the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
the bonds’ stated interest rate was greater than the market interest rate. The amount of the premium is recorded in a separate bond-related liability account. Over the life of the bonds the premium amount will be...
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...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
the systematic allocation of an asset or liability amount from the balance sheet to expense (or revenue) on the income statement. Here are a few examples: The debit balance in the contra liability account Discount of...
to a balance sheet account until a later accounting period when it will be moved to the income statement. Deferral is also used to describe the type of adjusting entries used to defer amounts at the end of an accounting...
Why is income received in advance a liability? Definition of Income Received in Advance Under the accrual method of accounting, when a company receives money from a customer prior to earning it, the company will have to...
needs permit A drawback of common stock is that the common stockholders are last in line to receive money if a corporation is dissolved. Common Stock is also the title of the general ledger account that is credited when...
to a liability account a debit to an expense account if the employees are not involved in the manufacturing of products. (The FUTA tax for employees in the manufacturing departments is recorded in an account associated...
Expense and credit a liability account in the accounting period when the sales occur. When the commission payment is made, the liability account is debited and the Cash account is credited. If the sales are related to...
as a reduction in the company’s Cash account and an increase in an asset account such as Advance to Employees or Other Receivables: Advances. (If the amount is expected to be repaid within one year, this account will...
money to the business, the entry will be to debit Cash and credit a liability account such as Notes Payable. (If Amy invests an asset other than cash, the business will record the cash equivalent or fair market value of...
report that is/was useful in a manual accounting system. If the trial balance did not “balance” it signaled an error somewhere between the journal and the trial balance. Often the cause of the difference was a...
to Cash of $10,150,000; a credit to Bonds Payable of $10,000,000; and a credit of $150,000 to Premium on Bonds Payable (an adjunct liability account). Over the life of the bonds, the $150,000 premium is to be accounted...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Sales minus the cost of good sold equals __________ __________. 2. The...
Bookkeeping Video Training Part 13 Sales on credit: risk, unsecured accounts receivable, aging to monitor allowance for doubtful accounts, bad debts expense Must-Watch Video Learn How to Advance Your Accounting and...
Financial Statements Video Training Part 2 Balance sheet: accounts receivable, estimated allowance for doubtful accounts, inventory cost flows (FIFO & LIFO) Must-Watch Video Learn How to Advance Your Accounting and...
An abbreviation for the word account.
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...
of the following would not be included in a product's cost for inventory valuation for the financial statements? Factory Supplies Wrong. Factory supplies are included in manufacturing overhead. Quality Control...
This term indicates the left side of a general ledger account and it is the normal balance for asset, expense, and loss accounts. debit This term indicates the left side of a general ledger account and it is the normal...
, the money is counted and is deposited into the church’s bank account. The transaction to record the cash and the revenues (remember double entry) should be dated Sunday, June 4, since that is the day of the...
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...
What is a comparative balance sheet? Definition of Comparative Balance Sheet A comparative balance sheet typically has two columns of amounts that appear to the right of the account titles or other descriptions such as...
on the disposal, the owner’s equity is unchanged. On the other hand, if the same truck is sold for $3,000 there will be a $2,000 loss ($3,000 of cash received versus the $5,000 of book value removed) reported on 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...
of an Expense As a prepaid cost such as the $6,000 in the asset account Prepaid Insurance expires, the part that expires will be reported on the income statement as Insurance Expense. If the insurance cost is expiring...
in an account that normally has a debit balance, or a debit balance in an account that normally has a credit balance A credit entry, when a debit entry will not have parentheses An unfavorable variance in standard...
but have not yet been recorded in the accounting records should be entered or recorded through an accrual adjusting entry which will: Debit Wages Expense Credit Wages Payable or credit Accrued Wages Payable Wages...
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
What is the difference between a debit and a debit balance? Definition of Debit A debit is an entry on the left side of a T-account. A debit entry is used to record assets, expenses, losses, and owner’s draws in their...
premium that is paid in advance for insurance coverage on a company’s vehicles. The amount paid is often recorded in the current asset account Prepaid Insurance. If the company issues monthly financial statements, its...
What is contained on a 10-column worksheet? The 10-column worksheet that I am familiar with will have the general ledger account titles in the first column followed by ten columns of amounts. There will be one debit and...
an accounting adjusting entry in which the account Depreciation Expense is debited and the contra asset account Accumulated Depreciation is credited. Effects of Depreciation The following are some of the effects for a...
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...
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
In a bank reconciliation, what happens to the outstanding checks of the previous month? Definition of Outstanding Checks Outstanding checks are checks written by a company, but the checks have not cleared the bank...
account. When the annual real estate taxes come due, the lender pays the real estate taxes by using the money in the borrower’s escrow account. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
What is a memorandum entry? Definition of Memorandum Entry A memorandum entry is a short message entered into the general journal and also entered into a general ledger account. It is not a complete journal entry because...
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