What are pro forma financial statements? Definition of Pro Forma Financial Statement A pro forma financial statement is one based on certain assumptions and projections (as opposed to the typical financial statement...
What are pro forma financial statements? Definition of Pro Forma Financial Statement A pro forma financial statement is one based on certain assumptions and projections (as opposed to the typical financial statement...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
What is capital budgeting? Definition of Capital Budgeting Capital budgeting is a process used by companies for evaluating and ranking potential capital expenditures or investments that are significant in amount. A few...
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...
the standard quantity of materials. The materials usage variance is favorable when the actual quantity of materials used was less than the standard quantity. In the U.S. the materials usage cost variance is expressed in...
What is the discounted value of expected net receipts? Let’s first define expected net receipts. These are future receipts after deducting any related payments. For example, if you are likely to receive $1,200 one year...
What is the interest coverage ratio? Definition of Interest Coverage Ratio The interest coverage ratio is a financial ratio used as an indicator of a company’s ability to pay the interest on its debt. (The required...
Is a favorable variance always an indicator of efficiency in operation? In a standard costing system, some favorable variances are not indicators of efficiency in operations. For example, the materials price variance,...
What is the payback reciprocal? The payback reciprocal is a crude estimate of the rate of return for a project or investment. The payback reciprocal is computed by dividing the digit “1” by a project’s payback...
What are the limitations of the payback period? Definition of Payback Period The payback period is a common (but not the best) tool for screening a company’s potential investments. It uses the potential investment’s...
liability accounts normally have credit balances, a contra liability account is expected to have a debit balance. Discount on Bonds Payable and Bond Issue Costs are contra accounts to the liability account Bonds...
Featured Review
"I have a BS in accounting, and was previously working as an accountant/cash manager. Then, I took 15 years off to raise my kids. Once I decided to go back to work, I felt very out of the loop, so to speak, when it came to accounting. My education and work experience had been such a long time ago. I found AccountingCoach quite by accident, but once I looked it over, I became a PRO user so that I could track my progress and have lifetime access to many of the other advantages PRO provides, like the videos and quick tests. I really liked that everything was organized into subjects and that I could either go in order, or click into different areas and read or work on a specific accounting subject. Working through various parts of your program really helped me remember different things that I had previously learned, and also helped give me the confidence to get back on track with my career. I am currently working as an assistant controller. I still go back in now and then to reinforce some of my previous education, as well as to go over things I don't have as much experience in, like non-profit accounting. This really is a great site, whether you're new to accounting, or you already have an accounting background and just need to use it to reinforce your knowledge or improve your skills. I have never regretted spending the money to become a PRO user." - Danna E.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: