What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Accounting Equation (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (20) Marked Wrong (0) Marked Right (0) accounting equation (or) basic accounting equation This algebraic expression is Assets...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Cash Flow Statement Cash Flow Statement The cash flow statement is officially known as the statement of cash flows (SCF). It reports the major cash inflows and outflows that have occurred during the accounting period...
What is inventory valuation? Definition of Inventory Valuation In the U.S., inventory valuation is the dollar amount associated with the items remaining in a company’s inventory. Generally speaking, the amount is the...
What would cause a decrease in accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the cumulative amount of depreciation taken since a depreciable asset was put into service. The...
Why does commitment and contingencies appear on the balance sheet without an amount? Definition of Commitments and Contingencies Commitments and contingencies is a balance sheet line with no amount reported. The line...
What do negative variances indicate? Definition of Negative Variances on Accounting Reports Negative variances are the unfavorable differences between two amounts, such as: The amount by which actual revenues were less...
What is the difference between net cash flow and net income? Definition of Net Cash Flow Net cash flow is the combination of the cash received and the cash disbursed. In other words, it is the combination of the debit...
Bank Reconciliation(Quick Test #3 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an explanation for the...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
What is meant by nonoperating revenues and gains? Nonoperating revenues are the amounts earned by a business which are outside of its main or central operations. Nonoperating revenues are also described as incidental or...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
What are quick assets? Definition of Quick Assets Quick assets are a company’s current assets which can quickly be converted into cash. Quick assets provide the liquidity necessary to pay the company’s obligations...
What is the entry for an employee's personal phone calls included in the company's bill? Let’s assume that an employee has made personal phone calls of $20 which are included in the company’s phone bill of $100....
Why would a business change its chart of accounts? There can be several reasons for a business to change its chart of accounts. One reason for changing the chart of accounts is to better match how the business is...
Why are some plastic cards called debit cards? I assume the name debit card relates to the reduction in the cardholder’s checking account balance at the time that the card is used. The checking account balances of a...
How do I record a loan payment which includes paying both interest and principal? Definition of a Loan Payment A loan payment is likely to consist of three amounts: Total payment amount Interest payment Principal payment...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed to...
What is "deficit" appearing in stockholders' equity? Definition of Deficit Within Stockholders’ Equity The term deficit is used within the stockholders’ equity section of a corporation’s balance sheet in place of...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
What is an asset account? Definition of an Asset Account An asset account is a general ledger account used to sort and store the debit and credit amounts from a company’s transactions involving the company’s...
Where is a manufacturer's inventory reported in the balance sheet? A manufacturer’s inventory will be reported in the current assets section of the balance sheet and in the notes to the financial statements. In the...
Which items on a bank reconciliation will require a journal entry? Journal Entries for Bank Reconciliation The items on the bank reconciliation that require a journal entry are the items noted as adjustments to books....
What adjustment is needed when a check that was written in a previous month appears on the current month's bank statement? A check written in any previous month but not appearing on previous bank statements, should have...
What is the difference between a debit and a debit balance? Definition of Debit A debit is an entry on the left side of a T-account. A debit entry is used to record assets, expenses, losses, and owner’s draws in their...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
What are gross sales? Definition of Gross Sales Gross sales are the amounts a company earned from selling its products. The amounts originate from the company’s sales invoices but the total will be adjusted to the...
Does a dividend reduce profit? Definition of Dividend A dividend declared by a corporation is a distribution to its stockholders of the profits the corporation had earned. Since the dividends are not an expense, the...
What conditions cause a discount on bonds payable? Discount on bonds payable occurs when a bond’s stated interest rate is less than the bond market’s interest rate. If a $1,000,000 bond issue promises to pay interest...
What is a financial statement? Definition of Financial Statement Generally, the term financial statement could be referring to: General-purpose, external financial reports that are distributed by a company to people...
What is a classified balance sheet? Definition of Classified Balance Sheet A classified balance sheet arranges the amounts from a company’s balance sheet accounts into a format that is useful for the readers. For...
Can a cost be both a direct cost and an indirect cost? A cost can be both a direct cost and an indirect cost. One of many examples is the cost of a supervisor in a department within a factory. Let’s assume that Sam...
Where can I find financial ratios for my industry? One source for financial ratios by industry is the RMA Annual Statement Studies Financial Ratio Benchmarks. RMA is the acronym for Risk Management Association and...
How are fully depreciated assets reported on the balance sheet? Definition of Fully Depreciated Asset A fully depreciated asset is a depreciable asset for which no additional depreciation expense will be recorded. In...
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