A business pays cash to purchase a certificate of deposit. The certificate matures after a term of 60 days and has a fixed annual interest rate of 2.5%. The journal entries to show the purchase and maturity are described.
A business pays cash into an escrow account held by a third party in respect of a property transaction. The amount remains the property of the business until the transaction is complete and shows as a current asset in the balance sheet of the business.
The current portion of long term loan or long term debt is a current liability. It is the amount of debt principal repayable within 12 months of the balance sheet date. The current portion of long-term debt is not the same as short term debt.
A business pays a cash deposit to secure the acquisition of a property. At the end of the accounting period the contract is not completely satisfied and the deposit is held on the balance sheet as a current asset. Subsequent to the year end the property purchase is completed and the deposit is used in part settlement for the purchase.
A business receives a purchase allowance from a supplier in respect of faulty goods. The supplier issues a credit note for 1,500 and the amount is posted to the purchase allowance contra expense account.
When a business maintains an imprest system of petty cash it is necessary to replenish the fund at the end of an accounting period. A journal entry is used to record the petty cash expenditure incurred during the period and to reflect the cash used for replenishment.
Stock options are a form of equity based compensation. When a business purchases the services of key personnel and pays for those services using stock options, it must record the expense in the income statement over the vesting period using stock based compensation accounting journal entries.
Last modified November 11th, 2019 by Michael Brown
When a business purchases an asset which includes several assets such as land, land improvements, and buildings which have dissimilar depreciation rates, it needs to be able to allocate the total cost of the asset to its component parts. The relative fair market value method is one technique used to carry out this allocation.