What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
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...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
An asset which serves as collateral for a loan.
The lender (bank) that receives an asset as collateral for a loan.
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...
. Examples of Current Liabilities and Long-term Liabilities Often a company’s current assets include cash, accounts receivable, and inventories. It’s current liabilities typically include accounts payable, loan...
A series of equal amounts occurring at the end of each equal time interval. Also known as an annuity in arrears. An example is the monthly payments on a loan. Another example is the semiannual interest on a bond.
To loan money for a limited time in exchange for the borrower’s promise of repayment and interest compensation.
Taking out a loan or issuing bonds in order to acquire an asset or another business.
The person or business that receives a loan from a bank or other lender.
Accounts receivable that serve as the collateral for a loan.
In cost accounting this term means to allocate, apply, apportion, or spread manufacturing overhead costs to the production output. In terms of accounts receivable, assign means to pledge accounts receivable to a lender...
A series of equal amounts occurring at the end of each equal time interval. Also known as an ordinary annuity. An example would be the monthly payments on a loan. Another example is the semiannual interest on a bond.
A lender such as a bank who has placed a lien on a borrower’s assets. As a result, the lender has collateral until the loan amount is repaid.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
Usually a bank, finance company, or person that makes a loan to another party, who is referred to as the borrower.
The borrower who provides to a lender an asset as collateral for a loan.
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...
to be “condensed” into a single amount. The financial statement would then display only the condensed total amount. It also prepared a separate page or schedule to show the detailed amounts. Mark the Cheat Sheet as...
Obligations that a company has incurred, but have not yet been routinely recorded in Accounts Payable. For example, if the interest on a bank loan is paid on the 10th of each month, then on the last day of each month...
The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...
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...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Where are short-term bank loans reported on the statement of cash flows? Definition of Short-Term Bank Loans Short-term bank loans are generally loans that must be repaid within one year of the date of the balance sheet....
with the county government to make known the bank’s claim and to protect the bank’s position regarding the inventory. A bank lends a company $500,000 in the form of a real estate mortgage loan to purchase a...
in the company, the cash will increase the company’s current assets with no increase in current liabilities. Therefore working capital will increase. If a company obtains a long-term loan to replace a current...
of the balance sheet date. Current portion of long-term debt which includes the principal payments of a mortgage loan or other long-term loans that must be paid within one year of the date of the balance sheet. There is...
-term or noncurrent liability. Example of a Note Payable If a company borrows money from its bank, the bank will require the company’s officers to sign a formal loan agreement before the bank provides the money. The...
, the basic accounting equation Assets = Liabilities + Owner’s Equity can be restated to be Assets = Equities. Equity can mean an owner’s interest in a personal asset. For example, the owner of a $200,000 house that...
. For example, a company may arrange with its bank to borrow money as needed but never owe the bank in excess of $500,000. The agreement might specify that interest will be calculated by multiplying the prime rate times...
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
or may not become a liability. Unless the liability/loss is remote, if the item is signicant, it must be disclosed. An example of a contingent liability is a company’s guarantee of its key supplier’s bank loan....
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Is it a requirement for a small business to have a CPA? Generally, a small business is not required to have a CPA or certified public accountant. A CPA would be needed if the small business must have its financial...
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