capital. On the other hand, it is common for today’s accounting software to show three amounts: owner’s capital at the start of the year, current year net income, and current year draws by the owner. Stockholders’...
capital. On the other hand, it is common for today’s accounting software to show three amounts: owner’s capital at the start of the year, current year net income, and current year draws by the owner. Stockholders’...
What is capex? Definition of Capex Capex is a shortened form of the term capital expenditure or capital expenditures. Capex is often used when referring one or both of the following: Actual amounts that were spent during...
a fixed asset had been put into service and simply keeps the asset in working order. (The amount spent to acquire a fixed asset is referred to as a capital expenditure. The amount of the capital expenditure will be...
in the temporary accounts will end up in a permanent account such as a corporation’s retained earnings account or in a sole proprietor’s capital account. (In a manual system, the balances in the income statement...
or to the proprietor’s capital account at the end of each accounting year.) Contra-revenue accounts including Sales Discounts, Sales Returns, etc. (The debit balances in these accounts allow for the reporting of both...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
See return on capital employed.
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
are considered to be liquidity ratios: Current ratio Quick ratio or acid test ratio The amount of a company’s working capital is also cited as an indicator of liquidity. However, a company with a large amount of...
is a temporary account because its balance is closed to the owner’s capital account at the end of each year in order to begin the next year with a $0 balance.) Examples of permanent accounts are: Asset accounts...
of the amounts reported in the asset accounts. If the source of an asset was an investor purchasing new shares of common stock, the corporation would credit the stockholders’ equity account Common Stock and perhaps...
What is the internal rate of return? Definition of Internal Rate of Return The internal rate of return is the interest rate that will discount an investment’s future cash amounts to be equal to cash paid at the...
+ Owner’s Capital + Revenues – Expenses – Owner’s Draws. The expanded accounting equation for a corporation provides more details for the stockholders’ equity amount shown in the basic accounting equation. The...
of the income statement accounts (revenues, expenses, gains, losses) by transferring their balances to the owner’s capital account or the corporation’s retained earnings account. This is done after the company’s...
interest expense How an Expense Affects the Balance Sheet An expense will decrease a corporation’s retained earnings (which is part of stockholders’ equity) or will decrease a sole proprietor’s capital account...
What is solvency? Definition of Solvency I use the term solvency to mean a company is able to 1) pay its obligations when they come due, and 2) continue in business. Some people look to a company’s working capital to...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
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...
is not an indication of the asset’s market value. For example, a building in an excellent location may be increasing in value even though the accumulated depreciation is increasing and therefore the book value is...
on the income statement over the asset’s useful life. Accountants point out that depreciation is an allocation process which does not result in reporting the asset’s market value. Example of Recording Depreciation...
, it debits Cash. Every transaction will require a debit to at least one account and a credit to at least one other account. Here are two examples to illustrate our five tips. A bakery records its cash sales at a local...
market value is $2,000,000. Unless there are improvements to the building, there will be no depreciation expense after the 30th year. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
not be considered to be the fair market value of the business. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
of the bond. The market interest rate—the rate that bond buyers demand—is changing daily. To illustrate, let’s assume that a 6% bond will mature in ten years and has a maturity value of $100,000. This means that...
investments with a maturity date that was 3 months or less at the time of purchase. In other words, there is very little risk of collecting the full amount being reported. Examples of Cash Equivalents Examples of cash...
reports amounts at a _________ in time. POINT NPOIT Unscramble POINT INTPO Unscramble 4. The amount of working __________ can be calculated quickly from a classified balance sheet. CAPITAL LACITAP Unscramble CAPITAL...
amount per share of common stock. The par value is also referred to as the corporation’s legal capital. On the other hand, if a corporation issues preferred stock, this stock’s par value is meaningful since its...
sections of the balance sheet. The classified balance sheets allow the users of this financial statement to quickly determine the amount of the company’s working capital and current ratio. Both of these metrics are...
Current assets minus current liabilities. Also see working capital.
A temporary account to which the income statement accounts are closed. This account is then closed to the owner’s capital account or a corporation’s retained earnings account. This and other summary accounts...
The net amount of revenues and gains minus expenses and losses for the current year for the sole proprietorship owned by R. Smith. After the financial statements are prepared for the year, this amount will be transferred...
A division’s operating income after deducting a charge for the cost of the corporation’s capital being used by the division.
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
Financial Statements Video Training Part 8 Balance sheet: working capital, current ratio, financial leverage, notes to financial statements, comparative balance sheets Must-Watch Video Learn How to Advance Your...
A rental agreement where ownership is not intended. An operating lease is not recorded in the general ledger accounts and therefore the asset and liability will not appear on the balance sheet. A lease that in substance...
See paid-in capital in excess of par value – preferred stock.
A financial statement that reported the changes in a company’s working capital. The funds flow statement has been replaced by the statement of cash flows.
See paid-in capital in excess of par value – common stock.
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