by reading our Stockholders' Equity (Explanation). 1. To start a corporation in the U.S., it is necessary to file an application in one of the states. The legal document that the state approves is the __________...
by reading our Stockholders' Equity (Explanation). 1. To start a corporation in the U.S., it is necessary to file an application in one of the states. The legal document that the state approves is the __________...
What is capitalized interest? Definition of Capitalized Interest Capitalized interest is the interest on debt that was used to finance a self-constructed, long-term asset. The capitalized interest for the company’s...
What is the difference between paid-in capital and retained earnings? Definition of Paid-in Capital Paid-in capital is one of the major categories of stockholders’ equity. Generally, paid-in capital reports the amount...
is presented under the following headings: General information on the business, risk factors, and legal proceedings Management’s Discussion and Analysis of Results of Operations and Financial Condition Financial...
What is the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
. (Accountants refer to this as amortizing the costs.) Example of Bond Issue Costs Assume that a corporation incurs $24,000 of bond issue costs (legal and accounting fees) to register its recently issued bonds that will...
for each of their most recent three accounting years. The term consolidated is used in the heading of the financial statements when the corporation controls several separate legal entities but is reporting the results...
Is contributed capital a noncurrent asset or a current asset, and is it a debit or credit? Definition of Contributed Capital Contributed capital is one of the major components of a corporation’s stockholders’ equity....
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
The stockholders’ equity account that represents the amount paid to a corporation for its preferred stock that was in excess of the preferred stock’s par value. This account is sometimes referred to as the...
The stockholders’ equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock’s par value. This account is sometimes referred to as the premium...
The stockholders’ equity account that reports the amount paid to a corporation that is in excess of the common stock’s stated value. The stated value of each share issued is recorded in the Common Stock...
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
What is budgeting? Definition of Budgeting Budgeting is the process of preparing detailed projections of future amounts. Companies often engage in two types of budgeting: Operational budgeting, and Capital budgeting...
foregone by carrying out another alternative is the__________ cost. 5. A division’s profit minus a charge for its assets or capital employed is its __________ income. 6. The per unit selling price and purchase price...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Interest Expense. Mark as wrong Mark as right debenture In the U.S. this indicates a bond that is not secured with a lien. debenture In the U.S. this indicates a bond that is not secured with a lien. Mark as wrong Mark...
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
liability until it is moved from the balance sheet to the income statement as an expense. This is done to achieve the accountants’ matching principle. Examples of Deferred Expenses Let’s assume that a large...
What is the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
and receiving records, the company will record the amount owed in Accounts Payable. Other amounts recorded in Accounts Payable will include invoices/bills that a company owes for services it had received on credit....
at a premium. Any discount or premium on the bonds is recorded in a separate account. Another account is used to record the bond issue costs such as legal fees, auditing fees, registration fees, etc. These bond-related...
(or other legal claim) on the company’s assets is an unsecured creditor. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
What is the face value of a bond payable? Definition of Face Value of a Bond Payable The face value of a bond payable is the amount printed on the bond. The face value is also referred to as the following: Face amount...
Why are loan costs amortized? Definition of Loan Costs Loan costs may include legal and accounting fees, registration fees, appraisal fees, processing fees, etc. that were necessary costs in order to obtain a loan. If...
the salaries and other expenses for the following business activities: selling, distribution, marketing, finance, accounting, IT, human resources, legal, and so on. (We have additional examples within our...
The paid-in (or contributed) capital account that is credited $100 for each share of $100 par preferred stock that is issued. If the proceeds from the issuance or sale of one of the shares is greater than $100, the...
The owner’s equity accounts are the owner’s capital account and the owner’s drawing account. During the year the income statement accounts (revenues, expenses, gains, losses), the owner’s drawing...
on common stock may appear on the balance sheet as paid-in capital in excess of par value–common stock or additional paid-in capital. Example of Premium on Common Stock Assume that a corporation’s common stock has a...
What is hurdle rate? Definition of Hurdle Rate In capital budgeting, the term hurdle rate is the minimum rate that a company wants to earn when investing in a project. Therefore, the hurdle rate is also referred to as...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
These journal entries are made after the financial statements have been prepared at the end of the accounting year. Most of the closing entries involve the income statement accounts (revenues, expenses, gains, losses,...
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...
Featured Review
"My current position is as a CPA. I have utilized many tools from AccountingCoach PRO, both in assisting other professionals to learn and more importantly in my role as an adjunct professor. The materials provided by AccountingCoach are organized by topic and the modules are built on each other, making it a perfect learning—or in my case, teaching—tool. AccountingCoach has saved me hundreds of hours in developing teaching materials, as I use the materials provided to supplement the college textbooks. " - Robert C.
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: