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What is meant by accounts written off

Offer Details: Accounts written off often refers to the accounts receivable that were deemed to be uncollectible and were removed from a receivable account in the general ledger. For example, a manufacturer may have written off an accounts receivable because a customer filed for bankruptcy and has insufficient

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How do you write off a bad account

Offer Details: The entry to write off a bad account depends on whether the company is using the direct write-off method or the allowance method. Examples of the Write-off of a Bad Account. Under the direct write-off method a company writes off a bad account receivable when a specific account is determined to be uncollectible. This usually occurs many months

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Are sales discounts reported as an expense

Offer Details: Definition of Sales Discounts Sales discounts are also known as cash discounts or early payment discounts. Sales discounts (along with sales returns and allowances) are deducted from gross sales to arrive at the company's net sales. Hence, the general ledger account Sales Discounts is a contra re

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When should costs be expensed and when should costs be

Offer Details: Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be: Reported as an expense on the current period's income statement, or Reported as an asset and expensed later. To defer the cost to the balance sheet

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Where in the chart of accounts is a suspense account

Offer Details: Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization's chart of accounts: Asset Liability Revenue Expense Examples of Suspense Accounts Assume that a company receives cash of $500 but cannot readily determine the reason why

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How is the account Cash Short and Over used

Offer Details: Definition of Cash Short and Over Account The account Cash Short and Over is an income statement account (within a company's general ledger) in which shortages or overages of cash are recorded. The Cash Short and Over account might be used by: A bank to record daily differences (if any) between a

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Where is a contingent liability recorded

Offer Details: 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 statement, and 2) a liability on the balance sheet.. Disclosing a Contingent Liability. A loss contingency which is possible but not probable will not be recorded in the accounts

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How is the material usage variance account reported on the

Offer Details: How is the material usage variance account reported on the financial statements? The material usage variance in a standard costing system results from using more or less than the standard quantity of direct materials specified for the actual goods produced. If the actual quantity of the input direct materials is more than the standard quantity allowed for the good output, the variance is

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Why are the amounts on the financial statements rounded to

Offer Details: Amounts on financial statements are often rounded in order to emphasize the important digits. As a result of rounding, the financial statements are more attractive in appearance which in turn makes them more inviting to read. Rounding is important because corporations must present three years of

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What is the difference between an invoice and a statement

Offer Details: What is the difference between an invoice and a statement? Definition of an Invoice. An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of all the items listed on the invoice, the terms of the sale, etc.. Definition of a Statement. A statement from a supplier lists the amounts from past invoices that the

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What is the allowance method

Offer Details: Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit. (The other way is the direct write-off method.) Under the allowance method, a company records an adjusting ent

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Pledging, Selling, Direct Write-Off Method AccountingCoach

Offer Details: Direct Write-off Method. Generally accepted accounting principles (GAAP) require that companies use the allowance method when preparing financial statements. The use of the allowance method is not permitted, however, for purposes of reporting income taxes in the United States because the Internal Revenue Service (IRS) does not allow companies to anticipate these credit losses.

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What is a fringe benefit rate

Offer Details: Next, let's assume that during the year an employee earns $20 per hour, and is entitled to 25 days or 200 hours off with pay (vacation, holidays, sick days). Therefore, the employee's wages for working on the job will be 1,880 hours per year (2,080 hours minus 200 hours) …

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Why isn't the direct write off method of uncollectible

Offer Details: Why isn't the direct write off method of uncollectible accounts receivable the preferred method? Definition of Direct Write Off Method. Under the direct write off method of accounting for credit losses pertaining to accounts receivable, no bad debts expense is reported on the income statement until an account receivable is actually removed from the company's receivables.

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How do you calculate the gain or loss when an asset is

Offer Details: How do you calculate the gain or loss when an asset is sold? Definition of Gain or Loss on Sale of an Asset. The gain or loss on the sale of an asset used in a business is the difference between 1) the amount of cash that a company receives, and 2) the asset's book value (carrying value) at the time of the sale.. In order to know the asset's book value at the time of the sale, the depreciation

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Where does the purchase of equipment show up on a profit

Offer Details: Where does the purchase of equipment show up on a profit and loss statement? Reporting the Purchase of Equipment. Assuming that the purchase of equipment is a long-term or noncurrent asset that will be used in a business, the purchase will not be reported on the profit and loss statement (income statement, statement of earnings). Rather, the equipment's cost will be reported in the general

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Does collecting a customer's accounts receivable affect

Offer Details: Does collecting a customer's accounts receivable affect net income? Collecting accounts receivable that are in a company's accounting records will not affect the company's net income. (Generally speaking, net income is revenues minus expenses.). Under the accrual basis of accounting, revenues and accounts receivable are recorded when a company sells products or earns fees by providing services

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How do you report a write-down in inventory

Offer Details: How do you report a write-down in inventory? Definition of Write-down in Inventory. Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be a reduction in the inventory amount. Often the balance in the current asset account Inventory is reduced through a credit to a contra inventory account, which is referred to

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What should be the entry when goods are purchased at a

Offer Details: Definition of Goods Purchased at a Discount There are two common types of discounts for companies buying goods to resell: Trade discount Early payment discount Examples of Entries for Goods Purchased at a Discount Trade discount. Some suppliers have catalogs with prices before any discounts. Let'

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What adjustment is needed when a check

Offer Details: What adjustment is needed when a check that was written in a previous month appears on the current month's bank statement? A check written in any previous month but not appearing on previous bank statements, should have been included in last month's list of outstanding checks.Now that the check appears on the current month's bank statement, the check should not be included in the current month

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Calculating Present Value AccountingCoach

Offer Details: PV tables cannot provide the same level of accuracy as financial calculators or computer software because the factors used in the tables are rounded off to fewer decimal places. In addition, they usually contain a limited number of choices for interest rates and time periods.

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What is the difference between receivables and accounts

Offer Details: What is the difference between receivables and accounts receivable? Definition of Accounts Receivables. Accounts receivable are usually current assets that result from selling goods or providing services to customers on credit.Accounts receivable are also known as trade receivables.. Definition of Receivables

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Does paying an account payable affect net income

Offer Details: Does paying an account payable affect net income? Paying accounts payable that are already included in a company's accounting records will not affect the company's net income. (Generally speaking, net income is revenues minus expenses.). Under the accrual basis of accounting, if an expense is associated with an accounts payable, the expense will be recorded at the time the accounts payable is

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Which financial statement tells the value of a business

Offer Details: Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows, statement of stockholders' equity) may provide some helpful partial information, but they will not report the value of the business.Two reasons why the value of a business is not

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Accounts Receivable and Bad Debts Expense Quiz and Test

Offer Details: It learns that one of its accounts receivable amounting to $1,800 is worthless and needs to be written off. 22. Which account should be debited for $1,800 when writing off the account? Allowance For Doubtful Accounts . Right! Accounts Receivable . Wrong. Bad Debts Expense . Wrong. 23.

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Is a loan payment an expense

Offer Details: Definition of Loan Payment Generally a loan payment consists of: An interest payment, which is an expense A principal payment, which reduces the loan's principal balance If the interest and principal portions of the loan payment are not listed, a loan amortization schedule will indicate the amoun

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What is the difference between book depreciation and tax

Offer Details: Definition of Book Depreciation Book depreciation is the amount recorded in the company's general ledger accounts and reported on the company's financial statements. This depreciation is based on the matching principle of accounting. Example of Book Depreciation Let's assume that equipment used i

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What type of expense is the purchase of propane

Offer Details: Technically, the purchase of propane is not an expense. Depending on the business, the propane is an asset until it is used, resold, or included in a product that is sold. At that time it will become an expense. If the purchased propane is used relatively soon, accountants will usually skip recor

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What is the net method

Offer Details: What is the net method? In accounting and bookkeeping, the net method often refers to how a company records each vendor invoice. Under the net method, the company will credit Accounts Payable for the invoice amount minus any early payment discount that is offered. For example, if a vendor's invoice for $1,000 has credit terms of 2/10, net 30 days, the company will record the invoice at the net

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Relationship Between Variances, Disposing of Variances

Offer Details: What To Do With Variance Amounts. Throughout our explanation of standard costing we showed you how to calculate the variances. In the case of direct materials and direct labor, the variances were recorded in specific general ledger accounts.

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Where should I enter unpaid wages

Offer Details: Definition of Unpaid Wages Unpaid wages are usually the amounts that hourly-paid employees have earned, but have not yet been paid to the employees. Entering Unpaid Wages Under the accrual basis of accounting, unpaid wages that have been earned by employees but have not yet been recorded in …

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What are some examples of financing activities

Offer Details: What are some examples of financing activities? Definition of Financing Activities. Financing activities often refers to the cash flows from financing activities, which is one of the three main sections of the statement of cash flows (or SCF or cash flow statement). In this section of the SCF, the company lists the cash inflows and cash outflows from:

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bad debts expense definition and meaning AccountingCoach

Offer Details: What is the direct write-off method? Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials Read all 2,239 Testimonials. PRO Lifetime Access. PRO Plus Lifetime Access. Video Training . Flashcards . Visual Tutorials . Quick Tests . Quick Tests with Coaching . Cheat Sheets . Business Forms .

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holiday, vacation, sick days expense: warehouse definition

Offer Details: When employees take time off with pay for holidays, vacation or sick days, the liability account is debited. Since this account involves the warehouse function of the business, this expense should be reported in the same section of the company's income statement as the warehouse salaries and wages are reported.

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Examples of Debits and Credits in a Corporation

Offer Details: Since assets are on the left side of the accounting equation, the asset account Equipment is expected to have a debit balance. The debit balance in the Equipment account will increase with a debit entry to Equipment for $5,000.

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state unemployment tax definition and meaning

Offer Details: Taxes assessed by states to cover unemployment benefits paid to unemployed workers who have been laid off or terminated by a company for specified reasons. This tax is paid by the employer but is computed by multiplying a percentage times the first $7,000 to $30,000+ (varies by state) of each employee's annual wages.

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Treasury Stock and Accumulated Other Comprehensive Income

Offer Details: The difference of $9 per share ($29 of proceeds minus the $20 cost) times 30 shares was credited to another stockholders equity account, Paid-in Capital from Treasury Stock. Although the corporation is better off by $9 per share, the corporation cannot report this "gain" on its income statement.

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write-off definition and meaning AccountingCoach

Offer Details: write-off definition. The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.

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