What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
depreciation is the declining-balance method often used for U.S. income tax depreciation.) Compared to the straight-line depreciation method, the sum-of-the-years’-digits method results in greater depreciation in the...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The financial statement that is often referred to as the P&L is the __________...
The ratio of total liabilities to total assets. For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).
A donor-imposed restriction on net assets that requires using the assets within a specified passage of time.
Same as book value. For example, an asset’s net book value is equal to the asset’s cost minus its accumulated depreciation.
Long-term assets that are reported under the classification of property, plant, and equipment on a company’s balance sheet. These assets are depreciated over their useful life.
of depreciation over the asset’s useful life is the asset’s cost minus an estimated salvage value at the end of the useful life. The result of this calculation is sometimes referred to as the asset’s depreciable...
A structured market for trading stocks and bonds such as the New York Stock Exchange or NASDAQ. Capital market can also include less structured markets such as private placements.
This term is often associated with an investment in the bonds issued by another corporation if the bonds are traded on a bond exchange.
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
To receive money in exchange for a promise to repay the amount to the lender.
The amount paid or contributed by stockholders in exchange for shares of a corporation’s stock.
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
moment of the accounting period. Similar to the accounting equation, the balance sheet must always be in balance. For instance under the accrual method of accounting, when a corporation earns revenues and allows the...
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...
amount of assets during the same year. If net sales were $800,000 and the average amount of assets was $1,000,000 the asset turnover ratio was 0.8:1 [$800,000/$1,000,000]. Mark the Cheat Sheet as Complete...
asset (other than cash) has decreased it usually means that cash was provided. Therefore, the SCF will report the amount of the asset’s decrease as a positive amount. For instance, if the asset Accounts Receivable has...
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...
by reading our Accounting Basics (Explanation). 1. Which financial statement reports the revenues and expenses for a period of time such as a year or a month? Balance Sheet Wrong. The balance sheet reports assets,...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
The difference between assets and liabilities, such as stockholders’ equity, owner’s equity, or a nonprofit organization’s net assets. Also used to indicate an owner’s interest in a personal...
This amount is an asset’s cost minus its accumulated depreciation. It is also the face value of bonds minus its unamortized discount (or plus its unamortized premium). It is also the amount of a corporation’s...
What is the debt ratio? Definition of Debt Ratio The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio. Hence, the formula for the debt ratio is: total liabilities divided by...
and it is positioned immediately after current assets. The cash restricted for a long-term asset is not reported as part of the company’s current assets because the cash is not available to pay current liabilities....
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
for the cost principle. If a company is a going concern (and therefore liquidation is not relevant), reporting its long term assets at cost is sufficient and there is no need to report the long term assets at their...
Where is a manufacturer's inventory reported in the balance sheet? A manufacturer’s inventory will be reported in the current assets section of the balance sheet and in the notes to the financial statements. In...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
with significant amounts of inventory and plant assets. For example, when inventory is measured by using the first-in, first-out cost flow assumption under US GAAP, the actual historical cost of inventory that is...
associated with plant assets. The use of the word reserve led some readers of the financial statements to conclude that money was set aside for replacing plant assets or the uncollectible accounts or loans. To avoid...
.) 4. Which of the following is an asset account? Accounts Payable Wrong. Accounts Payable is a liability account. Prepaid Insurance Right! Prepaid Insurance is a current asset. Prepaid costs that have not yet expired...
expense over the life of the asset cannot exceed the asset’s cost regardless of the depreciation method. In other words, the difference between accelerated depreciation and straight-line depreciation is a “timing...
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