estate are known as __________ bonds. 15. Bonds that are not secured by specific assets are known as __________. 16. The document that specifies the terms of a bond is the bond __________. 17. A fund that contains cash...
estate are known as __________ bonds. 15. Bonds that are not secured by specific assets are known as __________. 16. The document that specifies the terms of a bond is the bond __________. 17. A fund that contains cash...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that a sale was made on account and was not a cash sale. To learn more...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
will report each asset, liability, and owner equity amount as a percentage of total assets. Common-size financial statements allow you to compare the financial statements of large companies with the financial statements...
on equity, let’s assume that a corporation uses long term debt to purchase assets that are expected to earn more than the interest on the debt. The earnings in excess of the interest expense on the new debt will...
amount of working capital is solvent. This is a short run view since the focus is on the company’s current assets and its current liabilities. Others look at a company’s total assets and total liabilities or the...
What are the stockholders' equity accounts? The stockholders’ equity accounts are balance sheet accounts and a part of the accounting equation Assets = Liabilities + Stockholders’ Equity. In this light you can...
, fundraising, and management and general The change in net assets resulting from the previous two bullet points The statement of activities will have multiple columns in order to report the amounts for each of the...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
What is the difference between a debit and a debit balance? Definition of Debit A debit is an entry on the left side of a T-account. A debit entry is used to record assets, expenses, losses, and owner’s draws in their...
What is the difference between liquidity and liquidation? Definition of Liquidity Liquidity usually refers to a company’s ability to pay its bills when they become due. Liquidity is often evaluated by comparing a...
How does the accounting equation stay in balance when the monthly rent is paid? How a Rent Payment Affects the Accounting Equation A company’s payment of each month’s rent reduces the company’s asset Cash. This is...
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
What are turnover ratios? Definition of Turnover Ratios In accounting, turnover ratios are the financial ratios in which an annual income statement amount is divided by an average asset amount for the same year....
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
What is the significance of FOB Shipping Point and FOB Destination? Significance of FOB Shipping Point and FOB Destination The terms FOB shipping point and FOB destination have significance in accounting because they...
of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
). At the time of the sale: Company A reported a sale and a current asset, and Company B reported a purchase and a current liability At the time of payment: Company A’s Cash increased and its Accounts Receivable...
What does 2/10 mean in accounting? Definition of 2/10 2/10 is part of an early payment discount that allows a customer or client to pay after the sale or service has been provided. This sales discount...
What is net income? Definition of Net Income Net income is the positive result of a company’s revenues and gains minus its expenses and losses. A negative result is referred to as net loss. (There are a few gains and...
: Asset accounts such as Cash, Accounts Receivable, Inventory, Prepaid Expenses, Buildings, Equipment, etc. For example, a debit balance in the Cash account indicates a positive amount of cash. (Therefore, a credit...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
What is the accounting entry when an order is received? There is no accounting entry recorded in a company’s general ledger accounts when an order is received. The reason is that a sale or sales revenues has not yet...
and can be estimated, they are recorded at the time of the sale. The accounting entry will debit Warranty Expense and will credit Warranty Liability. If the estimated warranty costs are recorded at the time of the...
as a percent of total assets. The vertical analysis of an income statement results in every income statement amount being restated as a percent of net sales. Example of Vertical Analysis of a Balance Sheet If a...
... authorized issued outstanding 11. Which of the following current assets is also a quick asset? Select... Accounts receivable Inventory Supplies 12. The logical denominator in the turnover ratios should be the...
of a new warehouse should be depreciated. Select... True False 3. The entry to record depreciation includes a credit to the account __________ Depreciation. 4. The depreciation method likely to be used on a company’s...
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...
What is inventory shrinkage? Definition of Inventory Shrinkage Inventory shrinkage is a term to describe the loss of inventory. The shrinkage could be the result of theft, breakage, poor recordkeeping, etc. The term...
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...
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
A lender or supplier who is owed money but does not have a lien on any of the assets of the company that owes the money. If the company that owes the money is liquidated, the unsecured lender receives money only after...
The book value of a company equal to the recorded amounts of assets minus the recorded amounts of liabilities. To learn more, see Explanation of Balance Sheet.
Using debt (such as loans and bonds) to acquire more assets than would be possible by using only owners’ funds. Also referred to as trading on equity.
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
The balance sheet classification that is reported immediately after current assets and before property, plant, and equipment.
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