Explanation:
Form W-9 is the Request for Taxpayer Identification Number and Certification. It is used by businesses and individuals who are required to report certain payments to the IRS, such as payments made to independent contractors or interest income paid to individuals. When a payer needs to obtain the taxpayer identification number (TIN) of a vendor or contractor, they typically request them to fill out and return a completed Form W-9. This form provides the payer with the vendor's TIN, which is necessary for reporting payments to the IRS.
Explanation:
When an insurance premium is paid in advance but the coverage period has not yet begun, it is recorded as a prepaid expense. Since the premium is paid before the coverage period starts, it is treated as an asset because it represents future economic benefits. Therefore, the asset account related to this transaction would be "Prepaid Insurance," and it should have a debit balance to reflect the amount paid.
Explanation:
The term "Purchases" refers to goods that are bought for the purpose of resale. This means that the goods are not intended for personal use or consumption, but rather for selling to customers. The term "Purchases" specifically excludes goods that are bought on credit or goods that have been paid for. It focuses on the act of acquiring goods for the purpose of selling them again.
Explanation:
Internal controls are processes implemented by an organization to ensure the reliability of financial reporting, compliance with laws and regulations, and the effectiveness and efficiency of operations. Segregation of duties involves dividing responsibilities among different individuals to prevent fraud and errors, while safeguarding checks involves protecting company assets. Both are examples of internal controls aimed at maintaining the integrity of financial processes within the organization.
Explanation:
Bills Payable A/c is shown in the balance sheet under the head "Current liabilities" because it represents the amount of money that a company owes to its creditors for bills that have been issued but not yet paid. Current liabilities are obligations that are expected to be settled within a year, and bills payable fall under this category as it is a short-term debt that needs to be paid off in the near future.
Explanation:
When one party records an account payable (money owed), the other party records the corresponding transaction as an account receivable (money owed to them). In this case, if the buyer has an account payable, the seller would have an account receivable to reflect the money owed to them by the buyer.
Explanation:
The correct answer is "Yes, always." This means that the trial balance totals should always agree. A trial balance is a statement that lists all the general ledger accounts and their balances to ensure that debits equal credits. If the trial balance totals do not agree, it indicates that there is an error in the recording of transactions. Therefore, it is important for the trial balance totals to always balance in order to ensure the accuracy of the financial records.
Explanation:
In the accrual method of accounting, adjusting entries are made to ensure that revenues and expenses are recognized in the period in which they are earned or incurred, regardless of when cash is received or paid. Expenses that have been incurred but not yet recorded as accounts payable need to be recognized through adjusting entries to reflect the accurate financial position of the company.
Explanation:
Reversing entries are made at the beginning of the new accounting period to reverse the effects of certain adjusting entries made at the end of the previous period. This process simplifies accounting procedures and ensures that the expenses or revenues accrued in the previous period are correctly recorded in the new period.
Explanation:
Profit increases capital because when a business earns profit, it adds to its capital or financial resources. Profit is the surplus amount remaining after deducting expenses from revenue. This surplus can be reinvested into the business, leading to an increase in capital. By accumulating profit, a business can expand its operations, invest in new assets, or finance future projects. Therefore, profit plays a crucial role in growing and strengthening the capital base of a business.
Explanation:
Form 1099-NEC is used to report non-employee compensation, such as payments made to independent contractors for services rendered. It is issued to individuals or entities who are not employees but have provided services to the payer during the tax year. This form helps the IRS track income earned by independent contractors and ensures that they report their earnings accurately on their tax returns.
