This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
A measurement of financial performance of a company’s operating division that is not responsible for its financing and income taxes. The calculation is likely to be 1) the division’s operating income before...
to the financial statements. dividends in arrears These are the omitted dividends on cumulative preferred stock that must be paid before common stockholders can receive a dividend. These must be disclosed in the notes...
. A nonprofit organization’s financial reporting includes a statement of financial position, a statement of activities, a statement of functional expenses, and a statement of cash flows. Some nonprofits are required to...
to as financial leverage. Using debt financing allows the existing stockholders to maintain their percentage of ownership, since no new stock is being issued. However, the additional debt adds risk and may result in...
What is a certificate of deposit? Definition of Certificate of Deposit A certificate of deposit, also referred to as a CD, is a time deposit at a bank, credit union, or other financial institution. A certificate of...
receivable Statement of cash flows View Coaching An aging (also spelled ageing) of accounts receivable is an internal report (not a financial statement) that lists each customer having a balance in a company’s...
) and the income statement will report supplies expense of $7,500 (1,500 units at $5). Assume that a company purchases a delivery truck to be used in its business. Initially the truck’s cost will be recorded in the...
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 accounts receivable turnover ratio? Definition of Accounts Receivable Turnover Ratio The accounts receivable turnover ratio (or receivables turnover ratio) is an important financial ratio that indicates a...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
leveraged. Every balance sheet that is distributed by a company should include notes (or footnote disclosures). These notes provide important additional information concerning the company’s financial position...
What does crossfoot mean? Definition of Crossfoot or Crossfooting Accountants and auditors use the word foot to mean adding one or more columns of numbers. When there are several columns of numbers along with a...
What is the difference between receivables and accounts receivable? Definition of Accounts Receivables Accounts receivable are usually current assets that result from selling goods or providing services to customers on...
What is columnar? Prior to electronic worksheets, accountants had several pads of paper with a varying number of columns (and rows) preprinted on them. The pads of paper were labeled as columnar pads. The preprinted...
will be closed at the end of each year. However, the account’s debit balance is closed directly to the owner’s capital account. (The owner’s draws are not reported as an expense on the company’s income...
-30 days past due, 31-60 days past due, etc. A receivable that is current (not past due) is usually not a problem. However, when customers are past due it is a sign that they are experiencing some financial difficulties....
What is the effective interest rate for a bond? Definition of Effective Interest Rate of a Bond The effective interest rate of a bond is usually the market interest rate and the bond’s yield-to-maturity (as opposed to...
or within the operating cycle, whichever is longer. To assist you in computing and understanding accounting ratios, we developed 24 forms that are available as part of AccountingCoach PRO. You can also read our...
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 life....
What are the typical items reported as current liabilities? Definition of Current Liabilities Current liabilities (also known as short-term liabilities) for most companies are the obligations that must be paid within one...
of Long-term Assets Long-term assets include long-term investments in financial securities, property, plant, equipment, and intangible assets. Definition of Proceeds from Long-term Assets The money a company receives...
What is a blank check? Definition of Blank Check A blank check often refers to a check that has been signed by an authorized check signer without completing the other information (date, payee, amount). A blank check...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
. On the other hand, some companies are required by government regulations to end their accounting years on December 31, even though it is not the end of their natural business year. The term fiscal year is associated...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
What does overstated mean? Definition of Overstated When an accountant uses the term overstated, it means two things: The reported amount is incorrect, and The reported amount is more than the true or correct amount. In...
What does it mean to replenish the petty cash fund? Definition of Replenishing Petty Cash Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking...
to as an outstanding check. In the bank reconciliation process an uncleared cheque (or outstanding check) is deducted from the balance shown on the bank statement to arrive at the correct or adjusted balance per bank....
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
on the automakers’ balance sheets at the time that the cars are sold. The other part of the journal entry is to debit Warranty Expense and report it on the income statement. Definition of an Estimated Liability An...
Where does revenue received in advance go on a balance sheet? Definition of Revenue Received in Advance Under the accrual basis of accounting, revenues received in advance of being earned are reported as a liability. If...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
What is a checking account? Definition of Checking Account A checking account is a bank account in which a company deposits money and can subsequently withdraw the money by writing a check, using a debit card, arranging...
What is the net book value of a noncurrent asset? The net book value of a noncurrent asset is the net amount reported on the balance sheet for a long-term asset. To illustrate net book value, let’s assume that several...
What is depreciation? Definition of Depreciation In accounting, depreciation is the assigning or allocating of the cost of a plant asset (other than land) to expense in the accounting periods that are within the...
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