Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least two of its general ledger accounts.

For example, if a company borrows $10,000 from its bank, the company’s asset account Cash is increased with a debit entry [...] Continue Reading…

Bookkeeping involves the recording, storing and retrieving of financial transactions for a company, nonprofit organization, individual, etc.

Common financial transactions and tasks that are involved in bookkeeping include:

Billing for goods sold or services provided to clients.
Recording receipts from customers.
Verifying and recording invoices from suppliers.
Paying suppliers.
Processing employees’ pay and the related [...] Continue Reading…

In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic and logical manner.

For example, the systematic expensing of the cost of assets such as buildings, equipment, furnishings and vehicles is known as depreciation. The [...] Continue Reading…

The account Sales is credited because a corporation’s sales of products will cause its stockholders’ equity to increase. A sole proprietorship’s sales will cause the owner’s equity to increase.

The Sales account is used in order to keep a tally of the sales made during an accounting year. However, when [...] Continue Reading…

We will use the following example to illustrate how to divide the cost of real estate into the cost of the land and the cost of the building. Assume that the entire cost of a real estate purchase is $220,000. The appraisal made at the time of the purchase [...] Continue Reading…

A contingent liability is a potential liability (and a potential loss). It is dependent upon a future event occurring or not occurring. For instance, if someone files a lawsuit against Jay Corp, Jay Corp will have a contingent liability. The lawsuit liability is dependent upon Jay Corp losing the [...] Continue Reading…

In the U.S. payroll withholding taxes are the taxes that an employer is required to deduct from its employees’ gross wages, salaries, bonuses, and other compensation.

The typical payroll withholding taxes include each employee’s portion of the Social Security and Medicare taxes (also referred to as FICA), federal income tax, [...] Continue Reading…

The segregation of duties is associated with the safeguarding of an organization’s assets and the topic known as internal control.

An example of the segregation of duties would be a company’s requirement that the bank statement for its checking account must be reconciled by someone other than a person writing [...] Continue Reading…

As of July 1, 2011 the IRS optional standard mileage rate for business use of an automobile is 55.5 cents per mile. This new rate will apply for the six-month period of July 1 through December 31, 2011. The rate for January 1 through June 30, 2011 was 51 [...] Continue Reading…

The high-low method is a simple technique for computing the variable cost rate and the total amount of fixed costs that are part of mixed costs. Mixed costs are costs that are partially variable and partially fixed. The cost of electricity used in a factory is likely to be [...] Continue Reading…