Depreciation Methods Three examples of accelerated depreciation methods include the following: Double-declining-balance method (or 200% declining-balance method) 150%-declining-balance method Sum-of-the-years’-digits...
Depreciation Methods Three examples of accelerated depreciation methods include the following: Double-declining-balance method (or 200% declining-balance method) 150%-declining-balance method Sum-of-the-years’-digits...
that the stockholders are leaving in the corporation to be reinvested. The amount of retained earnings is reported in the stockholders’ equity section of the corporation’s balance sheet. Are Retained Earnings an...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
Loan Repayment A bank loan repayment is likely referring to the loan principal balance (or part of the principal balance) that the borrower is paying the lender (bank). When the principal payment is made, the...
reconciliation the outstanding checks are a deduction from the bank balance (or balance per the bank statement). If an outstanding check from the previous month did not clear the bank account in the current month, the...
up within one year are reported on a company’s balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement....
examples when the term carrying amount or carrying value is used: A company’s Accounts Receivable has a debit balance of $84,000. The company’s Allowance for Doubtful Accounts has a credit balance of $3,000. The...
prepares a bank reconciliation, the outstanding checks are subtracted from the bank statement balance in order to determine the correct or adjusted bank balance. There is no need for the company to write a journal...
What is the entry for a loan to an employee? Definition of Loan to Employee A loan to an employee is money advanced by the company to assist the employee. If the employee is expected to repay the loan within one year of...
, the expense will be recorded as part of the entry. When the company pays the invoice, the balance in Accounts Payable is reduced and the balance in the company’s Cash account is reduced. The payment does not affect...
To illustrate the calculation of net purchases, assume that a company had the following general ledger account balances at the end of its accounting year: Purchases had a debit balance of $250,000 Purchases Discount had...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
What is the difference between Rent Receivable and Rent Payable? Definition of Rent Receivable Rent Receivable is an asset account in the general ledger of a landlord which reports the amount of rent that has been earned...
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...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
for uncollectible accounts (or) allowance for bad debts This is the title to the contra account associated with Accounts Receivable. It reports the anticipated amount of the receivables that will not be collected. Mark...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Which financial statement is considered to be a “snapshot” of a company’s financial...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
statement. (The cost of goods sold is likely the largest operating expense and it is being matched to the related sales revenue to arrive at a company’s gross profit.) The cost of the items that are not yet sold are...
What would cause a decrease in accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the cumulative amount of depreciation taken since a depreciable asset was put into service. The...
receivable, net realizable value can also be expressed as the debit balance in the asset account Accounts Receivable minus the credit balance in the contra asset account Allowance for Uncollectible Accounts. In the...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
What is a temporary account? Definition of Temporary Account A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is...
. receives $24,000 on December 31, 2023 in exchange for promising to provide the client with services for the year January 1 through December 31, 2024. As of December 31, 2023 the entire $24,000 is unearned. Therefore,...
will be recorded by the issuing corporation as a debit to Discount on Bonds Payable, a debit to Cash for $9,800,000, and a credit to Bonds Payable for $10,000,000. Over the life of the bonds, the initial debit balance...
financial statements will report: Income tax expense on its income statement for the revenues and expenses appearing on the accounting period’s income statement, and Income taxes payable (a current liability on the...
account.) The Income Summary is very temporary since it has a zero balance throughout the year until the year-end closing entries are made. Next, the balance resulting from the closing entries will be moved to Retained...
: Divide company’s net credit sales for the year by 360 or 365 days = average credit sales per day Divide the average balance in Accounts Receivable during the year by #1 An alternative calculation is to use the...
is also a contra account to owner’s equity, because the drawing account’s debit balance is contrary to the normal credit balance for an owner’s equity account. At the end of the accounting year, the drawing...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
the loan) Credit Notes Payable for $100,000 (the principal amount that is due in two years) Since the principal balance of $100,000 will not be reduced until two years later, the note payable is reported on the balance...
of the corporation’s stockholders’ equity divided by the number of shares of common stock outstanding on that date. Both the amount of stockholders’ equity and the number of shares of common stock outstanding are...
Returns. This allows the company’s management to see the magnitude of the returns that occurred. The account Purchases Returns is a general ledger account that will have a credit balance (or no balance). Its credit...
: It is a note payable for the borrower who reports the note on its balance sheet as a liability It is a note receivable for the lender who reports the note on its balance sheet as an asset The interest promised in the...
What is a contra expense account? Definition of Contra Expense Account A contra expense account is a general ledger expense account that will intentionally have a credit balance (instead of the debit balance that is...
). However, sales have the effect of increasing a sole proprietorship’s credit balance in the owner’s equity section of the balance sheet, or a corporation’s stockholders’ equity section. (After the accounting...
that the company’s balance sheet will include the amount as a current liability. (The adjusting entry typically debits Wages Expense and credits Wages Payable.) Example of Wages Payable To illustrate wages payable we...
What is Notes Payable? Definition of Notes Payable In accounting, Notes Payable is a general ledger liability account in which a company records the face amounts of the promissory notes that it has issued. The balance in...
. Accounting for Office Supplies The cost of office supplies on hand at the end of an accounting period should be the balance in a current asset account such as Supplies or Supplies on Hand. The cost of the office...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
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