Manufacturing overhead (also known as factory overhead, factory burden, production overhead) involves a company’s factory operations. It includes the costs incurred in the factory other than the costs of direct materials and direct labor. This is the reason that manufacturing overhead is often classified as an indirect product cost.

Generally [...] Continue Reading…

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 [...] Continue Reading…

Cash receipts should be recorded with the date the money was received. For example, a church collects money during each of its services on Sunday, June 4.

On Monday, June 5, the money is counted and is deposited into the church’s bank account. The transaction to record the cash and [...] Continue Reading…

Under accrual accounting, your income statement should report the amount for the utilities used during the period of the income statement. The utility bills tell you the cost of the gas and electricity used between the meter reading dates appearing on the utility bill. For example, if the meters [...] Continue Reading…

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 figures on their income [...] Continue Reading…

The allowance for doubtful accounts is a balance sheet account that reduces the reported amount of accounts receivable. (A change to the balance in the allowance for doubtful accounts also affects bad debt expense on the income statement.) Providing an allowance for doubtful accounts presents a more realistic picture [...] Continue Reading…

The provision for discounts allowable is likely to be a balance sheet account that serves to reduce the asset account Accounts Receivable. The provision account’s counter part (remember double entry accounting) is an income statement account, such as Sales Discounts or Discounts for xxx.

Let me give you an example [...] Continue Reading…

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 [...] Continue Reading…

I see a bookkeeper’s responsibilities as getting the business transactions into the company’s general ledger. This involves a tremendous amount of accuracy and persistence in first getting the information and then getting it entered. At smaller companies the bookkeeper is likely to process the payables (receiving suppliers’ invoices, verifying [...] Continue Reading…

Double entry means that every transaction will involve at least two accounts. For example, if your company borrows money from the bank, the company’s asset Cash is increased and the company’s liability Notes Payable is increased. If your company pays the six-month insurance premium, your company’s asset Cash is [...] Continue Reading…