What are the elements of financial statements? Definition of Elements of Financial Statements The elements of financial statements are the classes of items contained in the financial statements. Examples of Elements of...
What are the elements of financial statements? Definition of Elements of Financial Statements The elements of financial statements are the classes of items contained in the financial statements. Examples of Elements of...
. This estimated amount is used to calculate the asset’s depreciation expense and it is often assumed to be zero. The term residual value may have other uses as well. For example, it is used when discussing leased...
, 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...
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
cycle, if the operating cycle is longer than one year). Fixtures Right! Fixtures is NOT a current asset account. Fixtures is reported under property, plant and equipment (which is part of a company's long-term...
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...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
since it has a credit balance. Whenever depreciation expense is recorded (with a debit entry), Accumulated Depreciation is credited. The combination (or net) of the asset’s debit balance and the asset’s accumulated...
financial statements is computed by using the estimated years of an asset’s __________. Select... physical life useful life 7. Several years ago, a company purchased land at a cost of $100,000. Today the land has a...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
! The amounts needed (total current assets and total current liabilities) are reported on the balance sheet. Cash Flow Statement Wrong. Income Statement Wrong. More Than One Will Be Needed Wrong. 3. The operating cycle...
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...
, the difference between the amounts of assets and liabilities is reported as net assets (instead of owner’s or stockholders’ equity). The net assets are presented as: without donor restrictions or with donor...
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...
What is an unsecured creditor? Definition of Unsecured Creditor An unsecured creditor is often a vendor or supplier that: Shipped goods to a customer as part of a sale on credit Has not been paid Does not have a lien on...
of the year. Accumulated Depreciation is a matching principle. In each accounting period, part of the cost of certain assets (equipment, building, vehicle, etc.) will be moved from the balance sheet to depreciation...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
What is stockholders' equity? Definition of Stockholders’ Equity Stockholders’ equity (also known as shareholders’ equity) is reported on a corporation’s balance sheet and its amount is the difference...
What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
The balance sheet and income statement are connected. Definition of Balance Sheet and Income Statement The balance sheet reflects the accounting equation: Assets = Liabilities + Owner’s (Stockholders’) Equity When a...
What is the difference between depreciation expense and accumulated depreciation? Definition of Depreciation Expense Depreciation expense is the amount of depreciation that is reported on the income statement. In other...
(such as years). Instead, the depreciation is expressed and calculated based on the asset’s usage. Under the units-of-activity method of depreciation, the asset’s cost (less any salvage value) is allocated to the...
Are liabilities always a bad thing? Definition of Liabilities Liabilities are a company’s obligations and are usually defined as a claim on the company’s assets. However, liabilities (and stockholders’ equity) can...
If cash and a note are exchanged for a plant asset, is the amount of the note used in the depreciation calculation? A plant asset’s cost is depreciated, unless the asset is land. Cost is defined as the cash or cash...
How do I compute the units of production method of depreciation? Definition of Units of Production Depreciation The units of production method of depreciation (which is also referred to as the units of activity method)...
Current assets minus current liabilities.
An estimate of an asset’s market value
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....
of a peripheral activity, such as a retailer selling one of its old delivery trucks. A gain occurs when the cash amount (or its equivalent) received is greater than the asset’s carrying amount, which is also referred...
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 expanded accounting equation? Definition of Expanded Accounting Equation The expanded accounting equation provides more details for the owner’s equity amount shown in the basic accounting equation. 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...
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 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 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...
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...
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...
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