How does an expense affect the balance sheet? Definition of Expense An expense is a cost that has been used up, expired, or is directly related to the earning of revenues. Most of a company’s expenses fall into the...
How does an expense affect the balance sheet? Definition of Expense An expense is a cost that has been used up, expired, or is directly related to the earning of revenues. Most of a company’s expenses fall into the...
Can you help me understand the golden rules of accounting? The golden rules of accounting are not presented in any of the U.S. accounting books that I have reviewed. I assume the reason for omitting the golden rules of...
The lender (bank) that receives an asset as collateral for a loan.
Savings accounts and certificates of deposits at a bank.
to its holiday season, a retailer borrows $200,000 from its bank and promises to repay the bank in three months plus interest of $3,000. On each of the retailer’s monthly income statements, it will report $1,000 of...
What is meant by reconciling an account? Definition of Reconciling an Account Reconciling an account is likely to mean proving or documenting that an account balance is correct. Examples of Reconciling an Account When a...
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
A form used at a bank to inform its customer that the customer’s account is being reduced for a fee or other charge.
A person or business that has a checking account or savings account at a bank.
A check that has been issued but has not yet been paid by the bank on which it is drawn. An uncleared check is also known as an outstanding check.
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
Usually a bank, finance company, or person that makes a loan to another party, who is referred to as the borrower.
Checks received from customers and others that are not yet deposited into a bank account. Undeposited checks which are not postdated are reported as part of a company’s cash.
This term refers to checking account balances. On a bank’s balance sheet, demand deposits are reported as current liabilities.
A check often referred to as an NSF check, a rubber check, or a check that bounced. It is a check that was not paid by the bank of the issuer (writer) of the check because the checking account of the issuer did not have...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
An amount earned by a company on its interest bearing bank accounts or other investments. The amount should be reported as Interest Revenues, Interest Income, or Investment Revenues in the accounting period in which the...
The amount that a bank commits to lend a borrower during a specified purpose.
A bank or investment account with a fluctuating interest rate. Usually the funds can be withdrawn on demand, even though the account is not a checking account.
Bookkeeping Video Training Part 5 Why does my bank credit my account when they increase my cash account? Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job...
A term used to describe checks written by a company that have been received and paid by the bank on which they were drawn or written. The check number and amount will appear on the company’s checking account...
The person or business that receives a loan from a bank or other lender.
The time between when a check is written and when the check clears the bank account on which it is drawn.
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
This is granted by banks only to very creditworthy customers. It states that the bank will guarantee amounts that its customer incurred when purchasing goods. A letter of credit might be necessary for a U.S. company...
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
Retailers’ normal operating activities would include the purchase and sale of merchandise and selling and administrative expenses. A retailer’s investing of its idle cash is a nonoperating activity. However,...
Interest on interest. For example, if $1,000 is deposited in an account earning interest of 6% per year the account will earn $60 in the first year. In year two the account balance will earn $63.60 (not $60.00) because...
A bearer bond is a bond that is not registered in its owner’s name. The person holding the bond is presumed to be the owner of the bond. The interest on a bearer bond is received by clipping one of the dated...
A check that is not paid by the bank on which it is written (drawn). Often the reason a check is not paid is that the account on which the check was drawn did not have a sufficient balance. In that case the check is...
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
could clear (be paid from) the bank account prior to that date. Post-dating a check makes sense only if you are certain that the payee will not cash or deposit the check before the date appearing on the check. Example...
proprietor’s balance sheet is equal to total assets minus total liabilities. owner's equity The total of this section of a sole proprietor’s balance sheet is equal to total assets minus total liabilities. Mark...
adjustments when reconciling the bank statement. For example, if a check is written in December but is voided in January, the Cash account in the company’s general ledger will need to be increased when the check is...
What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
to the modifications. Irrevocable letters of credit are often used to facilitate international trade because of the additional risks involved. The irrevocable letter of credit assures the seller that it will be paid by...
of the Cash account. Examples of Net Cash Flows The net cash flows include the cash inflows such as the money received from customers who purchased products on credit in an earlier accounting period, cash sales...
information on customers’ and potential customers’ credit ratings. 8. An arrangement with a bank for a company’s credit customers to remit amounts directly to the bank is known as a __________ account. 9. Trade...
ratios: Debt to equity Debt to total assets In these ratios, debt includes the company’s current and noncurrent liabilities such as: Bonds payable Bank loans Other loans Accounts payable Other amounts owed In a...
Featured Review
"I have learned so much about accounting by simply studying an hour a day. I did not realize how much fun the PRO Plus program was going to be. I highly urge anyone and everyone in business to try it. I personally have gained so much more knowledge than in my college classes. Thanks to AccountingCoach and their amazing online program!" - Frank G.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: