Is a money market account a current asset or a fixed asset? A money market account is a current asset unless it is restricted for a long-term purpose. The amount of an unrestricted money market account will likely be...
Is a money market account a current asset or a fixed asset? A money market account is a current asset unless it is restricted for a long-term purpose. The amount of an unrestricted money market account will likely be...
asset Accounts Receivable will decrease and its asset Notes Receivable will increase. 2) A company prepays its insurance. As a result its asset Cash decreases and its asset Prepaid Insurance increases. 3) A company buys...
Is a security deposit for a rental agreement recorded in a liability account? The person paying the security deposit would credit the asset account Cash and would debit the asset account Security Deposits. The person...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
How can I get a basic understanding of cost accounting?
How do you account for a project under construction? Accounting for a Project Under Construction If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will...
Isn't objectivity violated when estimates are used in bookkeeping and accounting? The use of estimates does not necessarily violate objectivity. If it is not possible to determine the exact amount of an expense and/or...
How is the material usage variance account reported on the financial statements? Definition of Materials Usage Variance The materials usage variance (in a standard costing system) results from using more or less than the...
How do I learn of new accounting rules? The U.S. accounting rules issued by the Financial Accounting Standards Board (FASB) can be found on its free website www.fasb.org/st/. There you will find: FASB Statements...
the customer. If the check was sent in error, I would photocopy the check, document on the photocopy what had occurred, and then return it to the customer. If you did not notice the double payment when processing the...
in the fire is in the company’s general ledger accounts at a cost of $106,000. The insurance policy deductible was $1,000 per occurrence. The journal entry for this transaction is: Debit Cash for $105,000 Credit...
cash accounts and their total reported as Cash or as Cash and cash equivalents as the first current asset. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
terms, where to remit payment, etc. Definition of a Voucher A voucher is an internal document used by a company’s accounts payable department in order to collect and organize the necessary documentation and approvals...
Is an entry made for outstanding checks when preparing a bank reconciliation? Definition of Outstanding Checks Outstanding checks are checks written by the company, recorded in the company accounts, but not yet appearing...
What is a deferred cost? Definition of Deferred Cost A deferred cost is a cost that is already recorded in a company’s accounts, but at least some of the cost should not be expensed until a future accounting period....
debit card, the bank’s liability account such as Customer Checking Accounts or Demand Deposits will be reduced. To reduce the normal credit balance in the bank’s liability account, a debit entry is required. The...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
accounts. (However, there could be an entry into the company’s computer system for scheduling the work or shipment, etc.) Reasons for No Accounting Entry When an Order is Received The following is the rationale for no...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
, the second account is to the temporary account Rent Expense which will be debited. The debit to Rent Expense also causes owner’s equity (or stockholders’ equity) to decrease. Eventually, the balances in the...
current ratio, but may not have liquidity. Hence, the inventory turnover ratio and the accounts receivable turnover ratio can provide insights as to a company’s ability to convert its current assets to cash in time to...
of common stock outstanding. This $600,000 distribution of cash will reduce the balances in two of the corporation’s balance sheet accounts: The current asset account Cash is reduced by $600,000 The stockholders’...
What is a rubber check? A rubber check is a check that is not paid (or honored) by the bank on which it is drawn. The reason the check is not paid is the maker’s account had insufficient funds or not sufficient funds...
, seasonal variations will be included. Using only the end of year point for two years is generally not indicative of the inventory levels in the months throughout the year. The 13-point average is also useful for...
assets in order to determine a company’s working capital. (Dividing current assets by the current liabilities is the company’s current ratio.) Examples of Current Liabilities The following are common examples of...
include: Billing for goods sold or services provided to clients Recording receipts from customers Verifying and recording invoices received from suppliers Paying suppliers Processing employees’ pay and the related...
payment from the buyer. The sales on credit are recorded with a debit to Accounts Receivable and a credit to Sales. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
ratios: Debt to equity Debt to total assets In these ratios, debt includes the company’s current and noncurrent liabilities such as: Bonds payable Bank loans Other loans Accounts payable Other amounts owed In a...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
Why is the P&L profit entered on the credit side of the balance sheet? Profit’s Effect on the Balance Sheet The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a...
are recorded in a contra revenue account such as Sales Discounts. Hence, its debit balance will be one of the deductions from sales (gross sales) in order to report the amount of net sales. Example of Sales Discounts To...
usually had an option to print the liability account balances on the balance sheet without the negative signs. If only one liability account has a negative sign, it is likely that the liability account has a debit...
What is petty cash? Definition of Petty Cash Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger...
. The retailer can record the delivery surcharges in a separate operating revenue account. In other words the sales revenues account could be used to record the revenues excluding the surcharges and then another sales...
, but the vendors’ invoices have not yet been recorded in Accounts Payable Accrued employee wages and fringe benefits Accrued management bonuses Accrued interest on loans payable Accrued advertising and promotion...
from Employees. Example of Employee Loan Assume an employee’s car needs an $800 repair and the employee does not have the money. The company employer agrees to give the employee an $800 advance to pay for the repair....
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...
are converted to cash in a timely manner. For example, if a company can better manage its inventory and its accounts receivable, the company’s cash and liquidity will increase. This in turn improves the company’s...
Featured Review
"After running my electrical contracting business for three decades, I attribute a significant portion of my financial acumen to the invaluable training provided by AccountingCoach. This premier site has been my go-to resource for accounting education, offering an extensive and comprehensible curriculum. What sets the PRO membership apart is its depth and breadth, providing advanced insights that are directly applicable to my business. The excellent explanations and materials on the site demystify complex accounting concepts, making them accessible and relevant to my industry. This program has not only fortified my understanding of financial intricacies but has also empowered me to make informed decisions, contributing substantially to the success and longevity of my business. AccountingCoach has been an indispensable companion throughout my entrepreneurial journey, and I highly recommend it to anyone seeking a robust foundation in accounting." - J.L.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviewsWe now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: