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 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...
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...
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...
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...
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...
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...
... 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...
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...
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...
. Current assets are reported on a company’s balance sheet in their order of liquidity. Since cash is the most liquid asset, it will appear first followed by the current assets that can be quickly turned into cash:...
What is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
will normally have debit balances. ASSETS TSSEAS Unscramble ASSETS AESSTS Unscramble 5. The accounting or bookkeeping ___________ is Assets = Liabilities + Stockholders' Equity. EQUATION AENTOQUI Unscramble...
depreciation expense is recorded. When an asset is disposed of (sold, retired, scrapped) the credit balance in Accumulated Depreciation is reduced when the asset’s credit balance is removed by debiting Accumulated...
an accrual adjusting entry that increases a company’s expenses and increases its current liabilities. The accrual of revenues and assets refers to revenues and/or assets that a company has earned, but the company...
. The bookkeeping or accounting equation is Assets = Liabilities + Owner's __________ Equity. 10. The book of original entry is the definition of a __________. Journal Right! Ledger Wrong. 11. When a sale is made on...
as the__________ price. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets. 8. Goal __________ refers to a decentralized division taking an action that is best for...
The withdrawal of business cash or other assets by the owner for the personal use of the owner. Withdrawals of cash by the owner are recorded with a debit to the owner’s drawing account and a credit to the cash...
What is a debenture? A debenture is an unsecured bond. In other words, a debenture is a bond without a lien on specific assets owned by the issuing corporation. Join PRO to Track Progress Mark the Question as Read...
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.
The contra owner’s equity account used to record the current year’s withdrawals of business assets by the sole proprietor for personal use. This is a temporary account with a debit balance. It will be closed...
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
An action by a nonprofit organization’s board of directors to earmark an asset for a specified purpose. Since this is not a donor-imposed restriction, the designated asset is classified and reported as part of...
Also known as a permanent account. Includes the balance sheet accounts (assets, liabilities, and owner’s or stockholders’ equity accounts) but excludes the owner’s drawing account, which is a temporary...
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
The balance sheet classification that is reported immediately after current assets and before property, plant, and equipment.
A report prepared by a professional appraiser with detailed information on the calculation of an asset’s current market value.
Repairs that do not improve an asset or extend the asset’s life. These repairs are charged to Repairs Expense or Maintenance Expense when incurred. Major repairs such as a complete engine overhaul that extends the...
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
The ratio of current assets to current liabilities. This ratio is an indicator of a company’s ability to meet its current obligations. To learn more, see Explanation of Financial Ratios.
The part of a balance sheet with the heading stockholders’ equity or owner’s equity. The total amount of this section is the amount of reported assets minus the amount of reported liabilities.
A company’s loss before nonoperating or other items. Other or nonoperating items include interest income, interest expense, and gains and losses on sale of assets used in the business, loss on lawsuit, etc.
A balance sheet with classifications (groupings or categories) such as current assets, property plant and equipment, current liabilities, long term liabilities, etc. To learn more, see Explanation of Balance Sheet.
Using debt in order to control more assets. Also known as financial leverage.
Also referred to as shareholders’ equity. At a corporation it is the residual or difference of assets minus liabilities. To learn more about stockholders’ equity, see our Stockholders’ Equity Outline.
A balance sheet heading or grouping that includes both cash and those marketable assets that are very close to their maturity dates.
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
A long-term asset account that reports the cost of real property exclusive of the cost of any constructed assets on the property. Land usually appears as the first item under the balance sheet heading of Property, Plant...
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
A loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
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