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A suspense account is an account in the general ledger in which AMOUNTS are TEMPORARILY RECORDED. The suspense account is used because the PROPER account could not be determined at the time that the TRANSACTION was recorded.

When the proper account is determined, the amount will be moved from the suspense account to the proper account.

A suspense account is an account in the general ledger in which amounts are temporarily recorded. The suspense account is used because the proper account could not be determined at the time that the transaction was recorded.

When the proper account is determined, the amount will be moved from the suspense account to the proper account.

Miscellaneous expense is often a general ledger account in which very small amounts are recorded. Generally it is best not to use this account. If ANOTHER account does not seem appropriate, consider opening a NEW account to CAPTURE the EXPENSES. For example, a $10 donation would be better recorded in an account Donations rather than in Miscellaneous Expense. Checking account fees would be better recorded in Bank Service Charges rather than Miscellaneous Expense.

Miscellaneous expense could also be a line on the income statement that reports the amounts from many general ledger ACCOUNTS whose balances are not significant. For example, the balances in Cash Short and Over, Bank Service Charges, and Donations might be combined into one amount and presented on the income statement as Miscellaneous Expense.

Miscellaneous expense is often a general ledger account in which very small amounts are recorded. Generally it is best not to use this account. If another account does not seem appropriate, consider opening a new account to capture the expenses. For example, a $10 donation would be better recorded in an account Donations rather than in Miscellaneous Expense. Checking account fees would be better recorded in Bank Service Charges rather than Miscellaneous Expense.

Miscellaneous expense could also be a line on the income statement that reports the amounts from many general ledger accounts whose balances are not significant. For example, the balances in Cash Short and Over, Bank Service Charges, and Donations might be combined into one amount and presented on the income statement as Miscellaneous Expense.

Accumulated depreciation is the total amount of a plant asset's cost that has been allocated to depreciation EXPENSE since the asset was put into service. Accumulated depreciation is associated with CONSTRUCTED assets such as buildings, machinery, office equipment, furniture, fixtures, vehicles, etc.

Accumulated Depreciation is also the title of the contra asset account which is CREDITED when Depreciation Expense is recorded each accounting period. 

The amount of accumulated depreciation is used to determine a plant asset's book value (or carrying value). For example, a delivery truck having a cost of $50,000 and accumulated depreciation of $31,000 will have a book value of $19,000. (It is important to note that an asset's book value does not indicate the asset's market value since depreciation is merely an allocation technique.)

The accumulated depreciation of each plant asset cannot exceed the asset's cost. If an asset remains in use after its cost has been fully depreciated, the asset's cost and its accumulated depreciation will REMAIN in the general ledger accounts and the depreciation expense stops. When the asset is disposed (sold, retired, etc.) the asset's cost and accumulated depreciation are removed from the accounts.

Accumulated depreciation is the total amount of a plant asset's cost that has been allocated to depreciation expense since the asset was put into service. Accumulated depreciation is associated with constructed assets such as buildings, machinery, office equipment, furniture, fixtures, vehicles, etc.

Accumulated Depreciation is also the title of the contra asset account which is credited when Depreciation Expense is recorded each accounting period. 

The amount of accumulated depreciation is used to determine a plant asset's book value (or carrying value). For example, a delivery truck having a cost of $50,000 and accumulated depreciation of $31,000 will have a book value of $19,000. (It is important to note that an asset's book value does not indicate the asset's market value since depreciation is merely an allocation technique.)

The accumulated depreciation of each plant asset cannot exceed the asset's cost. If an asset remains in use after its cost has been fully depreciated, the asset's cost and its accumulated depreciation will remain in the general ledger accounts and the depreciation expense stops. When the asset is disposed (sold, retired, etc.) the asset's cost and accumulated depreciation are removed from the accounts.

Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses. (The owner's drawing account is also a temporary account, even though it is not an income statement account.)

Nominal or temporary accounts are closed at the END of each accounting YEAR. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances.

The balances from the income statement accounts will end up in the owner's equity account, if the enterprise is a sole PROPRIETORSHIP. If the business is a corporation, the balances will end up in the retained EARNINGS account.

Nominal accounts in accounting are the temporary accounts, such as the income statement accounts. In other words, nominal accounts are the accounts that report revenues, expenses, gains, and losses. (The owner's drawing account is also a temporary account, even though it is not an income statement account.)

Nominal or temporary accounts are closed at the end of each accounting year. This means that their account balances are transferred to a permanent account. This closing process allows the nominal accounts to start the next accounting year with zero balances.

The balances from the income statement accounts will end up in the owner's equity account, if the enterprise is a sole proprietorship. If the business is a corporation, the balances will end up in the retained earnings account.

Parentheses around numbers could have a variety of meanings. Here are a few that COME to mind.

• An AMOUNT in parentheses could indicate a negative amount, such as a negative balance in your check register.
• Sometimes an amount in parentheses signifies a credit balance in an account normally having a debit balance, or even a debit balance in an account that normally has a credit balance.
• Some accountants use the parentheses to simply indicate credit entries. AMOUNTS without parentheses are debit entries.
• In standard costing, the variances that are unfavorable are often shown in parentheses. Favorable variances are presented as amounts without parentheses.
• In comparisons of ACTUAL expenses to budgeted expenses, the amount overspent is often shown in parentheses. Amounts that are underspent appear without parentheses. Similar to variances in standard costing, the parentheses represents unfavorable amounts.
• Sometimes parentheses are used to indicate that the amount is to be subtracted.
• The bottom line of a COMPARATIVE income statement (an income statement that reports several years) might read Net Income (Loss). In this case an amount in parentheses indicates a net loss—meaning that expenses exceeded revenues. The amounts on this line that are not in parentheses indicate a positive net income—meaning that revenues exceeded expenses.

I am certain there are other uses of parentheses as well.

Parentheses around numbers could have a variety of meanings. Here are a few that come to mind.

I am certain there are other uses of parentheses as well.

In accounting and bookkeeping, a journal is a record of financial transactions in order by date. A journal is often defined as the book of original entry. The definition was more appropriate when transactions were written in a journal prior to manually POSTING them to the accounts in the general LEDGER or subsidiary ledger. Manual systems usually had a variety of journals such as a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and a general journal.

With today's COMPUTERIZED bookkeeping and accounting, it is likely to find only a general journal in which adjusting entries and unique financial transactions are ENTERED. The recording and posting of most transactions will occur automatically when sales and vendor INVOICE information is entered, checks are written, etc. In other words, accounting software has eliminated the need to first record routine transactions into a journal.

In accounting and bookkeeping, a journal is a record of financial transactions in order by date. A journal is often defined as the book of original entry. The definition was more appropriate when transactions were written in a journal prior to manually posting them to the accounts in the general ledger or subsidiary ledger. Manual systems usually had a variety of journals such as a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and a general journal.

With today's computerized bookkeeping and accounting, it is likely to find only a general journal in which adjusting entries and unique financial transactions are entered. The recording and posting of most transactions will occur automatically when sales and vendor invoice information is entered, checks are written, etc. In other words, accounting software has eliminated the need to first record routine transactions into a journal.

Net assets is defined as total assets minus total liabilities. In a sole proprietorship the amount of net assets is reported as owner's equity. In a corporation the amount of net assets is reported as stockholders' equity.

In a not-for-profit (NFP) organization the amount of total assets minus total liabilities is actually reported as net assets in its statement of FINANCIAL position. The net ASSET SECTION for the NFP organization is DIVIDED into three classifications:

1. unrestricted net assets
2. temporarily restricted net assets
3. permanently restricted net assets.

The changes in these net asset classifications are reported in the organization's statement of activities.

Net assets is defined as total assets minus total liabilities. In a sole proprietorship the amount of net assets is reported as owner's equity. In a corporation the amount of net assets is reported as stockholders' equity.

In a not-for-profit (NFP) organization the amount of total assets minus total liabilities is actually reported as net assets in its statement of financial position. The net asset section for the NFP organization is divided into three classifications:

The changes in these net asset classifications are reported in the organization's statement of activities.

Debit means left or left side. For example, every accounting entry will have a debit and CREDIT amount. The debit amount is usually listed first and will be entered on the left side of the general ledger account INDICATED. (The credit amount will be entered on the right side of ANOTHER account.) The general ledger accounts will have both a debit and credit side, or left and right side. The balance in a general ledger account will be either a debit balance or a credit balance.

Asset accounts, expense accounts, and the owner's drawing account are expected to have debit balances. These debit balances will be increased when additional debit amounts are entered.

To illustrate the above, LET's assume that a company has cash of $500. The company's general ledger asset account Cash should indicate a debit balance of $500. If the company receives an additional $200, a debit entry will be made and will result in the Cash account having a debit balance of $700.

Sometimes the word charge is used in place of debit. For example, if a company does advertising of $900, the accountant will charge Advertising Expense for $900. The accepted abbreviation for debit is dr.

Debit means left or left side. For example, every accounting entry will have a debit and credit amount. The debit amount is usually listed first and will be entered on the left side of the general ledger account indicated. (The credit amount will be entered on the right side of another account.) The general ledger accounts will have both a debit and credit side, or left and right side. The balance in a general ledger account will be either a debit balance or a credit balance.

Asset accounts, expense accounts, and the owner's drawing account are expected to have debit balances. These debit balances will be increased when additional debit amounts are entered.

To illustrate the above, let's assume that a company has cash of $500. The company's general ledger asset account Cash should indicate a debit balance of $500. If the company receives an additional $200, a debit entry will be made and will result in the Cash account having a debit balance of $700.

Sometimes the word charge is used in place of debit. For example, if a company does advertising of $900, the accountant will charge Advertising Expense for $900. The accepted abbreviation for debit is dr.

A debit memo on a bank statement refers to a deduction from the bank account's balance. In other words, a debit memo has the same effect as a check WRITTEN on the bank account.

A bank debit memo could be a charge for interest owed to the bank, a loan payment, a FEE owed for the printing of checks, a fee for the HANDLING of a check that was returned because of insufficient funds, a transfer of funds from the bank account to another account at the bank, and so on.

The charge, decrease, or reduction is likely called a debit memo because the CHECKING account balance is a liability on the bank's books. This is the case because the bank has your money as one of its assets and it has your account balance as one of its liabilities. When the bank decreases your account balance, it is REDUCING its liability. Liabilities are reduced with a debit entry. That also explains why the bank credits your account when your account balance is increased.

A debit memo on a bank statement refers to a deduction from the bank account's balance. In other words, a debit memo has the same effect as a check written on the bank account.

A bank debit memo could be a charge for interest owed to the bank, a loan payment, a fee owed for the printing of checks, a fee for the handling of a check that was returned because of insufficient funds, a transfer of funds from the bank account to another account at the bank, and so on.

The charge, decrease, or reduction is likely called a debit memo because the checking account balance is a liability on the bank's books. This is the case because the bank has your money as one of its assets and it has your account balance as one of its liabilities. When the bank decreases your account balance, it is reducing its liability. Liabilities are reduced with a debit entry. That also explains why the bank credits your account when your account balance is increased.

Sundry can mean various, miscellaneous, or diverse. Sundry debtors might REFER to a COMPANY's customers who rarely make purchases on credit and the amounts they purchase are not significant.

I suspect that the term sundry was more common when bookkeeping was a manual task. In other words, prior to the low cost of computers and accounting SOFTWARE, a bookkeeper had to add a page to the company's ledger BOOK for every new customer. If a new page was added for every occasional customer, the ledger book would become unwieldly. It was more PRACTICAL to have one page entitled sundry on which those occasional customers' small transactions were entered.

With the efficiency and low cost of today's accounting systems, I believe the need for classifying customers and accounts as sundry has been greatly reduced.

Sundry can mean various, miscellaneous, or diverse. Sundry debtors might refer to a company's customers who rarely make purchases on credit and the amounts they purchase are not significant.

I suspect that the term sundry was more common when bookkeeping was a manual task. In other words, prior to the low cost of computers and accounting software, a bookkeeper had to add a page to the company's ledger book for every new customer. If a new page was added for every occasional customer, the ledger book would become unwieldly. It was more practical to have one page entitled sundry on which those occasional customers' small transactions were entered.

With the efficiency and low cost of today's accounting systems, I believe the need for classifying customers and accounts as sundry has been greatly reduced.

A liability is an obligation and it is reported on a company's balance sheet. A common example of a liability is accounts PAYABLE. Accounts payable arise when a company purchases goods or services on credit from a SUPPLIER. When the company pays the supplier, the company's accounts payable is REDUCED.

Other common examples of liabilities include loans payable, bonds payable, interest payable, wages payable, and income taxes payable. LESS common liabilities are customer deposits and deferred revenues. Deferred revenues come about when customers prepay a company for work to be done in a future accounting period. When the company performs the work, the liability will be reduced and the company will REPORT the amount it earned as revenues on its income statement.

Liabilities are also part of the accounting equation: Assets = Liabilities + Stockholders' Equity. Liabilities are often viewed as claims on a company's assets. However, liabilities can also be thought of as a source of a company's assets.

A liability is an obligation and it is reported on a company's balance sheet. A common example of a liability is accounts payable. Accounts payable arise when a company purchases goods or services on credit from a supplier. When the company pays the supplier, the company's accounts payable is reduced.

Other common examples of liabilities include loans payable, bonds payable, interest payable, wages payable, and income taxes payable. Less common liabilities are customer deposits and deferred revenues. Deferred revenues come about when customers prepay a company for work to be done in a future accounting period. When the company performs the work, the liability will be reduced and the company will report the amount it earned as revenues on its income statement.

Liabilities are also part of the accounting equation: Assets = Liabilities + Stockholders' Equity. Liabilities are often viewed as claims on a company's assets. However, liabilities can also be thought of as a source of a company's assets.

Having an asset account such as Accumulated Depreciation allows a company's balance sheet to EASILY report both

1. the amount of an asset's cost that has been depreciated as of the date of the balance sheet, and
2. the asset's cost. This is POSSIBLE because Accumulated Depreciation is credited each time that Depreciation Expense is debited.

Since Accumulated Depreciation will have a CONTINUALLY increasing credit balance it is referred to as a CONTRA asset account .

To illustrate, LET's assume that at the beginning of the current year a company's asset account Equipment reports a cost of $70,000. From the time of purchase until the beginning of the year the related Accumulated Depreciation account has accumulated a credit balance of $45,000. During the current year the company debits Depreciation Expense for $10,000 and credits Accumulated Depreciation for $10,000. At the end of the current year the credit balance in Accumulated Depreciation will be $55,000.

By crediting the account Accumulated Depreciation instead of crediting the Equipment account, the balance sheet at the end of the year can easily report both the equipment's cost of $70,000 and its accumulated depreciation of $55,000. This is more informative than reporting only the net amount of $15,000 (which would likely be the case if the contra asset account Accumulated Depreciation was not used).

Having an asset account such as Accumulated Depreciation allows a company's balance sheet to easily report both

Since Accumulated Depreciation will have a continually increasing credit balance it is referred to as a contra asset account .

To illustrate, let's assume that at the beginning of the current year a company's asset account Equipment reports a cost of $70,000. From the time of purchase until the beginning of the year the related Accumulated Depreciation account has accumulated a credit balance of $45,000. During the current year the company debits Depreciation Expense for $10,000 and credits Accumulated Depreciation for $10,000. At the end of the current year the credit balance in Accumulated Depreciation will be $55,000.

By crediting the account Accumulated Depreciation instead of crediting the Equipment account, the balance sheet at the end of the year can easily report both the equipment's cost of $70,000 and its accumulated depreciation of $55,000. This is more informative than reporting only the net amount of $15,000 (which would likely be the case if the contra asset account Accumulated Depreciation was not used).

In accounting, the three-way match refers to a procedure used when processing an invoice received from a vendor or supplier. The purpose of the three-way match is to avoid paying incorrect and perhaps fraudulent invoices.

Three-way refers to the three documents involved:

1. Vendor's invoice which was received and will become part of an organization's accounts payable if approved.
2. Purchase ORDER that was prepared by the organization.
3. Receiving report that was prepared by the organization.

Match refers to the comparison of the QUANTITIES, PRICE per unit, terms, etc. APPEARING on the vendor's invoice to the information on the purchase order and to the quantities actually received.

After the vendor's invoice has been validated by the three-way match, it can be further processed for payment. The three-way match is an important step in safeguarding an organization's ASSETS.

In accounting, the three-way match refers to a procedure used when processing an invoice received from a vendor or supplier. The purpose of the three-way match is to avoid paying incorrect and perhaps fraudulent invoices.

Three-way refers to the three documents involved:

Match refers to the comparison of the quantities, price per unit, terms, etc. appearing on the vendor's invoice to the information on the purchase order and to the quantities actually received.

After the vendor's invoice has been validated by the three-way match, it can be further processed for payment. The three-way match is an important step in safeguarding an organization's assets.

A contra asset account is an asset account where the balance will be either a credit balance or a zero balance. (A debit balance in a contra asset account will violate the cost principle.) Since a credit balance in an asset account is contrary to the normal or expected debit balance the account is referred to as a contra asset account.

The most common contra asset account is Accumulated Depreciation. Accumulated Depreciation is ASSOCIATED with property, plant and equipment and it is credited when Depreciation Expense is recorded. Recording the credits in the Accumulated Depreciation means that the cost of the property, plant and equipment will continue to be reported. Reporting the accumulated depreciation separately ALLOWS the readers of the balance sheet to see how much of the cost has been depreciated and how much has not yet been depreciated.

Another contra asset account is ALLOWANCE for Doubtful Accounts. This account appears next to the current asset Accounts Receivable. The account Allowance for Doubtful Account is credited when a company enters estimated amounts as debits to Bad Debts Expense under the allowance method. The use of Allowance for Doubtful Accounts permits a reader to see the documented amounts in Accounts Receivable that the company has a right to collect from its credit customers. The SEPARATE credit balance in the account Allowance for Doubtful Accounts tells the reader how much of the debit balance in Accounts Receivable is unlikely to be collected.

A less common EXAMPLE of a contra asset account is Discount on Notes Receivable. The credit balance in this account is amortized or allocated to Interest Income or Interest Revenue over the life of a note receivable.

A contra asset account is an asset account where the balance will be either a credit balance or a zero balance. (A debit balance in a contra asset account will violate the cost principle.) Since a credit balance in an asset account is contrary to the normal or expected debit balance the account is referred to as a contra asset account.

The most common contra asset account is Accumulated Depreciation. Accumulated Depreciation is associated with property, plant and equipment and it is credited when Depreciation Expense is recorded. Recording the credits in the Accumulated Depreciation means that the cost of the property, plant and equipment will continue to be reported. Reporting the accumulated depreciation separately allows the readers of the balance sheet to see how much of the cost has been depreciated and how much has not yet been depreciated.

Another contra asset account is Allowance for Doubtful Accounts. This account appears next to the current asset Accounts Receivable. The account Allowance for Doubtful Account is credited when a company enters estimated amounts as debits to Bad Debts Expense under the allowance method. The use of Allowance for Doubtful Accounts permits a reader to see the documented amounts in Accounts Receivable that the company has a right to collect from its credit customers. The separate credit balance in the account Allowance for Doubtful Accounts tells the reader how much of the debit balance in Accounts Receivable is unlikely to be collected.

A less common example of a contra asset account is Discount on Notes Receivable. The credit balance in this account is amortized or allocated to Interest Income or Interest Revenue over the life of a note receivable.

One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. For instance, assume that SellerCorp had issued a sales invoice for $800 for 100 units of product that it shipped to BuyerCo at a price of $8 each. BuyerCo informs SellerCorp that one of the units is defective and SellerCorp issues a credit memo for $8. The credit memo will cause the following in SellerCorp's accounting records: 1) a debit of $8 to Sales Returns and Allowances, and 2) a credit of $8 to Accounts Receivable.

In other words, the credit memo reduced SellerCorp's net sales and its accounts receivable. When BuyerCo records the credit memo, the following will occur in its accounting records: 1) a debit of $8 to Accounts Payable, and 2) a credit of $8 to Purchases Returns and Allowances (or Inventory).

Another type of credit memo, also referred to as a credit memorandum, is issued by a bank when it increases a DEPOSITOR's checking account for a certain transaction.

One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. For instance, assume that SellerCorp had issued a sales invoice for $800 for 100 units of product that it shipped to BuyerCo at a price of $8 each. BuyerCo informs SellerCorp that one of the units is defective and SellerCorp issues a credit memo for $8. The credit memo will cause the following in SellerCorp's accounting records: 1) a debit of $8 to Sales Returns and Allowances, and 2) a credit of $8 to Accounts Receivable.

In other words, the credit memo reduced SellerCorp's net sales and its accounts receivable. When BuyerCo records the credit memo, the following will occur in its accounting records: 1) a debit of $8 to Accounts Payable, and 2) a credit of $8 to Purchases Returns and Allowances (or Inventory).

Another type of credit memo, also referred to as a credit memorandum, is issued by a bank when it increases a depositor's checking account for a certain transaction.

The journal entry for depreciation contains a debit to the income statement account Depreciation Expense and a credit to the balance sheet account Accumulated Depreciation.

The purpose of the journal entry for depreciation is to achieve the MATCHING principle. In each accounting period, part of the cost of certain assets (EQUIPMENT, building, vehicle) gets moved from the balance sheet to depreciation expense on the income statement so it can be matched with the revenues obtained by using these assets.

The account Accumulated Depreciation is reported under the asset heading of Property, Plant and Equipment. It is also known as a contra asset account because it is an asset account with a credit balance. Because Accumulated Depreciation is a balance sheet (or real or permanent) account, its balance will carry over to the next accounting period. This means that its credit balance could get as large as the cost of the assets being depreciated.

The income statement account Depreciation Expense is a temporary account. At the end of each year, its balance is transferred out of the account and Depreciation Expense will BEGIN the new year with a zero balance.

It is important to realize that when the depreciation expense entry is RECORDED, a company's net income is reduced by the expense, but its cash is not reduced. (Cash would have been reduced when the asset was acquired.) You should also realize that depreciation is an estimate based on the asset's historical cost (not its replacement cost), its estimated useful life, and its estimated salvage value. The focus of depreciation is to allocate and match the cost to expense and it is not to provide an estimate of the CURRENT value of the asset. As a result, the market value of a one year old computer will likely be less than the remaining amount reported on the balance sheet. On the other hand, a rental property in a growing area might have a market value that is greater than the remaining amount reported on the balance sheet.

The journal entry for depreciation contains a debit to the income statement account Depreciation Expense and a credit to the balance sheet account Accumulated Depreciation.

The purpose of the journal entry for depreciation is to achieve the matching principle. In each accounting period, part of the cost of certain assets (equipment, building, vehicle) gets moved from the balance sheet to depreciation expense on the income statement so it can be matched with the revenues obtained by using these assets.

The account Accumulated Depreciation is reported under the asset heading of Property, Plant and Equipment. It is also known as a contra asset account because it is an asset account with a credit balance. Because Accumulated Depreciation is a balance sheet (or real or permanent) account, its balance will carry over to the next accounting period. This means that its credit balance could get as large as the cost of the assets being depreciated.

The income statement account Depreciation Expense is a temporary account. At the end of each year, its balance is transferred out of the account and Depreciation Expense will begin the new year with a zero balance.

It is important to realize that when the depreciation expense entry is recorded, a company's net income is reduced by the expense, but its cash is not reduced. (Cash would have been reduced when the asset was acquired.) You should also realize that depreciation is an estimate based on the asset's historical cost (not its replacement cost), its estimated useful life, and its estimated salvage value. The focus of depreciation is to allocate and match the cost to expense and it is not to provide an estimate of the current value of the asset. As a result, the market value of a one year old computer will likely be less than the remaining amount reported on the balance sheet. On the other hand, a rental property in a growing area might have a market value that is greater than the remaining amount reported on the balance sheet.

GENERALLY, retained earnings is a corporation's cumulative earnings since the corporation was formed minus the dividends it has DECLARED since it began. In other words, retained earnings represents the corporation's cumulative earnings that have not been distributed to its stockholders.

The AMOUNT of retained earnings as of a balance sheet's date is reported as a SEPARATE line item in the stockholders' EQUITY section of the balance sheet.

A negative amount of retained earnings is reported as deficit or accumulated deficit.

Generally, retained earnings is a corporation's cumulative earnings since the corporation was formed minus the dividends it has declared since it began. In other words, retained earnings represents the corporation's cumulative earnings that have not been distributed to its stockholders.

The amount of retained earnings as of a balance sheet's date is reported as a separate line item in the stockholders' equity section of the balance sheet.

A negative amount of retained earnings is reported as deficit or accumulated deficit.

A control account is a summary account in the general ledger. The details that support the balance in the summary account are contained in a subsidiary ledger—a ledger outside of the general ledger.

The purpose of the control account is to keep the general ledger FREE of details, yet have the correct balance for the financial statements. For example, the Accounts Receivable account in the general ledger could be a control account. If it were a control account, the COMPANY would merely update the account with a few amounts, such as total collections for the day, total sales on account for the day, total returns and allowances for the day, etc.

The details on each customer and each transaction would not be recorded in the Accounts Receivable control account in the general ledger. Rather, these details of the accounts receivable activity will be in the Accounts Receivable Subsidiary Ledger. This WORKS WELL because the employees working with the general ledger probably do not need to see the details for every sale or every collection transaction. However, the sales MANAGER and the credit manager will need to know detailed information on individual customers, including whether a customer recently reduced their account balance. The company can provide these individuals with access to the Accounts Receivable Subsidiary Ledger and can keep the general ledger free of a tremendous amount of detail.

A control account is a summary account in the general ledger. The details that support the balance in the summary account are contained in a subsidiary ledger—a ledger outside of the general ledger.

The purpose of the control account is to keep the general ledger free of details, yet have the correct balance for the financial statements. For example, the Accounts Receivable account in the general ledger could be a control account. If it were a control account, the company would merely update the account with a few amounts, such as total collections for the day, total sales on account for the day, total returns and allowances for the day, etc.

The details on each customer and each transaction would not be recorded in the Accounts Receivable control account in the general ledger. Rather, these details of the accounts receivable activity will be in the Accounts Receivable Subsidiary Ledger. This works well because the employees working with the general ledger probably do not need to see the details for every sale or every collection transaction. However, the sales manager and the credit manager will need to know detailed information on individual customers, including whether a customer recently reduced their account balance. The company can provide these individuals with access to the Accounts Receivable Subsidiary Ledger and can keep the general ledger free of a tremendous amount of detail.

Equity is used in accounting in several ways. Often the word equity is used when REFERRING to an ownership interest in a business. Examples include stockholders' equity or owner's equity.

OCCASIONALLY, equity is used to MEAN the combination of liabilities and owner's equity. For EXAMPLE, some restate the basic accounting EQUATION Assets = Liabilities + Owner's Equity to become Assets = Equities.

Equity is also used to indicate an owner's interest in a personal asset. The owner of a $200,000 house that has an $80,000 mortgage loan is said to have $120,000 of equity in the house.

Outside of accounting, the word equity is also used to indicate fairness or justice.

Equity is used in accounting in several ways. Often the word equity is used when referring to an ownership interest in a business. Examples include stockholders' equity or owner's equity.

Occasionally, equity is used to mean the combination of liabilities and owner's equity. For example, some restate the basic accounting equation Assets = Liabilities + Owner's Equity to become Assets = Equities.

Equity is also used to indicate an owner's interest in a personal asset. The owner of a $200,000 house that has an $80,000 mortgage loan is said to have $120,000 of equity in the house.

Outside of accounting, the word equity is also used to indicate fairness or justice.

Journals are referred to as books of original entry. Accounting entries are recorded in a JOURNAL in order by date. A company might use special journals (sales, PURCHASES, cash disbursements, cash receipts), or its accounting software will generate entries for routine transactions, but there will always be a general journal in which to RECORD nonroutine transactions, such as depreciation, bad debts, sale of an ASSET, etc. In the general journal you MUST enter the account to be debited and the account to be credited and the amounts. Once a transaction is recorded in the general journal, the amounts are then posted to the appropriate accounts.

Accounts (such as Cash, Accounts Receivable, Equipment, Accumulated Depreciation, Accounts Payable, Sales, Telephone Expense, etc.) are contained in the general ledger.

To recap...the general ledger houses the company's accounts. The general journal is a place to first record an entry before it gets posted to the appropriate accounts.

Journals are referred to as books of original entry. Accounting entries are recorded in a journal in order by date. A company might use special journals (sales, purchases, cash disbursements, cash receipts), or its accounting software will generate entries for routine transactions, but there will always be a general journal in which to record nonroutine transactions, such as depreciation, bad debts, sale of an asset, etc. In the general journal you must enter the account to be debited and the account to be credited and the amounts. Once a transaction is recorded in the general journal, the amounts are then posted to the appropriate accounts.

Accounts (such as Cash, Accounts Receivable, Equipment, Accumulated Depreciation, Accounts Payable, Sales, Telephone Expense, etc.) are contained in the general ledger.

To recap...the general ledger houses the company's accounts. The general journal is a place to first record an entry before it gets posted to the appropriate accounts.

Petty cash is a small amount of cash on hand that is used for paying small amounts owed, rather than WRITING a check. Petty cash is also referred to as a petty cash FUND. The person responsible for the petty cash is known as the petty cash custodian.

Some examples for using petty cash include the following: paying the postal carrier the 17 cents due on a letter being delivered, reimbursing an employee $9 for supplies PURCHASED, or paying $14 for bakery goods delivered for a company's early morning meeting.

The amount in a petty cash fund will vary by organization. For some, $50 is adequate. For OTHERS, the amount in the petty cash fund will need to be $200.

When the cash in the petty cash fund is low, the petty cash custodian requests a check to be cashed in order to replenish the cash that has been paid out.

Petty cash is a small amount of cash on hand that is used for paying small amounts owed, rather than writing a check. Petty cash is also referred to as a petty cash fund. The person responsible for the petty cash is known as the petty cash custodian.

Some examples for using petty cash include the following: paying the postal carrier the 17 cents due on a letter being delivered, reimbursing an employee $9 for supplies purchased, or paying $14 for bakery goods delivered for a company's early morning meeting.

The amount in a petty cash fund will vary by organization. For some, $50 is adequate. For others, the amount in the petty cash fund will need to be $200.

When the cash in the petty cash fund is low, the petty cash custodian requests a check to be cashed in order to replenish the cash that has been paid out.

Cost of sales is the caption commonly used on a manufacturer's or retailer's INCOME statement instead of the caption cost of goods sold or cost of PRODUCTS sold.

The cost of sales for a manufacturer is the cost of finished goods in its BEGINNING inventory plus the cost of goods manufactured minus the cost of finished goods in ending inventory.

The cost of sales for a retailer is the cost of merchandise in its beginning inventory plus the net cost of merchandise purchased minus the cost of merchandise in its ending inventory.

The cost of sales does not include selling expenses or GENERAL and administrative expenses, which are commonly referred to as SG&A.

Cost of sales is the caption commonly used on a manufacturer's or retailer's income statement instead of the caption cost of goods sold or cost of products sold.

The cost of sales for a manufacturer is the cost of finished goods in its beginning inventory plus the cost of goods manufactured minus the cost of finished goods in ending inventory.

The cost of sales for a retailer is the cost of merchandise in its beginning inventory plus the net cost of merchandise purchased minus the cost of merchandise in its ending inventory.

The cost of sales does not include selling expenses or general and administrative expenses, which are commonly referred to as SG&A.

ACCOUNTANTS report a merchandiser's and a manufacturer's revenues when a sale is made. The term, FOB Shipping POINT, INDICATES that the sale occurred at the shipping point—at the seller's shipping dock. FOB Destination indicates that the sale will occur when it arrives at the destination—at the buyer's receiving dock.

Accountants also assume that the cost of transporting the GOODS corresponds to these terms. If the sale occurred at the shipping point (seller's shipping dock), then the buyer should take responsibility for the cost of transporting the goods. (The buyer will record this cost as Freight-In or Transportation-In.) If the sale doesn't occur until the goods reach the destination (terms are FOB Destination), then the seller should be responsible for transporting the goods until they reach the buyer's UNLOADING dock. (The seller will record the transportation cost as Freight-Out, Transportation-Out, or Delivery Expense.)

Accountants report a merchandiser's and a manufacturer's revenues when a sale is made. The term, FOB Shipping Point, indicates that the sale occurred at the shipping point—at the seller's shipping dock. FOB Destination indicates that the sale will occur when it arrives at the destination—at the buyer's receiving dock.

Accountants also assume that the cost of transporting the goods corresponds to these terms. If the sale occurred at the shipping point (seller's shipping dock), then the buyer should take responsibility for the cost of transporting the goods. (The buyer will record this cost as Freight-In or Transportation-In.) If the sale doesn't occur until the goods reach the destination (terms are FOB Destination), then the seller should be responsible for transporting the goods until they reach the buyer's unloading dock. (The seller will record the transportation cost as Freight-Out, Transportation-Out, or Delivery Expense.)

You should be aware that some people use the terms wages and salary interchangeably. I and many others make the following distinction.

Wages is best associated with employee compensation based on the number of hours worked multiplied by an hourly rate of pay. For example, an employee working in an assembly plant might work 40 hours during the work week. If the PERSON's hourly rate of pay is $15, the employee will receive a paycheck showing gross wages of $600 (40 x $15). If the employee had worked only 30 hours during that week, her or his paycheck will show gross wages of $450 (30 x $15). Because the paycheck needs to be computed based on the actual hours worked, the employee earning wages will likely receive her or his paycheck five days after the work PERIOD.

Salary is best associated with employee compensation QUOTED on an annual basis. For example, the manager of the assembly plan might earn a salary of $120,000 per year. If the salaried manager is paid semi-monthly (perhaps on the 15th and last DAY of each month), her or his paycheck will show gross salary of $5,000 for the half-month. Since the salary is the same amount for each pay period, the salaried employee's paycheck will likely cover the work period through the date of the paycheck.

You should be aware that some people use the terms wages and salary interchangeably. I and many others make the following distinction.

Wages is best associated with employee compensation based on the number of hours worked multiplied by an hourly rate of pay. For example, an employee working in an assembly plant might work 40 hours during the work week. If the person's hourly rate of pay is $15, the employee will receive a paycheck showing gross wages of $600 (40 x $15). If the employee had worked only 30 hours during that week, her or his paycheck will show gross wages of $450 (30 x $15). Because the paycheck needs to be computed based on the actual hours worked, the employee earning wages will likely receive her or his paycheck five days after the work period.

Salary is best associated with employee compensation quoted on an annual basis. For example, the manager of the assembly plan might earn a salary of $120,000 per year. If the salaried manager is paid semi-monthly (perhaps on the 15th and last day of each month), her or his paycheck will show gross salary of $5,000 for the half-month. Since the salary is the same amount for each pay period, the salaried employee's paycheck will likely cover the work period through the date of the paycheck.

Accounts PAYABLE are amounts a company owes because it purchased goods or services on CREDIT from a SUPPLIER or vendor. Accounts receivable are amounts a company has a right to collect because it sold goods or services on credit to a customer. Accounts payable are liabilities. Accounts receivable are assets.

Let's assume that Company A sells merchandise to Company B on credit. (Perhaps the invoice states that the amount is due in 30 DAYS.) Company A will record a sale and will also record an account receivable. Company B will record the purchase (perhaps as inventory) and will also record an account payable.

Accounts payable are amounts a company owes because it purchased goods or services on credit from a supplier or vendor. Accounts receivable are amounts a company has a right to collect because it sold goods or services on credit to a customer. Accounts payable are liabilities. Accounts receivable are assets.

Let's assume that Company A sells merchandise to Company B on credit. (Perhaps the invoice states that the amount is due in 30 days.) Company A will record a sale and will also record an account receivable. Company B will record the purchase (perhaps as inventory) and will also record an account payable.

A general ledger account is an account or record used to sort and store balance SHEET and income statement transactions. Examples of general ledger ACCOUNTS include the asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and Equipment. Examples of the general ledger liability accounts include Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits. Examples of income statement accounts FOUND in the general ledger include Sales, Service Fee Revenues, Salaries EXPENSE, Rent Expense, Advertising Expense, Interest Expense, and Loss on Disposal of Assets.

Some general ledger accounts are summary records which are referred to as control accounts. The DETAIL that supports each of the control accounts will be found outside of the general ledger in what is known as a subsidiary ledger. For example, Accounts Receivable could be a control account in the general ledger, and there will be a subsidiary ledger which contains each customer's credit activity. The general ledger accounts Inventory, Equipment, and Accounts Payable could also be control accounts and for each there will be a subsidiary ledger containing the supporting detail.

A general ledger account is an account or record used to sort and store balance sheet and income statement transactions. Examples of general ledger accounts include the asset accounts such as Cash, Accounts Receivable, Inventory, Investments, Land, and Equipment. Examples of the general ledger liability accounts include Notes Payable, Accounts Payable, Accrued Expenses Payable, and Customer Deposits. Examples of income statement accounts found in the general ledger include Sales, Service Fee Revenues, Salaries Expense, Rent Expense, Advertising Expense, Interest Expense, and Loss on Disposal of Assets.

Some general ledger accounts are summary records which are referred to as control accounts. The detail that supports each of the control accounts will be found outside of the general ledger in what is known as a subsidiary ledger. For example, Accounts Receivable could be a control account in the general ledger, and there will be a subsidiary ledger which contains each customer's credit activity. The general ledger accounts Inventory, Equipment, and Accounts Payable could also be control accounts and for each there will be a subsidiary ledger containing the supporting detail.