Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows,...
Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows,...
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...
What is the difference between an adjunct account and a contra account? Definition of Adjunct Account An adjunct account is a general ledger account that is related to another general ledger account. The combination of...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
Why do people start their businesses as sole proprietorships? I believe that people start their businesses as a sole proprietorship because a sole proprietorship can be formed easily, quickly, and with little cost....
Is there a difference between work-in-process and work-in-progress? It depends on the user of the terms. Definition of Work-in-Process I use the term “work-in-process” to mean a manufacturer’s inventory that is not...
What is the effective interest rate for a bond? Definition of Effective Interest Rate of a Bond The effective interest rate of a bond is usually the market interest rate and the bond’s yield-to-maturity (as opposed to...
What is the difference between public companies and public sector? Definition of Public Companies Public companies are those businesses owned by individuals (and not by a government). Definition of Publicly-Held...
Why is a negative cash balance reported as a liability? The following will illustrate why a negative cash balance is reported as a liability instead of being reported as a negative asset amount. Company X writes checks...
What is the difference between the accounts rent receivable and rent revenue? Definition of Rent Receivable Rent Receivable is the title of the balance sheet asset account which indicates the amount of rent that has been...
What is meant by the full cost of a product? Many (perhaps most) accountants use the term full cost to mean the full manufacturing or production cost of a product. To these accountants this means a product’s cost of...
What accounts for the difference in inventory values between periodic LIFO and perpetual LIFO? Difference Between Periodic LIFO and Perpetual LIFO The difference between periodic LIFO and perpetual LIFO involves the time...
What is the difference between Rent Receivable and Rent Payable? Definition of Rent Receivable Rent Receivable is an asset account in the general ledger of a landlord which reports the amount of rent that has been earned...
Why is there a large difference between share value and stockholders' equity? There can be many reasons why the market value of a corporation’s stock is much greater than the amount of stockholders’ equity reported...
What is the meaning of a favorable budget variance? Definition of a Favorable Budget Variance A favorable budget variance means that the actual amount that occurred was better for the company (or organization) than the...
What is the difference between stock dividend and cash dividend? Definition of a Stock Dividend A stock dividend is a dividend consisting of additional shares of stock. Assume that before a corporation declares a stock...
What is the difference between equity financing and debt financing? Definition of Equity Financing Equity financing involves increasing the owner’s equity of a sole proprietorship or increasing the stockholders’...
How should the sale of gift certificates be recorded in the general ledger? Definition of Gift Certificates Gift certificates (and gift cards) are often sold by a retailer to a buyer for cash. The buyer can then redeem...
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
What is the difference between fixed assets and noncurrent assets? Fixed Assets are Part of Noncurrent Assets Fixed assets are one of several categories of noncurrent assets. Fixed assets are usually reported on the...
What is the difference between an implicit cost and an explicit cost? Definition of Implicit Cost An implicit cost is present but it is not initially shown or reported as a separate cost. Definition of Explicit Cost An...
How do you calculate the average balance in accounts receivable? The average will be more representative if you include additional balances in the computation. For example, if you compute the average balance for the year...
Why would the cost behavior change outside of the relevant range of activity? Cost behavior often changes outside of the relevant range of activity due to a change in the fixed costs. When volume increases to a certain...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
A credit is not a normal balance for what accounts? Definition of Credit Balance A credit balance refers to the balance on the right side of a general ledger account or T-account. Normally, the liability and owner’s...
What is a non-discount method in capital budgeting? Definition of Non-discount Method of Capital Budgeting A non-discount method of capital budgeting is one that does not consider the time value of money. In other words,...
What is meant by the term relevance in accounting? Definition of Relevance In accounting, the term relevance could mean one of the following: An amount, disclosure, etc. that will make a difference to the decision maker...
How do you divide the cost of real estate into land and building? Dividing the Cost of Real Estate into Land and Building In accounting, the cost of real estate must be divided into: The cost of land (because land is not...
What is the difference between Notes Payable and Accounts Payable? Definition of Notes Payable The account Notes Payable is a liability account in which a borrower’s written promise to pay a lender is recorded. (The...
Where can I find the amount of income taxes paid by a corporation? Definition of Income Taxes Paid by a Corporation The amount of income tax paid by a corporation is different from the amount of income tax (income tax...
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 is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
What is the difference between assessed value and appraised value? Definition of Assessed Value Assessed value will likely be the amount that a local or state government has designated for individual properties. This...
Can I take the CPA exam without having a bachelor degree? You will need to inquire with your state or jurisdiction about its requirements to take or sit for the CPA Exam. Generally, you will need to have a minimum of 150...
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...
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
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...
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