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...
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...
payable will require the issuer/borrower to pay interest, the issuing company will have interest expense. Under the accrual method of accounting, the company will also have another liability account entitled...
Perhaps the most common example of the term amortization is the amortization schedule associated with a mortgage loan. For a 15-year mortgage loan with a fixed interest rate and monthly payments, the amortization...
What is premium on bonds payable? Definition of Premium on Bonds Payable Premium on bonds payable (or bond premium) occurs when bonds payable are issued for an amount greater than their face or maturity amount. This is...
to issuing the financial statements. Example of an Accrued Expense To illustrate an accrued expense, let’s assume that a company borrowed $200,000 on December 1. The agreement requires that the company repay the...
What is yield to maturity? Definition of Yield to Maturity Yield to maturity is the total return that will be earned by someone who purchases a bond and holds it until its maturity date. The yield to maturity might also...
this topic by reading our Present Value of a Single Amount (Explanation). 1. A future amount that has been discounted to time period 0 becomes a __________ present value. 2. Interest earned on interest is referred to as...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within the...
of semiannual interest payments that are part of a bond payable is an example of an ordinary annuity. A 10-year bond with a face value of $10 million and a stated interest rate of 6% will include an ordinary annuity...
Where is accrued income reported in the balance sheet? Definition of Accrued Income Accrued income refers to amounts that have been earned, but the amounts have not yet been received. For example, a corporation may have...
or $63,000, there will be a variance of $5,000 or $13,000 respectively. Similarly, if a company has budgeted its revenues to be $280,000 and the actual revenues end up being $271,000 or $291,000, there will be a...
but are not yet recorded in the accounts, and revenues and assets that have been earned but are not yet recorded in the accounts Example of an Accrual of an Expense One example of an accrual of an expense and liability...
reports a company’s revenues, expenses, and most of the gains and losses which occurred during the period of time shown in the statement’s heading. (A few gains and losses are not reported on the profit and loss...
, there will be a variance of $2,000 or $4,000 respectively. Similarly, if a company has budgeted its revenues to be $200,000 and its actual revenues end up being $193,000 or $208,000, there will be a variance of $7,000...
such as prepaid insurance, on its December 31 balance sheet. A deferral also occurs with revenues. The insurance company receiving the $12,000 for the six-month insurance premium beginning December 1 should report...
. The second subtotal is the amount of operating income. Example of a Multiple-Step Income Statement Here is an example of a condensed multiple-step income statement for a hypothetical sole proprietorship: Notice these...
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,...
deferred revenues (or) unearned revenues These amounts have been received from customers in advance of completing a sale or service. They are reported as a liability until they become earned. deferred revenues (or)...
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...
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...
The amount by which actual costs exceed the standard costs or budgeted costs. Also, the amount by which actual revenues are less than the budgeted revenues.
The income statement format where the operating and nonoperating revenues are grouped and totaled and the operating and nonoperating expenses are grouped and totaled. Then there is one subtraction of the combined...
A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from its maturity value. Rather than receiving interest, an investor’s compensation will be the difference...
Is an automobile loan payment an expense? Only the interest portion of an automobile loan payment is an expense. The principal portion of the loan payment is a reduction of the loan balance, which is reported as a Note...
, the cost is recorded as an expense in the year of the expenditure.) Examples of Capitalized Costs When a company constructs a new building, the interest incurred to finance its construction is capitalized. This means...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
The stated interest rate appearing on the face of the bond. Also referred to as the nominal rate or the stated interest rate.
A company’s loss before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
Market interest rate, current return, effective interest rate. Also see yield to maturity.
A payment toward the amount of principal owed. Generally when a loan payment consists of only a principal and interest payment, the amount owed for interest is processed first and the remaining amount of the payment is...
A company’s profit before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
In financial accounting this term refers to the amount of debt excluding interest. Payments on mortgage loans usually require monthly payments of principal and interest.
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
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...
What is the difference between the accounts rent receivable and rent revenue? Definition of Rent Receivable Rent Receivable is the title of the balance sheet asset account which indicates the amount of rent that has been...
Unscramble 4. The type of account involved with the deferral of revenues. LIABILITY IBLLIITAY Unscramble LIABILITY AIBTLIILY Unscramble 5. This type of account is part of the entry to accrue revenues. ASSET ETASS...
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...
owned by a company that have future value which can be measured. assets These are the resources owned by a company that have future value which can be measured. Mark as wrong Mark as right liabilities These are a...
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