How do I record a loan payment which includes paying both interest and principal? Definition of a Loan Payment A loan payment is likely to consist of three amounts: Total payment amount Interest payment Principal payment...
How do I record a loan payment which includes paying both interest and principal? Definition of a Loan Payment A loan payment is likely to consist of three amounts: Total payment amount Interest payment Principal payment...
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
, when the invoice is to be paid, a detailed listing of the goods and/or services, the amount owed for each item, and the total amount of the invoice. Some common invoice payment terms are: Due upon receipt Net 30...
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...
decreases. Examples of Variable Expenses Assume that a website business sells a product and requires the customer to pay with a credit card. The credit card processor charges the business a fee of 3% of each amount...
How do I calculate IRR and NPV? Definition of IRR The internal rate of return (IRR) method or model determines the interest rate that discounts all cash inflows and cash outflows to a net present value of $0. In other...
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...
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...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Accounts receivable result from __________ sales as opposed to cash...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
of presenting the statement of cash flows, the cash from operating activities begins with the company’s net income and is then adjusted for depreciation expense and the changes in the current assets and current...
The terms which indicate when payment is due for sales made on account (or credit). For example, the credit terms might be 2/10, net 30. This means the amount is due in 30 days; however, if the amount is paid in 10 days...
date. As a result, the increase in accounts receivable is reported as a negative amount on the SCF. The negative amount is shown as an adjustment to the amount of net income listed in the operating activities section of...
are referred to as __________ checks. 3. Checks received from customers on December 31, but not deposited until January 2 are referred to as deposits __________ __________. 4. Recording $980 as $890 is known as a...
ratio. days' sales in inventory This is the result of dividing 365 or 360 days by the inventory turnover ratio. Mark as wrong Mark as right working capital (or) net working capital This is calculated by subtracting...
items. The not-for-profit organization’s equity section has the heading Net Assets. The reason for the use of Net Assets is the NFP does not have owners. Within the net assets section are the amount of net assets...
, and depreciation expense of $8,000. Therefore, the net income reported on its income statement was $22,000. (The depreciation pertains to a truck purchased in an earlier year.) Depreciation and the Statement of Cash...
that the balance sheet reports the net amount that is expected to be collected. The credit balance in the Allowance account is associated with the income statement account Bad Debts Expense. In other words, when a...
An employee fringe benefit provided by an employer that allows employees to be absent from work with pay. Often the number of paid vacation days allowed is based on the number of years of employment.
An employee’s pretax compensation based on hours worked times an hourly rate of pay. Production workers and nonmanagement employees are usually paid wages. To learn more, see Explanation of Payroll Accounting.
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
A term often used when referring to production workers and other workers who are paid with an hourly pay rate. These workers’ compensation is referred to as “wages” (as opposed to salaries).
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
The amount before deductions. For example, gross pay is the amount before withholding deductions. Gross sales is the amount before sales returns and allowances and sales discounts.
A directive to a company’s bank to not honor (pay) a specific check that the company had written. The company making the request will be charged a fee by the bank for this service.
The general ledger account Cash that reports currency, coins, undeposited checks, and the checking accounts of a company. (Could also be a reference to a customer required to pay cash for purchases.)
This current liability account reports the amount a company owes the United Way organization as of the balance sheet date. The amount includes the withholdings from employees’ pay plus the amount owed by the...
A document that discloses important information on bonds or preferred stock. Included in the indenture would be the call price, the actions that can occur if the company fails to pay the interest or dividend, etc.
A formal, written promise to pay interest and to repay the principal amount.
An interest rate that is not explicitly stated. For example, instead of paying $100 cash a person is allowed to pay $9 per month for 12 months. The interest rate is not stated, but the implicit rate can be determined by...
A formal written promise to pay interest every six months and the principal amount at maturity.
Sales made on account. Sales where the customer is allowed to pay at a later date. Noncash sales.
The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
must match the amount withheld. (Self-employed individuals pay both the employee and the employer portions of the payroll tax.) Example of Annual Wage Limit Assume that an employee has gross wages of $170,000 during the...
Net income divided by net sales.
and will usually increase an asset when the revenues are earned (as opposed to waiting until the client’s cash is received). For example, if the company earns fees of $4,000 and allows the client to pay in 30 days,...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
accounts because the account balances are closed at the end of the accounting year. When the income statement accounts are closed, the net amount will be recorded in a stockholders’ (or owner’s) equity account. The...
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...
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