What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
Are bonds payable reported as a current liability if they mature in six months? Definition of Bonds Payable Bonds payable are formal, long-term obligations that promise to pay interest every six months and the principal...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
How do you record an owner's money that is used to start a company? Recording Money to Start a Sole Proprietorship If Amy Ott begins a sole proprietorship by putting money into her business, the sole proprietorship will...
What is a nominal account in accounting? Definition of Nominal Account In accounting, nominal accounts are the general ledger accounts that are closed at the end of each accounting year. The closing process transfers...
What is the difference between a nominal account and a real account? Definition of Nominal Account The balance in a nominal account is closed at the end of the accounting year. As a result, a nominal account begins each...
When should costs be expensed and when should costs be capitalized? Definition of Costs In the context of the question, costs are the amounts paid in exchange for materials, products, or services. The costs could be:...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Stockholders' Equity (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. If you have difficulty answering the following questions, learn more about this topic by reading our...
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...
Financial Ratios Financial Ratios Including Limitations Financial ratios are one component of financial analysis. Financial ratios are often calculated by using amounts from previously issued annual financial statements....
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...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
What is the FISH inventory method? FISH is the acronym for first-in, still-here. FISH is an attempt to bring humor to the fact that some items have been sitting in inventory for years. Unlike FIFO and LIFO, which are...
Debits and Credits For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Financial Ratios For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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 (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (29) Marked Wrong (0) Marked Right (0) statement of cash flows (or) SCF (or) cash flow statement This financial statement...
What are turnover ratios? Definition of Turnover Ratios In accounting, turnover ratios are the financial ratios in which an annual income statement amount is divided by an average asset amount for the same year....
What is the difference between stocks and bonds? Definition of Stocks Stocks, or shares of capital stock, represent an ownership interest in a corporation. Every corporation has common stock. Some corporations issue...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
Why is the P&L profit entered on the credit side of the balance sheet? Profit’s Effect on the Balance Sheet The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a...
What is the difference between the Cash Flow and Funds Flow statements? Definition of Cash Flow and Funds Flow Statements The cash flow statement, known formally as the Statement of Cash Flows, reports a company’s...
If we dispose of an asset, will there be a change in the owner's equity? The owner’s equity of a sole proprietorship will change only if the disposal of an asset causes a gain or loss to be reported on the income...
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...
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
What is managerial accounting? Definition of Managerial Accounting Managerial accounting is also known as management accounting and it includes many of the topics that are included in cost accounting. Some of the...
Where should a business report cash which is restricted to purchase a long-term asset? The cash which a business has restricted to purchase a long-term asset should be reported on the balance sheet under the asset...
Where does a bond sinking fund appear on the balance sheet? Definition of Bond Sinking Fund A bond sinking fund is an investment made by a corporation that is restricted for the purpose of retiring its bonds payable,...
What is the difference between liquidity and liquidation? Definition of Liquidity Liquidity usually refers to a company’s ability to pay its bills when they become due. Liquidity is often evaluated by comparing a...
What is the difference between financial accounting and management accounting? Definition of Financial Accounting Financial accounting has its focus on the financial statements which are distributed to stockholders,...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
What is the total asset turnover ratio? Definition of Total Asset Turnover Ratio The total asset turnover ratio indicates the relationship between a company’s net sales for a specified year to the average amount of...
Which accounts are debited in the closing entries? Definition of Closing Entries Closing entries occur at the end of an accounting year to transfer the balances in the temporary accounts to a permanent or real account....
Why is an amount in the cash flows from investing activities shown in parenthesis? An amount shown in parenthesis within the investing activities section of the cash flow statement indicates that cash was used to...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
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