What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
Cash Flow Statement(Quick Test #1) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
What does Accumulated Depreciation tell us? Definition of Accumulated Depreciation Accumulated depreciation reports the amount of depreciation that has been recorded from the time an asset was acquired until the date of...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they 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...
Adjusting Entries(Quick Test #4 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
A current liability account that reports the amounts owed to the utility companies for electricity, gas, water, phone as of the date of the balance sheet. If a utility bill has not been received, the company will have to...
Also known as a CD. A bank time deposit (savings deposit) that cannot be withdrawn until a specified date. For example, a CD might mature in 6, 9, 12, or 18 months. If the amount deposited in a CD needs to be withdrawn...
The amount owed to employees as of a specified date for the amount of vacation pay that has been earned but has not been taken. For example, the accrued vacation pay as of December 31, 2023 is the amount the employees...
Bonds Payable Bonds Bonds are a form of long-term debt for the issuer. (For the buyer of the bonds, the bonds are an investment.) Bonds Payable As part of the entry to record the issuance of bonds, the issuer will record...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
How do I calculate depreciation using the sum of the years' digits? Definition of the Sum-of-the-Years’-Digits Depreciation The sum-of-the-years’-digits depreciation (SYD depreciation) is one method for calculating...
How should the cost of a yearly subscription for a newspaper be recorded? Definition of Recording a Yearly Subscription Typically, yearly subscriptions are paid in advance or at the start of the subscription period. If...
This is a contra long-term asset account which is credited for the depreciation associated with Buildings. Since it is a balance sheet account, the accumulated depreciation account balance does not close at the end of...
This account is a contra long-term asset account which is credited for the depreciation associated with land improvements. As an asset account, the accumulated depreciation account balance does not close at the end of...
Debits and Credits (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (30) Marked Wrong (0) Marked Right (0) debit (or) debit balance This is the left side of an account and also the normal...
What is the time value of money? Definition of Time Value of Money The time value of money recognizes that receiving cash today is more valuable than receiving cash in the future. The reason is that the cash received...
What is the meaning of systematic and rational allocation? Definition of Systematic and Rational Allocation Systematic and rational allocation is typically included in the definition of depreciation. In this context, it...
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...
How, when and why do you prepare closing entries? Definition of Closing Entries Closing entries transfer the balances from the temporary accounts to a permanent or real account at the end of the accounting year. As a...
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating...
One of the main financial statements of a nonprofit organization. This financial statement reports the revenues and expenses and the changes in the amounts of each of the classes of net assets during the period shown in...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
What is owner's equity? Definition of Owner’s Equity Owner’s equity is one of the three main sections of a sole proprietorship’s balance sheet and one of the components of the accounting equation: Assets =...
Bonds Payable(Quick Test) Download PDF After you have answered all 40 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
The most common example is the correction of an error from a prior year. When such a correction is made, it is reported in the current period’s statement of retained earnings rather than in the current...
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Debits and Credits(Quick Test #2) Download PDF After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
Why does commitment and contingencies appear on the balance sheet without an amount? Definition of Commitments and Contingencies Commitments and contingencies is a balance sheet line with no amount reported. The line...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
What is the conservatism principle? Definition of Conservatism Principle In accounting, the conservatism principle (or accounting constraint) directs an accountant, who is faced with doubt between two possible...
What is a credit balance? Definition of Credit Balance In accounting and bookkeeping, a credit balance is the ending amount found on the right side of a general ledger account or subsidiary ledger account. Examples of...
Where is interest on a note payable reported on the cash flow statement? Definition of Interest on a Note Payable The interest on a note payable is reported on the income statement as Interest Expense. Usually this means...
What is a nonprofit organization? A nonprofit organization is an organization without commercial owners and which addresses the needs of society. Nonprofit organizations are also known as not-for-profits, NFP’s or...
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