A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...
A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...
The system where the general ledger account Inventory is not updated during the year. Rather, the merchandise purchased is recorded in temporary purchases accounts. At the time a balance sheet is presented, the inventory...
This is a contra owner’s equity account, because it has a debit balance if draws were made. Even though it is a balance sheet account, it is a temporary account. At the end of each year the account’s debit...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
The owner’s equity account that reports the amount invested in the sole proprietorship owned by Tony Mandella plus the cumulative amount of net income minus the cumulative amount of the sole proprietor’s...
If an accrual adjusting entry increases an expense and a liability, how does the balance sheet remain in balance? An expense is a temporary account which reduces owner’s equity or stockholders’ equity. The decrease...
This contra owner’s equity account has a debit balance that represents the current year draws made by the owner, Mary Smith. After the year’s financial statements have been prepared, the balance in this...
The temporary contra purchases account used in a periodic inventory system which represents the amounts of merchandise that were returned to suppliers and the amounts allowed as deductions by suppliers for goods not...
A listing of all of the accounts in the general ledger with account balances after the closing entries have been posted. This means that the listing would consist of only the balance sheet accounts with balances. The...
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
The accounting guideline requiring amounts in the accounts and on the financial statements to be the actual cost rather than the current value. Accountants can show an amount less than cost due to conservatism, but...
An assumption that determines the order in which costs should flow out of a balance sheet account (e.g. Inventory, Investments, Treasury Stock) when the item is sold. For an illustration of the cost flow assumption, see...
, advertising revenue, interest revenue, etc. The revenue accounts are temporary accounts that facilitate the preparation of the income statement. However, when a corporation earns revenue, it has the effect of...
to the next accounting year, a nominal account is also referred to as a temporary account. Examples of Nominal Accounts The nominal accounts are almost always the income statement accounts such as the accounts for...
Inventory is dormant and contains only the cost of the prior year’s ending inventory. With the periodic inventory system, the costs of additional purchases of goods are debited to the temporary account Purchases....
the time value of money. Since the investments have an impact over many years, the preferred methods for capital budgeting decisions are those which use discounted cash flows. (In addition to using the discounted cash...
Long-term assets include the following: Long-term investments. These include some investments in stocks and bonds of other corporations, a company’s bond sinking fund, the cash surrender value of life insurance...
What is DCF? In accounting, DCF refers to discounted cash flows or to the discounted cash flow techniques such as net present value or internal rate of return. DCF is a preferred method for evaluating capital...
Why is an amount in the cash flows from investing activities shown in parenthesis? An amount shown in parenthesis within the investing activities section of the cash flow statement indicates that cash was used to...
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...
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
The owner’s equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began. The...
Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land,...
Liabilities Equity or net assets Investments by owners Distributions to owners Comprehensive income Revenues Expenses Gains Losses The above list is based on the FASB’s Statement of Financial Accounting Concepts No....
consist of the following: Property, plant and equipment (fixed assets) Long-term investments Intangible assets Deferred charges and other noncurrent assets Join PRO to Track Progress Mark the Question as Read Must-Watch...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Retained Earnings is debited for the total amount of the dividend that will be paid and the current liability account Dividends Payable is credited for the same amount. (Some corporations will debit the temporary...
, there are occasions when the general ledger expense accounts will be credited. Examples of Expenses being Credited Below are some examples of when general ledger expense accounts are credited: When recording closing...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
, that is a temporary situation until the actual bills are processed. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
, their balances are on the right side of the accounts similar to their position in the accounting equation: assets = liabilities + owner’s equity. The revenue accounts (which are temporary accounts) also have credit...
income. The retailer’s main operations are purchasing and selling merchandise. Investing its idle cash in interest-bearing investments is outside of its main or central operations. Gains often involve the disposal of...
What is capital budgeting? Definition of Capital Budgeting Capital budgeting is a process used by companies for evaluating and ranking potential capital expenditures or investments that are significant in amount. A few...
What is the internal rate of return? Definition of Internal Rate of Return The internal rate of return is the interest rate that will discount an investment’s future cash amounts to be equal to cash paid at the...
noncurrent asset section of the corporation’s balance sheet. This section is likely to have the heading Investments. The bond sinking fund is a noncurrent (or long-term) asset even if the fund contains only cash. The...
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