Equipment. Since the repair was not an improvement nor did it extend the life of the equipment, the controller prepared a journal entry that debits Repairs Expense for $5,000 and credits Equipment for $5,000. The...
Equipment. Since the repair was not an improvement nor did it extend the life of the equipment, the controller prepared a journal entry that debits Repairs Expense for $5,000 and credits Equipment for $5,000. The...
using the asset. Since it is difficult to precisely match a productive asset’s cost to a company’s revenues, the asset’s cost is usually allocated to the years in which the asset is used. In other words,...
maturity dates. Stocks pay dividends, which are a distribution of the corporation’s profits to its owners. However, the dividend occurs only if the corporation’s board of directors declare the dividend. The dividend...
in recording the payment as an asset—a prepaid expense or deferred charge—that will then be amortized to expense over the three year contract. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
Where do I record the refund of a registration fee? If the registration fee refers to a fee expense that you had originally paid but the amount is now being refunded to you, I would credit the same expense account that...
on equity, let’s assume that a corporation uses long term debt to purchase assets that are expected to earn more than the interest on the debt. The earnings in excess of the interest expense on the new debt will...
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
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...
. Once an asset is fully depreciated, there will be no additional depreciation expense. Example of a Fully Depreciated Asset Let’s assume that a company purchased a building more than 30 years ago at a cost of...
Why do we charge depreciation? Definition of Depreciation Accountants charge (to expense) Have a significant cost Will be useful for more than a year Will not be useful indefinitely Since the asset land is assumed to be...
year with a zero balance. The temporary accounts include the income statement accounts (revenue, expense, gain, loss, income summary) and also the drawing account of a sole proprietorship. The balances in these accounts...
is on the bank statement, but not yet on the company’s books, a journal entry is needed to credit Cash and to debit an expense such as Bank Charges or Miscellaneous Expense. Check printing charges Customer checks that...
, inventory, prepaid expenses, accounts payable, wages payable, income taxes payable, etc. 8. Generally, the changes in noncurrent assets will result in cash flows appearing within which section of the cash flow...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
does not give the bondholders any ownership interest semiannual interest payments must be made when due the maturity amount must be paid when the bonds come due the issuer’s interest expense qualifies as an income tax...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
basis for measuring profitability in a limited time period. ACCRUAL LAAURCC Unscramble ACCRUAL AUALCRC Unscramble 5. The expense associated with debt. INTEREST RENESITT Unscramble INTEREST ETRESITN Unscramble 6. At the...
a cost has no future benefit that can be measured. When an expense occurs and cash has not yet been paid, a liability account will also be recorded. (The expenses that were not paid in the current accounting period will...
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 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 Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
with an imprest balance of $100. The petty cash custodian has $17.00 on hand and is preparing a check request to replenish the fund. The petty cash receipts show disbursements of $81.00 consisting of $30.00 for supplies...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Operating expenses made to return an asset to its previous condition (rather than to make the asset more than it was originally). The amount is charged to an account such as Repairs and Maintenance Expense in the period...
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
A contra liability account arising when the proceeds of a note payable is less than the face amount of the note. The debit balance in this account will be amortized to interest expense over the life of the note.
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
A current asset that reports the amount paid for advertising that has not yet taken place. When the advertising occurs the prepaid advertising is reduced and advertising expense is recorded.
The systematic allocation of the costs incurred to issue bonds (reported in a contra liability account) to Interest Expense over the life of the bonds.
A distribution of part of a corporation’s past profits to its stockholders. A dividend is not an expense on the corporation’s income statement.
Also referred to as draws. These are a reduction of owner’s equity, but are not a business expense and they do not appear on the sole proprietorship’s income statement.
Sometimes referred to in the context of cost or expense behavior such as “variable expenses increase as volume increases.” In this context volume might be an activity such as the number of machine hours, the...
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
An asset’s cost that has been assigned to Depreciation Expense.
See accrued rent expense. Also see accrued rent income.
To report a revenue or expense that has occurred, but has not yet been entered in the accounting records as of the end of the accounting period. To learn more, see Explanation of Adjusting Entries.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
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