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calculations are more accurate when it comes to matching expenses to revenues. The use of
percentage of receivables method would be to estimate what percentage of receivable will report
a loss as the outcome, rather than the percentage of sales method, in which the estimate is for
what percentage of credit sales, will go uncollected.
Organizations use plant assets, natural resources, and intangible assets. Plant asset include
but are not limited to land, buildings, and equipment. Natural resources can be a coal mine, water
supply, or oil reserves. Intangible are assets worth value but you can't touch such as trademarks
and patents. Plants assets are depreciated, natural resources are depleted and intangibles are
amortized. The three ways of calculating depreciation is straight line, units of activity, and
declining balance.
The entries that can be associated with the disposal, acquisitions, and sales of plant assets
will include the costs of the asset and any costs that are associated with that asset. Revenue
expenditures are required by organizations in order to maintain the life of their assets.
Organizations debit the expenses from a repair expense account when they occur. Capital
expenditures can increase the efficiency of operations and the assets production. An organization
commonly debits these expenses from a plant asset that has been affected by them.
Accounts payable is an accounting entry that represents an organizations obligation to pay off
short term debts, found on the balance sheet under current liabilities. Notes payable are loans
obtained from financial institutions in which the organization is required to pay back in addition
to all interest charges as well. Generally, they are loans that are obtained to meet the demand of
a short term obligation. Accrued expenses are those expenses that are due upon periodic times,
such as weekly payroll, monthly bills, and interest charges on bank loans. Various state laws
allow organizations the ability to issue bonds. Bonds are utilized to limit financial obligations to
banks (which require significant financing charges), so that the company can utilize financial
backing to further its growth or development. The face value of the bond must be repaid by the
company on the maturity date of the bond, as well as any relevant interest charges that are due
before its maturity.
If a company issues a bond that totals $1,000,000, and receives a premium of $60,000 for
it, then the bonds rate was higher than the rate that was currently in the market. The organization
must record the bond as a debit of cash totaling $1,060,000, then credit bonds payable for the
$1,000,000 and credit premium on bonds payable for $60,000. Eventually the bonds payable
account will be reduced to 0 on its maturity date.