Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
On credit; not for cash.
the budgeted expenses The amount by which actual net income was less than the budgeted net income The amount by which current revenues were less than the previous year’s revenues The amount by which actual expenses...
How do the income statements of a sole proprietorship and a regular corporation differ? Definition of Income Statements of Sole Proprietorship and Regular Corporation The income statement of a sole proprietorship and a...
A company’s total contribution margin in dollars is the total net sales minus the total amount of variable expenses. Dividing the contribution margin in dollars by the total amount of net sales is the contribution...
What is the difference between Present Value (PV) and Net Present Value (NPV)? Definition of Present Value (PV) Present value or PV is the result of discounting one or more future amounts to the present. The greater the...
What is the difference between gross margin and contribution margin? Definition of Gross Margin Some use the term gross margin to mean the same as gross profit, which is: net sales minus the cost of goods sold. Others...
Receivable or Loans Receivable is decreased. Definition of a Loan Payment A loan payment (such as a monthly mortgage loan payment or a monthly car payment) consists of an interest payment for one month’s interest and...
. The entry will debit Loan to Employee for $5,000 and will credit Cash for $5,000. Under the accrual method of accounting, at each balance sheet date the company should record any accrued interest by debiting Interest...
the company immediately, you can record the $100 phone bill by debiting Telephone Expense for $80 and debiting the asset account Receivable from Employees for $20. When you receive the $20 from the employee, you will...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
liability. When a company receives money in advance of earning it, the accounting entry is a debit to the asset Cash for the amount received and a credit to the liability account such as Customer Advances or Unearned...
ledger account Accounts Payable. Example of Recording a Liability without the Vendor’s Invoice At any time, the retailer’s accounts payable clerk/department will have many transactions waiting to be recorded in...
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
Will every transaction affect an income statement account and a balance sheet account? Definition of Income Statement and Balance Sheet Accounts A company’s general ledger accounts are arranged into two categories...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
How do I calculate IRR and NPV? Definition of IRR The internal rate of return (IRR) method or model determines the interest rate that discounts all cash inflows and cash outflows to a net present value of $0. In other...
similar to the sole proprietor’s Drawing account and Capital account which are part of owner’s equity. Both the Dividends account and the Drawing account are temporary balance sheet accounts since they are closed at...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within the...
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...
entries. Temporary accounts are also referred to as nominal accounts. All of the income statement accounts are classified as temporary accounts. A few other accounts such as the owner’s drawing account and the income...
accounts. It also uses the terms debit and credit, which had their origin five centuries ago. Today, you should associate debit with left side of an account, and associate the term credit with the right side of an...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days...
items. The not-for-profit organization’s equity section has the heading Net Assets. The reason for the use of Net Assets is the NFP does not have owners. Within the net assets section are the amount of net assets...
can see, the entry does not involve the account Cash. Hence, depreciation expense is referred to as a noncash expense. Example of Depreciation Assume that a sidewalk florist operates a cash only business. During the...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. A listing of the account numbers and titles but without account balances is the __________...
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...
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
Net income divided by net sales.
. With standard costing, the general ledger accounts for inventories and the cost of goods sold contain the standard costs of the inputs that should have been used to make the actual good output. Differences between the...
that are recorded in income statement accounts. This allows the balance sheet account Owner’s Capital (or Retained Earnings) to avoid having all of the thousands or millions of revenue and expense transactions from...
’ equity, and statement of changes in equity) is one of the five required financial statements issued by a U.S. corporation whose common stock is publicly traded. This financial statement summarizes on one page all of...
by a company’s liabilities will generally have a lower cost than money raised from stockholders’ equity for the following reasons: Some liabilities such as accounts payable have no interest expense associated with...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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...
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