, 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...
, 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...
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...
customers and accounts as sundry has been eliminated. 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 your current job...
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’...
to manually posting them to the accounts in the general ledger or subsidiary ledger. Examples of Journals in a Manual Accounting System Manual systems usually had a variety of journals such as a sales journal, purchases...
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...
A company’s original sales invoice amounts are the source for the company’s gross sales. These amounts are recorded as credit entries in the general ledger account Sales. Any sales returns, sales allowances, and...
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...
on its products and its allowance for uncollectible accounts receivable will need to be estimates. Providing an estimated amount is better than ignoring reality and reporting a zero amount. I recommend that 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...
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....
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...
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...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
is associated with Accounts Receivable and the Allowance for Doubtful Accounts. 3. Depreciation Expense is associated with the contra-asset account __________ Depreciation. 4. Insurance Expense is associated with the...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Reconciling the bank statement is a procedure that can improve a company’s internal...
include this type of account. EXPENSE PENESXE Unscramble EXPENSE EXPEENS Unscramble 7. A common adjusting entry pertaining to plant assets is the recording of ______________. DEPRECIATION ODAPNTIERIEC Unscramble...
What is the difference between book depreciation and tax depreciation? Definition of Book Depreciation Book depreciation is the amount recorded in the company’s general ledger accounts and reported on the company’s...
What are the notes to the financial statements? Definition of Notes to Financial Statements The notes to the financial statements are a required, integral part of a company’s external financial statements. They are...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
Where is the discount on the purchase of office furniture recorded? Definition of Discount on Purchase of Office Furniture The discount on the purchase of office furniture that will be used by a company (as opposed to...
What is burn rate? In business, burn rate is usually the monthly amount of cash spent in the early years of a start-up business. Burn rate is an important metric since the new business must spend time and money...
What are payroll withholding taxes? Definition of Payroll Withholding Taxes In the U.S. payroll withholding taxes are the taxes that an employer is required to deduct from its employees’ gross wages, salaries, bonuses,...
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...
is deferred to the balance sheet account Prepaid Rent (or Prepaid Expenses,) which is a current asset. During the three months of January 1 through March 31 (when the prepaid rent is expiring) the $3,000 prepayment must...
What does it mean to rotate stock? Definition of Rotating Inventory Stock To rotate stock means to arrange the oldest units in inventory so they are sold before the newer units. The goal is to avoid losses due to getting...
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 be...
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...
31 from the bank statement balance as of August 31. The resulting amount is the adjusted balance per bank. Next, look at the general ledger account that is associated with the bank statement. Let’s assume it is...
Is it a requirement for a small business to have a CPA? Generally, a small business is not required to have a CPA or certified public accountant. A CPA would be needed if the small business must have its financial...
Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
for the year of the income statement might be $300,000. The $300,000 accounting entry debited Depreciation Expense and credited Accumulated Depreciation. As you can see, not a penny left the checking account in the year...
What are marketable securities? Marketable securities are unrestricted financial instruments which can be readily sold on a stock exchange or bond exchange. Marketable securities are often classified into two groups:...
What is the difference between stocks and bonds? Definition of Stocks Stocks, or shares of capital stock, represent an ownership interest in a corporation. Every corporation has common stock. Some corporations issue...
What is a condensed income statement? A condensed income statement is one that summarizes much of the income statement detail into a few captions and amounts. For example, a retailer’s condensed income statement will...
What is self-insurance? Self-insurance means no insurance. For example, if a retailer decides to self-insure its buildings, the retailer will not have an insurance policy to pay for losses that may occur to its...
What is FIFO? Definition of FIFO In accounting, FIFO is the acronym for First-In, First-Out. It is a cost flow assumption usually associated with the valuation of inventory and the cost of goods sold. Under FIFO, the...
ledger account Sales Discounts is a contra revenue account. Sales discounts are not reported as an expense. Example of Sales Discounts A company offers its business customer sales discounts of 1/10, net 30. For the...
What is the cash flow statement? Definition of Cash Flow Statement The cash flow statement (officially known as the statement of cash flows) is one of the required financial statements issued by U.S. businesses (and by...
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