of Liability Accounts Common liability accounts used with the accrual method of accounting include: Accounts Payable Notes Payable or Loans Payable Accrued Liabilities or Accrued Expenses Unearned Revenues or...
of Liability Accounts Common liability accounts used with the accrual method of accounting include: Accounts Payable Notes Payable or Loans Payable Accrued Liabilities or Accrued Expenses Unearned Revenues or...
the vacation pay that its employees have earned but have not yet taken? Select... Accrual Deferral Use the following information for Questions 23 - 24: A company correctly recorded an accrual adjusting entry on December...
What is cumulative preferred stock? Definition of Cumulative Preferred Stock Cumulative preferred stock is a type of preferred stock for which any omitted dividends must be paid before the corporation is allowed to pay a...
the deductions for payroll withholding taxes and other items. If the gross pay is $800 and the total payroll deductions amount to $200, the employee’s net wages will be $600. Net wages is also known as the net pay,...
of $48,000 ($4,000 per month multiplied times 12 months in a year). A person with a semimonthly salary of $3,000 is earning an annualized salary of $72,000 ($3,000 multiplied times 24 semimonthly pay periods). A company...
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...
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...
How is a short term bank loan recorded? Definition of Short Term Bank Loan When a company borrows money from its bank and agrees to repay the loan amount within a year, the company will record the loan by increasing its...
bookkeeping or accounting system, another general ledger account will also be misstated by the same amount. Example of Understated Assume that a company reports its accounts payable as $210,000. Also assume that the...
. Liabilities are a company’s obligations as of the balance sheet date and will include loans payable, accounts payable, accrued expenses not yet recorded in accounts payable, warranty obligations, taxes payable, and...
and matching principle. Book value of an asset is: the asset’s cost minus the asset’s accumulated depreciation. Book value of the liability Bonds Payable is the combination of the following: Maturity or par value of...
liability accounts including Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits stockholders’ equity accounts such as Common Stock, Retained Earnings, Treasury Stock, and Accumulated...
is a liability account. To decrease a liability account you debit the account. Credit Wrong. Accounts Payable is a liability account. Liability accounts have credit balances and to decrease the balance you need to DEBIT...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
How do you record a deposit on utilities? Definition of Deposit on Utilities A new customer of a public utility (electricity, natural gas, telephone, etc.) may be required to pay a refundable amount known as a utility...
Also known as time-and-one-half. A term used in conjunction with overtime pay when an employee gets a 50% higher pay rate for hours in excess of 40 hours per week. The “half” is also known as the overtime...
How is petty cash reported on the financial statements? Definition of Petty Cash Petty Cash is a small amount of money that a company has available to pay small amounts without writing a company check. The money might be...
What are sales discounts? Definition of Sales Discounts Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated discount periods. Sales discounts...
of a company’s customers who were given 30 days in which to pay has filed for bankruptcy and the customer’s assets are close to $0. Therefore, there will be no amount left to pay any of the $4,000 it owes to the...
What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
to improve the internal control of its assets. Examples of Restrictive Endorsements The most common restrictive endorsement is the phrase For Deposit Only written along with the payee’s signature on the back of a...
of an interest payment of $500 and a principal payment of $1,500. The company’s entry to record the loan payment will be: Debit of $500 to Interest Expense Debit of $1,500 to Loans Payable Credit of $2,000 to Cash The...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
This term might be used to express the combined balances of two accounts. For example, if Equipment has a debit balance of $300,000 and the account Accumulated Depreciation on Equipment has a credit balance of $130,000,...
to be an adjusting entry dated December 31 to debit Interest Expense and to credit Interest payable for the amount of interest owed as of December 31. The principal balance on the mortgage loan already appears in the...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
. The payment for the equipment is to be made on February 10. Under the accrual method, on December 29 the company should debit the asset account Equipment and credit the liability account Accounts Payable. (When the...
on the SCF as a positive amount. For example, if Notes Payable has increased by $10,000 it will be reported on the SCF as a positive $10,000 since the increase in Notes Payable means there was a cash inflow, cash was...
are referred to as __________ checks. 3. Checks received from customers on December 31, but not deposited until January 2 are referred to as deposits __________ __________. 4. Recording $980 as $890 is known as a...
accounts. When a company borrows money, its asset account Cash increases and its liability account Loans Payable increases. When a company pays one of its accounts payable, its Cash account decreases and its liability...
must match the amount withheld. (Self-employed individuals pay both the employee and the employer portions of the payroll tax.) Example of Annual Wage Limit Assume that an employee has gross wages of $170,000 during the...
but inadequate for other companies. Difference Between Net Working Capital and Liquidity Net working capital is often cited as one of the indicators of a company’s liquidity. However, the amount of net working capital...
A formal, written promise to pay interest and to repay the principal amount.
A formal written promise to pay interest every six months and the principal amount at maturity.
An interest rate that is not explicitly stated. For example, instead of paying $100 cash a person is allowed to pay $9 per month for 12 months. The interest rate is not stated, but the implicit rate can be determined by...
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