What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
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...
Why are accruals needed every month? Reasons for Monthly Accruals Accrual adjusting entries are needed monthly only if a company issues monthly financial statements. Two reasons for the monthly accrual adjusting entries...
Why does a bond's price decrease when interest rates increase? Definition of Bond’s Price A bond’s price is the present value of the following future cash amounts: The cash interest payments that occur every six...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
Is a loan's principal payment included on the income statement? Definition of Loan Principal Payment When a company borrows money from its bank, the amount received is recorded with a debit to Cash and a credit to a...
How is a short term bank loan recorded? Definition of Short Term Bank Loan When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its...
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....
What is the entry for an employee's personal phone calls included in the company's bill? Let’s assume that an employee has made personal phone calls of $20 which are included in the company’s phone bill of $100....
Why does a company prepare a bank reconciliation? Reasons for Preparing a Bank Reconciliation There are several reasons for a company to prepare a bank reconciliation: To safeguard the company’s cash. Performing a bank...
How is petty cash reported on the financial statements? Definition of Petty Cash Petty Cash is a small amount of money that a company has available to pay small amounts without writing a company check. The money might be...
What is the face value of a bond payable? Definition of Face Value of a Bond Payable The face value of a bond payable is the amount printed on the bond. The face value is also referred to as the following: Face amount...
What is the difference between wages and salary? You should be aware that some people use the terms wages and salary interchangeably. I and many others make the following distinction… Definition of Wages Wages are...
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 an unpresented cheque or check and does it require an adjustment to the balance sheet? Definition of Unpresented Cheque or Check An unpresented cheque is a check that a company has written, but the check has not...
What is opportunity cost? Definition of Opportunity Cost Opportunity cost is the profit that was lost or missed because of some action or failure to take some action. Some refer to opportunity cost as opportunity lost....
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...
Are undeposited checks reported as cash? Undeposited checks that are not postdated (not dated with a future date) are reported as cash. Accountants define cash as more than just currency and coins. For example,...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services, and 2) manage...
How is working capital defined and measured? Definition of Working Capital Working capital is defined as the amount of a company’s current assets minus the amount of its current liabilities usually as of the final...
How do I record a loan payment which includes paying both interest and principal? Definition of a Loan Payment A loan payment is likely to consist of three amounts: Total payment amount Interest payment Principal payment...
What is the difference between stockholder and stakeholder? Definition of Stockholder A stockholder or shareholder is the owner of shares of a corporation’s common or preferred stock. Definition of Stakeholder A...
What is the accounting equation? Definition of Accounting Equation The accounting equation of a sole proprietorship is assets = liabilities + owner’s equity. For a corporation, the accounting equation is assets =...
What is the chart of accounts? Definition of Chart of Accounts The chart of accounts is a listing of the names and account numbers for the general ledger accounts available for recording amounts. However, the chart of...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee is not...
What is a sole proprietorship? Definition of Sole Proprietorship A sole proprietorship is a form of business organization that is owned by one person and is easy to start. The owner is referred to as a sole proprietor....
If a company issues stocks or bonds to pay outstanding debt, should this noncash transaction be included in the cash flow statement? If a company issues stocks or bonds for cash and then pays off the debt, the...
What is a dividend and why is it needed? A dividend paid by a corporation is a distribution of profits to the owners of the corporation. The owners of a corporation are known as stockholders or shareholders. (In a sole...
What is the difference between information and data? I was taught that information is useful data. The point is there are lots of data (plural of datum) everywhere, and most of the data will not be useful to a decision...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
What is a certificate of deposit? Definition of Certificate of Deposit A certificate of deposit, also referred to as a CD, is a time deposit at a bank, credit union, or other financial institution. A certificate of...
What is a journal? Definition of a Journal In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry. The...
What are accruals? Definition of Accruals The accounting and bookkeeping term accruals refers to adjustments that must be made before a company’s financial statements are issued. Accruals involve the following types of...
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...
Why and how do you adjust the inventory account in the periodic method? Definition of Inventory Account in Periodic Method Under the periodic method or periodic system, the account Inventory is dormant throughout the...
What is the statement of stockholders' equity? Definition of the Statement of Stockholders’ Equity The statement of stockholders’ equity (also known as the statement of shareholders’ equity, statement of equity,...
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 is the difference between a nominal account and a real account? Definition of Nominal Account The balance in a nominal account is closed at the end of the accounting year. As a result, a nominal account begins each...
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