The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
The result of subtracting operating expenses from gross profit. Income from operations is the amount before non-operating items (such as gains and losses on the sale of assets, interest revenue, and interest expense).
Using debt in order to control more assets. Also known as financial leverage.
This term is usually associated with assets that are depreciated. In the month that an asset is acquired or disposed, it is assumed to have occurred in the middle of the month.
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.
An amount remaining after another amount is subtracted. In the accounting equation, owner’s equity is the residual of assets minus liabilities.
A dividend paid in assets other than cash.
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 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.
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
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...
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...
The inability to pay liabilities as they become due. Some consider a company to be insolvent when its current liabilities exceed its current assets.
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
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...
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...
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.
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...
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
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 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 report prepared by a professional appraiser with detailed information on the calculation of an asset’s current market value.
A balance sheet heading or grouping that includes both cash and those marketable assets that are very close to their maturity dates.
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...
. 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...
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...
to be renewed. Long-term (or noncurrent) liabilities are the obligations that are not due within one year of the balance sheet date and will not require a cash payment. Typically, companies issue classified balance...
will normally have debit balances. ASSETS TSSEAS Unscramble ASSETS AESSTS Unscramble 5. The accounting or bookkeeping ___________ is Assets = Liabilities + Stockholders' Equity. EQUATION AENTOQUI Unscramble...
Accounting Equation (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (20) Marked Wrong (0) Marked Right (0) accounting equation (or) basic accounting equation This algebraic expression is Assets...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
How can a company with a net loss show a positive cash flow? Definition of Net Loss A net loss occurs when a company’s revenues and gains are less than its operating expenses, other expenses and losses. The net loss or...
Does paying an account payable affect net income? Definition of Paying Accounts Payable Under the accrual basis of accounting, expenses are recorded when they have occurred, not when they are paid. Therefore, if an...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
What is the transaction approach and balance sheet approach to measuring net income? The transaction approach to measuring net income is the traditional bookkeeping and accounting method. That is, individual transactions...
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
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 Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The financial statement that reports the amount of a company’s assets is the __________....
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
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