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...
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...
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....
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
How does inflation affect the cost of goods sold? Inflation and the Cost of Goods Sold Generally speaking, a company selling goods during periods of inflation will see an increase in its cost of goods sold. When and by...
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...
. The stockholders’ equity section of the balance sheet is divided into several parts: Paid-in (or contributed) capital Retained earnings Accumulated other comprehensive income Treasury stock Stockholders’ equity...
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...
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...
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...
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...
+ 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...
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...
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...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Current assets minus current liabilities is __________ capital. 2. The time it takes for a retailer’s...
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...
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...
of comprehensive income Statement of cash flows Statement of stockholders’ equity The balance sheet must present the amounts at the final moment of the most recent 2 years. 2. Which of the annual financial statements...
year. Examples of the Columns Often Appearing on the Statement The statement usually has the following columns into which the amounts will be sorted: Common stock issued – number of shares Common stock issued –...
will begin each accounting year with a zero balance and will have its balance at the end of the year closed to an equity account such as a corporation’s retained earnings or a proprietor’s capital account....
of a corporation, the equity account is Retained Earnings. In the case of a sole proprietorship, the equity account is the owner’s capital account. As a result, the income statement accounts will begin the next...
The net amount of revenues and gains minus expenses and losses for the sole proprietorship owned by Matt Jones. After the financial statements are prepared for the year, this amount will be transferred to Matt Jones,...
See paid-in capital in excess of par value – preferred stock.
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...
The cash flow from operating activities minus the amount of capital expenditures. Other variations are also used. To learn more, see Explanation of Cash Flow Statement.
A payment. The expenditure might be for a significant long term asset (capital expenditure), a short term asset (prepaid insurance), a reduction in a liability, or for an immediate expense such as rent.
The contra owner’s equity account used to record the current year’s withdrawals of business assets by the sole proprietor for personal use. This is a temporary account with a debit balance. It will be closed...
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...
The stockholders’ equity account which reports the par value of the preferred shares of stock that have been issued. Amounts received that are greater than the par value are recorded in Paid-in Capital in Excess of...
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.
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...
Current assets minus current liabilities. Also see working capital.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
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...
Would you please help me understand opportunity cost? You might think of opportunity cost as the profit you had to forego. Let’s illustrate this with a little story. Suppose that you are the sole owner of a company...
How do I compute the product cost per unit? Definition of Product Cost per Unit In accounting, a product’s cost is defined as the direct material, direct labor, and manufacturing overhead. Other costs such as...
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