What is Form 10-K? Definition of Form 10-K Form 10-K is a required annual report filed with the U.S. Securities and Exchange Commission (SEC) by U.S. corporations whose common stock is publicly traded. It is common for a...
What is Form 10-K? Definition of Form 10-K Form 10-K is a required annual report filed with the U.S. Securities and Exchange Commission (SEC) by U.S. corporations whose common stock is publicly traded. It is common for a...
What is the purpose of subsidiary ledgers? Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable...
What is meant by accounts written off? Definition of Accounts Written Off Accounts written off is likely referring to accounts receivable that a company deemed to be uncollectible and were removed from the general ledger...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
What is the accounts receivable collection period? Definition of Accounts Receivable Collection Period The accounts receivable collection period is similar to the days sales outstanding or the days sales in accounts...
What is a letter of credit? A letter of credit is a letter or document issued by a bank for use by one of its customers. The letter of credit states that the bank will guarantee payment up to the stated amount for...
Is a security deposit a current asset? Definition of Security Deposit A security deposit is often an amount paid by a tenant to a landlord to hold until the tenant moves. The amount of the security deposit is refundable...
What is the meaning of aging? Definition of Aging In accounting, the term aging is often associated with a company’s accounts receivable. Accounts receivable arise when a company provides goods or services and allows...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
What is capital surplus? Definition of Capital Surplus In the past, capital surplus was used to describe what is now referred to as paid-in capital in excess of par or Premium on Common Stock. Example of Capital Surplus...
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...
What is a basis point? A basis point is a hundredth (1/100) of a percentage point. Expressed another way, one percentage point is equal to 100 basis points. This means that if an interest rate drops by 1/2 of a...
What are accrued liabilities? Definition of Accrued Liabilities Accrued liabilities are usually expenses that have been incurred by a company as of the end of an accounting period, but the amounts have not yet been paid...
What is the difference between assets and fixed assets? Assets are resources owned by a company as the result of transactions. Examples of assets are cash, accounts receivable, inventory, prepaid insurance, land,...
What is the three-way match? Definition of Three-Way Match In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or...
Why Does Inventory Get Reported on Some Income Statements? Reporting of Inventory on Financial Statements Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance...
What is the advantage of using historical cost on the balance sheet for property, plant and equipment? Definition of Historical Cost Historical cost is the original cost of an asset including all the necessary costs to...
What is a contra revenue account? Definition of Contra Revenue Account A contra revenue account is a revenue account that is expected to have a debit balance (instead of the usual credit balance). In other words, its...
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
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...
Does sales commission get reported in the income statement? Definition of Sales Commissions Sales commissions are amounts earned by selling another company’s goods or services and paid by the company whose goods or...
What items are added to the balance per bank on the bank reconciliation? Bank Reconciliation Adjustments to Bank Balance The items that are added to the balance per bank when doing a bank reconciliation include: Deposits...
How do I record an advance to an employee and the deduction? Definition of Advance to an Employee A cash advance to an employee is usually a temporary loan by a company to an employee. In other words, the company is the...
What is the purpose of control accounts? Definition of Control Account A control account is a general ledger account containing only summary amounts. The details for each control account will be found in a related (but...
What is workers' compensation insurance? Workers’ compensation insurance is likely to be an insurance policy obtained by a company to cover the medical costs and lost wages for its employees’ work-related injuries...
What is an imprest system of petty cash? Definition of Petty Cash Petty cash refers to a small amount of currency and coins that a company uses to pay small amounts without writing a check. The amount of petty cash (also...
Where is the premium or discount on bonds payable presented on the balance sheet? Definition of Premium or Discount on Bonds Payable The premium or discount on bonds payable is the difference between the amount received...
How do you calculate staff turnover? To calculate staff turnover, I would use the W-2 wage statements for the most recent year. My first step would be to sort the W-2’s into meaningful groups such as full-time...
What accounting entry is made when a company receives an order for its goods or services? Definition of Accounting Entry When an Order is Received At the time when a company receives a customer’s order (without...
Why is there a difference in the amounts for Bad Debts Expense and Allowance for Doubtful Accounts? Amount Reported as Bad Debts Expense The amount reported in the income statement account Bad Debts Expense pertains to...
What does current portion of long term debt mean? Definition of Current Portion of Long-Term Debt The current portion of long-term debt is the amount of principal that will be due within one year of the date of the...
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
Why do companies use cost flow assumptions to cost their inventories? Cost flow assumptions are necessary because of inflation and the changing costs experienced by companies. If costs were completely stable, it...
What is the rationale for not reporting plant assets at their liquidation value? I will assume that the plant assets‘ liquidation values are higher than the present carrying values when answering your question. Plant...
What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of a...
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...
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
How do you record an owner's money that is used to start a company? Recording Money to Start a Sole Proprietorship If Amy Ott begins a sole proprietorship by putting money into her business, the sole proprietorship will...
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