will be a negative $8,000. The negative amount of owner’s equity is a problem that will be obvious to anyone reading the company’s balance sheet. However, the company may be able to operate if its cash inflows are...
will be a negative $8,000. The negative amount of owner’s equity is a problem that will be obvious to anyone reading the company’s balance sheet. However, the company may be able to operate if its cash inflows are...
. Depreciation, depletion and amortization are also described as noncash expenses, since there is no cash outlay in the years that the expense is reported on the income statement. As a result, these expenses are added...
noncurrent asset section of the corporation’s balance sheet. This section is likely to have the heading Investments. The bond sinking fund is a noncurrent (or long-term) asset even if the fund contains only cash. The...
Is a postdated check considered to be currency? A postdated check—a check with a date that is later than the current date—is not considered to be currency. Further, the postdated check should not be reported as part...
, the expense will be recorded as part of the entry. When the company pays the invoice, the balance in Accounts Payable is reduced and the balance in the company’s Cash account is reduced. The payment does not affect...
. The landlord requires a security deposit of $1,000. The company debits the long-term asset Security Deposit for $1,000 and credits Cash for $1,000. The landlord debits Cash for $1,000 and credits a liability account...
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
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 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...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Which financial statement is considered to be a “snapshot” of a company’s financial...
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...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Expense will be debited for $1,000 and the account Cash will be credited for $1,000. (When only one account is debited and one account is credited, the entry is referred to as a simple entry.) If the rent of $1,000...
or correct balance per books? Select... NSF checks from customers Outstanding checks 17. Checks received from customers on December 31 but not deposited until the next day should be reported as __________ as of December...
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...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
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...
One of the types of donor-imposed temporary restrictions. An example of a purpose restriction is a cash donation with a donor-imposed requirement that the money be used only to purchase a vehicle for one of its programs....
The rate that will discount all cash flows to a net present value of zero.
Checks received from customers and others that are not yet deposited into a bank account. Undeposited checks which are not postdated are reported as part of a company’s cash.
The financial statements of nonprofits include the statement of financial position, the statement of activities, the statement of cash flows, notes to the financial statements, and the statement of functional expenses....
A term used in evaluating business investments. It represents the targeted rate that a company needs to earn. It is also referred to as the discount rate, because this rate is used to discount the future cash flows to...
A term often used in present value calculations to distinguish a one-time cash amount from an annuity (or series of equal payments).
A temporary account that is debited when cash dividends have been declared (instead of debiting the Retained Earnings account. At the end of the accounting year, the balance in this account is transferred to the Retained...
A current liability account that reports the amounts of cash dividends that have been declared by the board of directors but not yet distributed to the stockholders.
An account in the general ledger, such as Cash, Accounts Payable, Sales, Advertising Expense, etc. To learn more, see Explanation of Chart of Accounts.
The journal entry recorded in the general journal (as opposed to the sales journal, cash journal, etc.).
The day after the record date for a cash dividend on shares of stock. Theoretically, the market price of the stock should drop on this day by the amount of the dividend.
Includes the main financial statements (income statement, balance sheet, statement of cash flows, statement of retained earnings, statement of stockholders’ equity) plus other financial information such as annual...
A dividend paid in assets other than cash.
A term used to describe the net present value method and the internal rate of return. The model discounts future cash flows back to the present time.
Noncurrent assets. Assets that are not intended to be turned into cash or be consumed within one year of the balance sheet date. Long-term assets include long-term investments, property, plant, equipment, intangible...
Factors that are used to convert future cash flows to their present value.
The amount appearing in the general ledger. When reconciling the bank statement, the balance per books is the balance of the Cash account in the general ledger that pertains to the bank account.
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
The direct method could refer to the method of preparing the statement of cash flows. The direct method could also refer to the method of allocating a manufacturing facility’s service departments to its production...
A journal entry with more than the minimum of one debit and one credit. Example: a debit to Cash of $500 and a credit to Sales of $475 and a credit to Sales Tax Payable of $25.
A check bearing a date in the future. The company receiving such a check should not report the check as cash until the date of the check.
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
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