RNTUREC Unscramble CURRENT ETCRRNU Unscramble 5. Under the indirect method, a decrease in current ____________ will cause a decrease in cash from operating activities. LIABILITIES ITIELBSLIIA Unscramble LIABILITIES...
RNTUREC Unscramble CURRENT ETCRRNU Unscramble 5. Under the indirect method, a decrease in current ____________ will cause a decrease in cash from operating activities. LIABILITIES ITIELBSLIIA Unscramble LIABILITIES...
of merchandise on May 15, but allows the customer to pay on June 15. On May 15, the company will credit its income statement account Sales and will debit its current asset account Accounts Receivable. (When the customer...
additional debit amounts are entered, and will be decreased when credit amounts are entered. Examples of Debit To illustrate the term debit, let’s assume that a company has cash of $500. Therefore, the company’s...
as of the date of the balance sheet, minus 2) the principal payments that are reported as a current liability The lender’s balance sheet will report a current assets for the principal amounts to be received within one...
will move all the income statement account balances to Retained Earnings. Let’s assume that today a corporation sold goods on credit. The corporation’s current asset Accounts Receivable will increase and the company...
as dividends to its stockholders. Are Retained Earnings an Asset? The amount of a corporation’s retained earnings is reported as a separate line within the stockholders’ equity section of the balance sheet. However,...
, the allocated manufacturing cost will be included as part of the following costs: Cost of goods that are in inventory (a current asset on the balance sheet) Cost of goods that were sold (as the expense cost of goods...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
An asset account used to record amounts given to an employee with the expectation of repayment. For example, if an employee is given money by a company and the money is expected to be repaid or spent for company...
The combined amount of the debit balance in the current asset account Accounts Receivable and the credit balance in the contra asset account Allowance for Doubtful Accounts. The difference between the balances in these...
A long term asset account containing the cost of delivery equipment acquired by a company and used in its business. The account will appear on the balance sheet under the heading of Property, Plant and Equipment. There...
This is the period of time that it will be economically feasible to use an asset. Useful life is used in computing depreciation on an asset, instead of using the physical life. For example, a computer might physically...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
In accounting, cost is defined as the cash amount (or the cash equivalent) given up for an asset. Cost includes all costs necessary to get an asset in place and ready for use. For example, the cost of an item in...
A legal agreement to pay rent to the lessor for a stated period of time. Sometimes the lease is in substance a purchase of an asset and a financing arrangement. For example, if a company agrees to lease a forklift truck...
up within one year are reported on a company’s balance sheet as a current asset. As the amount expires, the current asset is reduced and the amount of the reduction is reported as an expense on the income statement....
for a long-term purpose, it cannot be used to pay its short-term liabilities. Therefore, the sinking fund is not a current asset nor is it part of the corporation’s working capital. Example of Reporting a Sinking Fund...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
The difference between the call price of a bond or preferred stock and its stated or par value.
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the...
The ratio of the market value of a share of common stock to the earnings per share of common stock. For example, if a corporation earned $3 per share and its stock is trading at $36, it’s price earnings ratio is...
A phrase that indicates a transaction was between two independent parties and that the resulting amount is a fair representation of the value.
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
The number of years needed to recover the cash amount invested in a project. The calculation uses cash flows rather than accounting income flows. Generally the cash flows are not discounted to reflect the time value of...
See paid-in capital in excess of par value – preferred stock.
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
The rate that will discount all cash flows to a net present value of zero.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
See paid-in capital in excess of par value – common stock.
An interest rate that is not explicitly stated. For example, instead of paying $100 cash a person is allowed to pay $9 per month for 12 months. The interest rate is not stated, but the implicit rate can be determined by...
Future cash amounts that have not been discounted to their present value.
In accounting this is the rate used to discount future cash flows in order to determine their present value.
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...
. A manufacturer’s inventory consists of the cost to produce the items (the costs of direct materials, direct labor, and manufacturing overhead). Sometimes a company’s inventory cost has to be reduced to a lower...
Our Explanation of Financial Accounting introduces some of the basic accounting concepts and how they affect the income statement, balance sheet, and other financial statements.
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...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
What are accounting ratios? Definition of Accounting Ratios Accounting ratios, which are also known as financial ratios, are one part of financial statement analysis. Accounting ratios will often relate one financial...
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