What entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
What entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
What does a balance sheet tell us? Definition of Balance Sheet A balance sheet reports the dollar amounts of a company’s assets, liabilities, and owner’s equity (or stockholders’ equity) as of midnight of the...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
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 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...
SONIPOIT Unscramble 3. Contributions received by a nonprofit are reported as part of the organization's ____________________. REVENUES EVNUERES Unscramble REVENUES UEEEVRNS Unscramble 4. When an asset is released...
an accounting adjusting entry in which the account Depreciation Expense is debited and the contra asset account Accumulated Depreciation is credited. Effects of Depreciation The following are some of the effects for a...
What is owner's equity? Definition of Owner’s Equity Owner’s equity is one of the three main sections of a sole proprietorship’s balance sheet and one of the components of the accounting equation: Assets =...
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
Is it acceptable for companies to use two methods of depreciation? Definition of Depreciation Methods There are various methods of depreciating assets that are used in a business. It is acceptable and common for...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
What is the statement of financial position? Definition of Statement of Financial Position The statement of financial position is another name for the balance sheet. It is one of the main financial statements. The...
the classified balance sheet shows the total amount of the company’s current assets and the total amount of its current liabilities. A classified balance sheet is likely used by companies and is organized as follows:...
that the assets are presented on the left side or debit side. The liabilities and owner’s equity (or stockholders’ equity) are presented on the right side or credit side. Recall that the balance sheet reflects the...
income This separate line within stockholders’ equity reports the corporation’s cumulative income that had been excluded from previous income statements. Examples include the results from currency translation,...
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...
is the __________ __________. 3. Generally a __________ asset is one that will turn to cash or will be used up within one year of the balance sheet date. 4. Plant assets used in the business are reported under the...
) effects on the accounting equation of the business or company. 2. The owner invests personal cash in the business. Assets Increase Right! The company's asset account Cash increases. Decrease Wrong. No Effect...
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
An account used in combination with another account. For example, the account Allowance for Doubtful Accounts is used with Accounts Receivable in order to present the net amount of the accounts receivable. The account...
is the difference between the total amount of assets and the total amount of liabilities as reported on the balance sheet, the corporation’s book value is not the market value of the corporation. Two reasons for the...
What is the accounting equation? Definition of Accounting Equation The accounting equation of a sole proprietorship is assets = liabilities + owner’s equity. For a corporation, the accounting equation is assets =...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
rate, the asset will also be recorded at $50,000. A long-term asset that will be used in a business (other than land) will be depreciated based on its cost. The cost will be reported on the balance sheet along with the...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
is not adjusted for inflation or for changes in the current value or replacement value of the asset. For buildings, equipment, fixtures, vehicles, and other long-lived tangible assets other than land, the asset’s...
What is the bookkeeping equation? Definition of Bookkeeping Equation The bookkeeping equation (or accounting equation) is similar to the structure of the balance sheet: For a sole proprietorship: Assets = Liabilities +...
and intangible assets acquired, minus 2) the liabilities that were assumed. Goodwill is reported on the balance sheet as a long-term or noncurrent asset. Since 2001, U.S. companies are no longer required to amortize the...
depreciation is the declining-balance method often used for U.S. income tax depreciation.) Compared to the straight-line depreciation method, the sum-of-the-years’-digits method results in greater depreciation in 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. The financial statement that is often referred to as the P&L is the __________...
Long-term assets that are reported under the classification of property, plant, and equipment on a company’s balance sheet. These assets are depreciated over their useful life.
A donor-imposed restriction on net assets that requires using the assets within a specified passage of time.
The ratio of total liabilities to total assets. For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).
One of the main financial statements of a nonprofit organization. This financial statement reports the amounts of assets, liabilities, and net assets as of a specified date. This financial statement is similar to the...
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
of depreciation over the asset’s useful life is the asset’s cost minus an estimated salvage value at the end of the useful life. The result of this calculation is sometimes referred to as the asset’s depreciable...
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...
amount of assets during the same year. If net sales were $800,000 and the average amount of assets was $1,000,000 the asset turnover ratio was 0.8:1 [$800,000/$1,000,000]. Mark the Cheat Sheet as Complete...
Featured Review
"I've been an AccountingCoach PRO user for several years, and have used the course to expand my understanding and become more advanced in my bookkeeping skills. The course is very easy to follow and complete. I particularly like to use the ‘search for any accounting term’ feature when I need to find and learn about something specific. Each time I log in, I pick up something new that I didn't know before. I recommend this website if you are looking to learn or improve your accounting skills." - Cathy W.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: