The net result of combining the discounted cash inflows and the discounted cash outflows of an investment, project, company, etc.
The net result of combining the discounted cash inflows and the discounted cash outflows of an investment, project, company, etc.
Life insurance with a cash value (as opposed to term insurance, which does not have a cash value).
The third section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
The accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected. This is part of the accrual basis of accounting (as...
A liability account on the books of a company receiving cash in advance of delivering goods or services to the customer. The entry on the books of the company at the time the money is received in advance is a debit to...
Journals other than the general journal. Special or specialized journals include the cash receipts journal, the cash disbursements journal, the purchases journal, and the sales journal.
Statement of Cash Flows. See Explanation of Cash Flow Statement.
The second section of the statement of cash flows. To learn more, see Explanation of Cash Flow Statement.
Earnings are said to be of a high quality if the accounting policies are conservative. One indication is that the cash flows from operating activities shown on the statement of cash flows consistently exceed the amount...
similar amounts. The following are common account titles: Cash, Accounts Receivable, Accounts Payable, Loans Payable, Sales, Advertising Expense, Rent Expense, Interest Expense, and perhaps hundreds more. When we use...
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.
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...
of comprehensive income, balance sheet, statement of cash flows, and statement of stockholders’ equity. financial statements These are part of the accounting cycle and part of a corporation’s external financial...
The activities involved in earning revenues. For example, the purchase or manufacturing of merchandise and the sale of the merchandise including marketing and administration. In the statement of cash flows the operating...
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...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
income. The retailer’s main operations are purchasing and selling merchandise. Investing its idle cash in interest-bearing investments is outside of its main or central operations. Gains often involve the disposal of...
. Bank interest earned Loan payments Electronic charges or remittances from suppliers and others Customer’s checks that were deposited but are now being returned because of insufficient funds The journal entries for...
the following: Debit Cash Credit the account(s) that was debited when the check was originally recorded This entry increases the general ledger account Cash (that contains the company’s checking account). It also...
Where do I record the refund of a registration fee? If the registration fee refers to a fee expense that you had originally paid but the amount is now being refunded to you, I would credit the same expense account that...
What is the entry when a company lends money to an employee? Definition of Employee Loan When a company lends money to one of its employees, the company is reducing its Cash and increasing another asset such as Other...
with an investment of $5,000. The entry to business accounts will include a debit to Cash for $5,000. On the next day, the business spends $1,000 to purchase office equipment. Part of this entry will include a credit to...
, the payback reciprocal is 1 divided by 4 = 0.25 = 25%. The payback reciprocal overstates the true rate of return because it assumes that the annual cash flows will continue forever. It also assumes that the annual cash...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
When a company writes a check, the company records it with a credit to the Cash account in the company’s general ledger. Whether the check has or hasn’t cleared the bank account, the company’s Cash account...
How do you record a check that clears the bank months after it was voided? Since you had voided the check months earlier, your general ledger no longer reflects 1) the original credit to the cash account, and 2) the...
What are credit sales? Definition of Credit Sales As opposed to cash sales, credit sales (or sales on credit) allow the customer to pay the seller at a later date. Perhaps the seller allows its credit worthy customers to...
What is the difference between dividends and interest expense? Definition of Dividends Dividends are a distribution of a corporation’s earnings to its stockholders. Dividends are not an expense of the corporation and...
is the expected number of years it will take for a company to receive net cash inflows that add up to the amount of its initial cash investment. Note that the payback period focuses on future cash flows over many years...
. Examples of Double-Entry Bookkeeping Let’s assume that a company borrows $10,000 from its bank. The company’s asset account Cash is increased with a debit entry of $10,000 and the company’s liability account...
automatically and only require information on the other account. Examples of Double Entry When a company borrows money from a bank, the company’s asset Cash is increased and the company’s liability Notes Payable or...
will include preparing the following projections for the next accounting year: Amounts for sales Amounts for producing goods Amounts for each department’s expenses Summarizing the above budgets into a master budget or...
balance. When a bank credits a company’s checking account, the bank’s liability account Customer Deposits is increased. However, the company must debit its Cash account to increase the company’s asset Cash. Credit...
How do you record an asset that was partially financed? Example of Recording an Asset that was Partially Financed Assume that your company purchased a car for $10,000 by paying cash of $4,000 and signing a promissory...
. Examples of Inventory Turnover If a company’s cost of goods sold for the most recent year was $600,000 and its inventory during that year was $150,000 the inventory turnover was 4 times. This mean the inventory on...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
: Asset accounts such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Buildings, Equipment, etc. For example, a debit balance in the Cash account indicates a positive amount of cash. (Therefore, a credit...
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...
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