they will not pay the amount they owe the company. Good accounting requires the company to have an Allowance for Doubtful Accounts to report a credit balance for the estimated amount of the accounts receivable that will...
they will not pay the amount they owe the company. Good accounting requires the company to have an Allowance for Doubtful Accounts to report a credit balance for the estimated amount of the accounts receivable that will...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
employees’ wages to pay part of the cost of the insurance, the company will credit its contra expense account 4211 Employee Withholdings for Health Ins. The benefit of using the contra expense account is that the...
records the transaction with a $10,000 debit to Accounts Receivable and a $10,000 credit to Sales. Since Supplier Company does not have a lien on the retailer’s assets, Supplier Company is an unsecured creditor. On...
for a customer on December 28 and allows the customer 10 days in which to pay its invoice of $850. On December 28, HRS records the $850 it has earned in the current asset account Accounts Receivable and in the revenue...
date. However, if the depositor insists on withdrawing the money before the maturity date, the financial institution will assess a penalty—usually the loss of interest. Since the depositor agreed to a maturity date,...
. The transfer price is the amount that Sub2 will pay Sub 1 for each component it needs. If Sub 1 has idle capacity, it can make an additional profit even with a transfer price of less than $20. However, Sub2 will be...
What does the term arrears mean in accounting? Definition of Arrears In accounting, the term arrears will be used in the following situations: If a corporation does not declare and pay the dividend on its cumulative...
of the amount of the accounts receivable that will be turning to cash, since some customers may not pay the full amount owed to the company. The credit balance in the allowance account is an estimate amount in an...
Website Services Corp (WSC) completed extensive and unique services for a client and agreed to a single payment of $100,000 to be made two years from now. The client’s financial condition would require it to pay...
of Cost Principle The cost principle means that a long-term asset purchased for the cash amount of $50,000 will be recorded at $50,000. If the same asset was purchased for a down payment of $20,000 and a formal promise...
total fixed costs to pay for additional supervisors, space, and other fixed costs. Hence, an experienced accountant would say that the company’s fixed costs are approximately $200,000 per month within a relevant range...
at the time that the bond was purchased by the investor The yield to maturity is expressed as an annual percentage rate. Example of Yield to Maturity Assume that a 5% $100,000 bond will mature in 5 years and will pay...
for a small fee that was immediately expensed. Since then Company X has been very effective in promoting this trademarked brand. Consumers now pay a premium price for this recognized and superior product. A competitor...
in the period in which they are earned even though the dependable customers will pay the company 30 days later. Example of Revenues On June 10, a company sells $4,000 of goods to one of its best customers with credit...
low. There can also be differences within the same industry. For example, one computer company might assemble and ship computers within hours of receiving the order via its website. Its inventory turnover will be off...
What is the discounted value of expected net receipts? Let’s first define expected net receipts. These are future receipts after deducting any related payments. For example, if you are likely to receive $1,200 one year...
of the manufacturing costs are not directly traceable to individual products and will need to be allocated to them. Examples of indirect manufacturing costs include the rent, property taxes, depreciation, heat,...
or services on credit and the customer did not pay the amount owed. Examples of Bad Debts Expense There are two methods for reporting the amount of bad debts expense: direct write-off method allowance method The direct...
corporations may have negative retained earnings, which are reported as a deficit. State laws require corporations to have a positive amount of retained earnings in order to pay cash dividends. It is important to note...
the customer to pay in 30 days, the company will increase its asset account Accounts Receivable with a debit of $500. It must also record a credit of $500 in Service Revenues because the revenue was earned. The credit...
consist of the costs of direct materials, direct labor, and manufacturing overhead Examples of Inventoriable Costs Assume that a retailer purchases an item for resale by paying $20 to the supplier. The item is purchased...
of Purchase Discount Assume that a company receives a supplier’s invoice of $5,000 with the credit terms 2/10 net 30. The company will be allowed to subtract a purchase discount of $100 (2% of $5,000) and remit...
of $100 and its current asset Prepaid Insurance will report $500. The prepaid amount informs the readers of the December 31 balance sheet that the company will not have to pay $500 in cash for insurance during the next...
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...
-on experience. Don’t be overly concerned with the starting pay since your value will come after you demonstrate your proficiency as an effective bookkeeper. Join PRO to Track Progress Mark the Question as Read...
MNPEYTEUMNOL Unscramble UNEMPLOYMENT EYMOUPEMNNLT Unscramble 4. The ________ unemployment tax is often a net rate of 0.6% of each employee's first $7,000 of annual wages. FEDERAL EDELRAF Unscramble FEDERAL ELREAFD...
What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
is that a small percent of customers will not pay the full amount. After reviewing the customers’ balances the company estimates that $10,000 of the $1,000,000 will not be collected. Rather than waiting until the...
of its customers. Ace requires that the customer pay $50,000 before Ace begins to design and construct the machine. The $50,000 payment is made in December 2023 and the machine must be finished by March 31, 2024. The...
$2,000 for purchases made 40 days ago. Since Jim does not have the money to pay the supplier, he offers to mail the supplier two $1,000 checks: one check dated for June 20 and the other check dated for July 20. The...
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...
purchased and the company’s standard cost per pound for the raw materials that were purchased. (The standard cost per pound is the cost that the company expected to pay for the year and was included in the company’s...
to pay off the loan, the company will have no liability. If the supplier fails to repay the bank, the company will have an actual liability. If a company is sued by a former employee for $500,000 for age discrimination,...
will be recorded in the inventories and the cost of goods sold accounts. Since the company must pay its vendors and production workers the actual costs incurred, there are likely to be some differences. The differences...
was $300,000 and the average inventory was $150,000 the inventory on average turned to cash only 2 times during the year. When inventory items are slow to be converted into cash, the company’s money is sitting in...
How do I start a petty cash fund? Definition of Petty Cash Fund A petty cash fund is a small amount of money available to pay small amounts without requiring the processing of a business check. Example of Starting a...
customers. The contract requires the customer to pay TOPCO $5,000 when the contract is signed and the remainder of $20,000 to be paid when TOPCO delivers the machine within 30 days of the signing. When TOPCO receives...
a lien on the property that protects the lender if the borrower fails to pay the amounts owed. Example of a Mortgage Loan Typically, mortgage loans are long-term loans requiring monthly payments of interest and...
in the bank’s records. This process is known as the bank reconciliation. Examples of Checking Accounts Companies often have several checking accounts. For example, it may have a separate checking account for each of...
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