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...
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...
cost principle) requires that transactions be recorded at their cost. Cost is defined as the cash amount or the cash equivalent amount at the time of the transaction. Except for certain marketable investment securities...
. In other words, the calculation is: [cash + marketable securities + accounts receivable] divided by current liabilities. If a company had current assets of $300,000 (of which $180,000 was inventory) and current...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to...
of current assets by the amount of current liabilities. current ratio This results from dividing the amount of current assets by the amount of current liabilities. Mark as wrong Mark as right quick ratio (or) acid test...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
What is a post-closing trial balance? Definition of Post-closing Trial Balance A post-closing trial balance is a trial balance which is prepared after all of the temporary accounts in the general ledger have been closed....
accounts are also referred to as temporary accounts or nominal accounts because at the end of each accounting year their balances will be closed. This means that the balances in the income statement accounts will be...
Depreciation Expense is a temporary account. Therefore, at the end of each year, its balance is closed and the account Depreciation Expense will begin the next year with a zero balance. The account Accumulated...
since its debit balance is contrary to the normal credit balance of the owner’s equity or capital account. The title of the account for recording R. Smith’s draws from his or her business is R. Smith, Drawing or R....
of the sale, the company can experience a temporary or even permanent cash flow problem. In order for the company to minimize these potential problems, a company is wise to routinely review an aging of accounts...
(revenues, expenses, gains, losses) as temporary accounts because their balances will be closed and transferred to the owner’s capital account at the end of the year. Join PRO to Track Progress Mark the Question as...
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...
. This will get the proper amounts on the company’s income statement and balance sheet. The account Interest Expense will begin January with a zero balance, since expenses are temporary accounts that are closed at the...
of the owner’s capital account and a drawing account. The drawing account is a temporary account in which the owner’s current year draws or withdrawals are recorded. The sole proprietor withdraws money for personal...
. Therefore, another account will need to be credited. In this case Service Revenues will be credited for $300. Service Revenues is a temporary account that will eventually be closed to the owner’s equity account. Join...
What is the accounting entry to close the sole proprietorship drawing account? Definition of Sole Proprietorship Drawing Account The drawing or withdrawal account for a sole proprietorship is a temporary owner equity’s...
to pay at a later date, the company records the sale with a debit to Accounts Receivable and a credit to the revenue account Sales. The Sales account is a temporary account used to keep a tally of the sales made during...
similar to the sole proprietor’s Drawing account and Capital account which are part of owner’s equity. Both the Dividends account and the Drawing account are temporary balance sheet accounts since they are closed at...
general ledger account. As a result, the nominal accounts are also referred to as temporary accounts. The closing process also means that each nominal account will start the next accounting year with a zero balance....
the following year with zero balances.) Examples of Balance Sheet Accounts Examples of a corporation’s balance sheet accounts include Cash, Temporary Investments, Accounts Receivable, Allowance for Doubtful Accounts,...
) is considered to be a contra account. In addition, the drawing account is a temporary account since its balance is closed to the capital account at the end of each accounting year. Example of the Drawing Account...
What is the periodic inventory system? Definition of Periodic Inventory System The periodic inventory system does not update the general ledger account Inventory when a company purchases goods to be resold. Rather than...
is a temporary account that records the proprietor’s draws during the year. At the end of the year, the account’s debit balance will be closed to owner’s capital account A corporation will likely have the...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
by reading our Financial Accounting (Explanation). 1. Financial accounting is focused on the __________ financial statements of a company. External Right! Internal Wrong. 2. Financial statements report the fair market...
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...
. The quick ratio includes Cash, Temporary Investments, and Accounts Receivable—the items that can be turned into cash QUICKLY. Inventory is NOT considered a quick asset. Inventory Right! Inventory is NOT considered a...
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...
Revenues, Service Revenues, Investment Income, Wages Expense, Rent Expense, Utilities Expense, Advertising Expense, Insurance Expense, Depreciation Expense, Interest Expense, Gain on Sale of Assets, Loss from Lawsuit,...
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...
could be described as __________ accounts. Select... balance sheet permanent temporary 21. When interest is earned by a company, the account Interest Income or Interest Revenue should be __________. Select... debited...
in retained earnings? Select... Foreign currency translation adjustments Unrealized holding gains on readily marketable equity securities View Coaching Beginning in 2018, the unrealized holding gains (and losses) on...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
from disposing of an old asset, etc. The net cash flows also include the cash outflows such as paying for new equipment, paying for goods and services from the last accounting period, repaying bank loans, making a...
Expense, but should have been recorded in the income statement account Promotion Expense. The correcting entry will credit Advertising Expense and will debit Promotion expense. It is important to note that the income...
. Definition of Closing Entries Closing entries are dated as of the last day of the accounting period, but are entered into the accounts after the financial statements are prepared. Closing entries involve the temporary...
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