If a voided check was written in a previous month, remove the voided check from the list of outstanding checks and write a journal entry to debit Cash and credit the account(s) that was debited when the check was originally recorded. This entry restores the cash into the checking [...] Continue Reading…

One day I was explaining to the owner of a small business that I would have to accrue for the shipping expenses associated with his company’s sales. Since the shipping company billed him on the 15th of each month for his shipments from the 16th of the previous month [...] Continue Reading…

Under the accrual basis of accounting, revenues are reported on the income statement when they are earned. (Under the cash basis of accounting, revenues are reported on the income statement when the cash is received.) Under the accrual basis of accounting, expenses are matched with the related revenues and/or [...] Continue Reading…

Conservatism has to do with uncertainty. When uncertainty exists between two alternatives that appear to be reasonable, the accountant “breaks the tie” by picking the alternative that reports less profit and less asset amount (or more liability amount).

If there is uncertainty as to whether there was a gain, the [...] Continue Reading…

When I became a director of a meatpacking company, I was concerned about the thin profit margins, the corporation’s lack of working capital, and my inexperience in the industry.

The company slaughtered cattle from Tuesday through Saturday. By Monday the products were shipped and the coolers were empty–what a perfect [...] Continue Reading…