Bookkeeping

Temporary Accounts

Do You Know How Temporary vs. Permanent Accounts Differ? What are the temporary accounts? Examples of temporary accounts are: Revenue accounts. Expense accounts (such as the cost of goods sold, compensation expense, and supplies expense accounts) Gain and loss accounts (such as the loss on assets sold account) Write a corresponding credit in the income
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What Is a Capital Asset?

Their balances will increase with a debit entry, and will decrease with a credit entry. If a company pays one of its suppliers the amount that is included in Accounts Payable, the company will need to debit Accounts Payable so that the credit balance is decreased. If a company purchases additional goods or services on
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The accrual principle

Matching principle requires __________. What is the matching principle and why it is important to accountants? The matching principle is important because the proper matching of expenses and revenues gives a more accurate appraisal of the results of operations, helps to avoid distortion of the financial position of the business, and improves the quality of
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Operating Cash Flow Ratio

Any time your company spends or gains money by investing, you report it on the cash flow statement. Add up any money received from the sale of assets, paying back loans or the sale of stocks and bonds. What Is Cash Flow from Investing Activities? Cash flow from investing activities is the net change in
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What is the allowance method?

Accounts Receivable Aging Method To predict your company’s bad debts, you must create an allowance for doubtful accounts entry. You must also use another entry, bad debts expense, to balance your books. A company will debit bad debts expense and credit this allowance account. The allowance for doubtful accounts is a contra-asset account that nets
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