketable securities? Marketable securities are unrestricted financial instruments which can be readily sold on a stock exchange or bond exchange. Marketable securities are often classified into two groups:...
What are interim financial statements? Definition of Interim Financial Statements Interim financial statements report amounts for time intervals that are shorter than a company’s annual financial statements. The...
What are the notes to the financial statements? Definition of Notes to Financial Statements The notes to the financial statements are a required, integral part of a company’s external financial statements. They are...
What are consolidated statements of operations? Consolidated statements of operations is the heading appearing on the financial statement also referred to as the income statement. In a small survey of 14 U.S....
What are consolidated financial statements? Definition of Consolidated Financial Statements Consolidated financial statements are financial statements for a group of separate legal entities that are controlled by one...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Is the drawing account a capital account? Definition of Drawing Account A sole proprietorship will have a drawing account in which the owner’s withdrawals or draws of cash or other assets are recorded. The amounts of...
What is the difference between a ledger and a trial balance? Definition of a Ledger A ledger is often defined as a book of accounts. Today the ledger and its accounts are likely to be an electronic record or file....
Where is a contract with a customer reported on the balance sheet? A contract to perform future services for a customer is not reported on the balance sheet of the company that will be providing the services. For...
What is a general ledger? Definition of General Ledger A general ledger is a grouping of perhaps hundreds of accounts that are used to sort and store information from a company’s business transactions. The general...
Total liabilities divided by total assets. This indicates how much of a corporation’s assets are financed by lenders/creditors as opposed to purchased with owners’ or stockholders’ funds. If a high...
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
A current liability account that reports the amounts of cash dividends that have been declared by the board of directors but not yet distributed to the stockholders.
A corporation with a limited number of stockholders and whose stock is usually not publicly traded.
The date that determines which stockholders are entitled to receive a corporation’s declared dividend. No accounting entry is made on this date.
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
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.
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...
Debits and Credits For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
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