with the heading current assets. Current assets are listed in the order in which they are expected to turn to cash. This is known as the order of liquidity. Since cash is the most liquid asset, it is listed first. After...
with the heading current assets. Current assets are listed in the order in which they are expected to turn to cash. This is known as the order of liquidity. Since cash is the most liquid asset, it is listed first. After...
of presenting the statement of cash flows, the cash from operating activities begins with the company’s net income and is then adjusted for depreciation expense and the changes in the current assets and current...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
for Doubtful Accounts is a contra account to __________ __________. 4. Inventory is often reported at the lower of __________ or net __________ value. 5. The cost of insurance premiums that have been paid but have not...
of depreciation taken on the plant assets since they were put into service. accumulated depreciation This contra asset account reports the amount of depreciation taken on the plant assets since they were put into...
approach is also referred to as the capital maintenance approach. Under the balance sheet approach one looks at the change in stockholders’ or owner’s equity to determine the amount of net income during the period...
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...
What does Accumulated Depreciation tell us? Definition of Accumulated Depreciation Accumulated depreciation reports the amount of depreciation that has been recorded from the time an asset was acquired until the date of...
What is the difference between the current ratio and the quick ratio? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
What is a balance sheet and why is it prepared? Definition of Balance Sheet The balance sheet is prepared in order to report an organization’s financial position at the end of an accounting period, such as midnight on...
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...
... increase decrease not change 22. What is the effect on a corporation’s accounting equation when it uses the accrual method and bills a client for the services it had just provided? Select... An increase in assets...
prepares monthly financial statements. Select... an accrual a deferral 27. Customer Deposits and Deferred Revenues are two examples of __________ accounts. Select... asset liability revenue 28. When the same amount of...
disclosure required by Statement 33 was the reporting of the effects of general inflation as indicated by the change in the consumer price index. In other words, a large company had to disclose in the notes to its...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
using the asset. Since it is difficult to precisely match a productive asset’s cost to a company’s revenues, the asset’s cost is usually allocated to the years in which the asset is used. In other words,...
How do you calculate an asset's salvage value? Definition of Asset Salvage Value In accounting, an asset’s salvage value is the estimated amount that a company will receive at the end of a plant asset’s useful...
How is working capital defined and measured? Definition of Working Capital Working capital is defined as the amount of a company’s current assets minus the amount of its current liabilities usually as of the final...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
How are the balance sheet and income statement connected? Connection between Balance Sheet and Income Statement The connection between the balance sheet and the income statement results from: The use of double-entry...
rato. This ratio is computed by dividing a company’s net sales during a year by the average amount of the company’s total assets during the same year. In the case of financial ratios, a higher turnover ratio...
as right depreciation This is the systematic allocation of a plant asset’s cost to expense over the useful life of the asset in order to match an asset’s cost to the accounting periods in which the asset is used....
A company’s balance sheet that shows each item’s amount after it has been divided by the amount of total assets. In other words, current assets will be shown as a percentage of total assets. This will allow...
. If a store sells its old delivery truck for cash, and the cash amount is more than its book value, a __________ is reported on the income statement. 4. An asset’s book value or carrying value is the the asset’s...
that compared to the straight-line method, the depreciation expense will be faster in the early years of the asset’s life but slower in the later years. However, the total amount of depreciation expense during the...
will likely be reinvested in additional income-producing assets or used to reduce the corporation’s liabilities. Where do Retained Earnings Come From? At the end of an accounting year, the balances in a...
Does collecting a customer's accounts receivable affect net income? Definition of Accounts Receivable Accounts receivable is a current asset that results when a company reports revenues from sales of products or the...
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
This is the systematic allocation of a plant asset’s cost to expense over the useful life of the asset. This is necessary because of the matching principle. depreciation expense This is the systematic allocation of a...
What does a balance sheet tell us? Definition of Balance Sheet A balance sheet reports the dollar amounts of a company’s assets, liabilities, and owner’s equity (or stockholders’ equity) as of midnight of the...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
What entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
during the asset’s construction The interest on the debt related to the asset’s construction Adding the capitalized interest to the asset’s cost instead of reporting it as interest expense of the current...
-in-process, and the finished goods that are owned and on hand. Inventory is generally valued at its cost and it is likely to be the largest component of the company’s current assets. Since the unit cost of inventory...
comprehensive income. Some of these items involve currency translation, hedging, and pensions. Balance sheet. This statement of financial position reports a corporation’s assets, liabilities and stockholders’ equity...
value of 1 table is used. (However, using an online calculator or a financial calculator is more practical, precise and faster.) Net Present Value Model Net present value (NPV) is one of the discounted cash flow models...
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