a company’s cash flow statement (or statement of cash flows). A variation of the above calculation is to also subtract the dividends to stockholders, if the dividends are viewed as a requirement. Example of Free Cash...
a company’s cash flow statement (or statement of cash flows). A variation of the above calculation is to also subtract the dividends to stockholders, if the dividends are viewed as a requirement. Example of Free Cash...
as a current liability such as Accrued Expenses Payable. On the corporation’s income statements, the interest that occurred (whether paid or not paid) during the period of the income statement will be reported as...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
What are some reasons that cause the balance on the bank statement to differ from the cash balance on the books? Reasons a Bank Balance Will Differ from a Company’s Balance Some of the reasons for a difference between...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
Bookkeeping Video Training Part 3 Accounts for expenses are debited, the income statement and balance sheet are connected, accrual method of accounting Must-Watch Video Learn How to Advance Your Accounting and...
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
, it is wise for a company to use some debt to control a larger amount of profitable assets. However, too much debt can mean significant risk when business conditions decline. Leverage is also known as trading on equity....
underlying guidelines. The extensive generally accepted accounting principles (US GAAP) are found in the authoritative source known as the Financial Accounting Standards Board Accounting Standards Codification. Join PRO...
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
that during a recent year a company’s income statement reported net sales of $2,100,000. During the same period, the company’s total assets reported on its 12 monthly balance sheets averaged $1,400,000. The...
card means that the bank (or other financial institution) is making a loan or providing credit to the cardholder. Usually the cardholder will receive a monthly statement showing the credit card transactions and must...
What is the difference between the cash basis and the accrual basis of accounting? Definition of the Cash Basis of Accounting Revenues are reported on the income statement in the period in which the cash is received from...
What is ERP? Definition of ERP In accounting, ERP is the acronym for enterprise resource planning. ERP could be described as a database software package that supports all of a business’s processes and operations...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
of working capital during the year was $400,000. Therefore, its working capital turnover ratio was: net sales of $2,400,000 divided by average working capital of $400,000 = 6 times during the year. As with most...
be broken down to be: [Sales divided by Assets Employed] times [Operating Income before taxes and interest divided by Sales] = Operating Income divided by Assets Employed = ROCE. Take our Financial Ratios Exam. Join...
a profitable division that no longer meets its long range goals. The proceeds from this disinvestment are then used to improve the company’s financial position by reducing its debt. Join PRO to Track Progress Mark the...
payments that will not speed up or increase revenues. The cash flow statement, formally known as the statement of cash flows, is an important financial statement that can be helpful in computing a realistic burn rate....
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
that were provided. This is done with a debit to the liability account Gift Certificates Outstanding and a credit to a revenue account. Our explanation pertains to financial accounting. To learn about the income tax...
reported as other comprehensive income on each period’s statement of comprehensive income. It is similar to the amount of retained earnings which is the net cumulative amount of the items reported on each period’s...
What is the quick ratio? Definition of Quick Ratio The quick ratio is a financial ratio used to gauge a company’s liquidity. The quick ratio is also known as the acid test ratio. The quick ratio compares the total...
(as reported on the balance sheet) that is owed to creditors. The larger the debt ratio the greater is the company’s financial leverage. The appropriate debt ratio depends on the industry and factors that are unique...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
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...
statement account Sales Returns and Allowances is a contra revenue account that is associated with the revenue account Sales. If the balance in this contra account is a debit of $3,000 and the Sales account has the...
Why are revenues credited? Why Revenues are Credited Revenues cause owner’s equity to increase. Since the normal balance for owner’s equity is a credit balance, revenues must be recorded as a credit. At the end of...
adjustments when reconciling the bank statement. For example, if a check is written in December but is voided in January, the Cash account in the company’s general ledger will need to be increased when the check is...
In what order are liabilities listed in the chart of accounts? Order for Listing Liabilities It is logical for a company’s liabilities to be organized in the chart of accounts in the same way as they are presented on...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
What is the difference between loan interest and bank loan repayment? Definition of Loan Interest Loan interest is the expense a borrower incurs for using a lender’s money. Loan interest is also the income earned by a...
What is the difference between interest expense and interest payable? Definition of Interest Expense Assuming the accrual method of accounting, interest expense is the amount of interest that was incurred on debt during...
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
Is a security deposit for a rental agreement recorded in a liability account? The person paying the security deposit would credit the asset account Cash and would debit the asset account Security Deposits. The person...
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