Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
by reading our Accounting Basics (Explanation). 1. Which financial statement reports the revenues and expenses for a period of time such as a year or a month? Balance Sheet Wrong. The balance sheet reports assets,...
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...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
What is the debt ratio? Definition of Debt Ratio The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio. Hence, the formula for the debt ratio is: total liabilities divided by...
and it is positioned immediately after current assets. The cash restricted for a long-term asset is not reported as part of the company’s current assets because the cash is not available to pay current liabilities....
for the cost principle. If a company is a going concern (and therefore liquidation is not relevant), reporting its long term assets at cost is sufficient and there is no need to report the long term assets at their...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
of the division’s headquarters or executive’s office.) With that in mind, ROCE is calculated as follows: The division’s Operating Income (before income taxes and before interest expense) divided by the Assets...
with significant amounts of inventory and plant assets. For example, when inventory is measured by using the first-in, first-out cost flow assumption under US GAAP, the actual historical cost of inventory that is...
associated with plant assets. The use of the word reserve led some readers of the financial statements to conclude that money was set aside for replacing plant assets or the uncollectible accounts or loans. To avoid...
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...
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 sale of inventory on credit will usually cause an increase in the __________ ratio. Select... current quick both current and quick neither current nor quick 8. The return on total assets can be viewed as the profit...
This amount is an asset’s cost minus its accumulated depreciation. It is also the face value of bonds minus its unamortized discount (or plus its unamortized premium). It is also the amount of a corporation’s...
.) 4. Which of the following is an asset account? Accounts Payable Wrong. Accounts Payable is a liability account. Prepaid Insurance Right! Prepaid Insurance is a current asset. Prepaid costs that have not yet expired...
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
expense over the life of the asset cannot exceed the asset’s cost regardless of the depreciation method. In other words, the difference between accelerated depreciation and straight-line depreciation is a “timing...
balance sheet be affected when the corporation earns revenues and allows the customer to pay in 30 days? Select... Only assets will change Only stockholders' equity will change Both assets and stockholders'...
purchased (or donated). If an item is not listed on the balance sheet as an asset, it will not be included in a corporation’s book value. (A corporation’s book value is the amount of stockholders’ equity reported...
Elements of Financial Statements (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. 1. Probable future economic benefits is part of the definition of __________....
spent to acquire or improve a company’s fixed assets. The capital expenditures increase the respective asset accounts which are reported in the noncurrent asset section of the balance sheet entitled property, plant...
What is salvage value? Definition of Salvage Value In accounting, salvage value is the amount that is expected to be received at the end of a plant asset‘s useful life. Salvage value is sometimes referred to as...
How do you calculate the gain or loss when an asset is sold? Definition of Gain or Loss on Sale of an Asset The gain or loss on the sale of an asset used in a business is the difference between 1) the amount of cash that...
balance show that the accounts having debit balances = the accounts having credit balances. Example of Balance Sheet Totals Assets normally have debit balances. However, there are a few asset accounts that are expected...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and 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...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
Why will some asset accounts have a credit balance? Definition of Asset Account Balances In accounting, asset accounts normally have debit balances. That is, the general ledger accounts for assets typically have their...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
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