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...
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...
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...
inventory is not a quick asset (and the quick ratio uses only the quick assets), the quick ratio is still accurate. On the other hand, the total amount of current assets is overstated (the reported amount is larger than...
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...
asset (other than cash) has decreased it usually means that cash was provided. Therefore, the SCF will report the amount of the asset’s decrease as a positive amount. For instance, if the asset Accounts Receivable has...
! 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...
(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...
, 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,...
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)...
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...
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 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...
, 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...
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...
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...
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...
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...
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 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...
Current assets minus current liabilities.
An estimate of an asset’s market value
Financial Statements Video Training Part 4 Balance sheet: property, plant and equipment (accumulated depreciation, book value) Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
No. 33 required large companies to report supplementary information on the effects of changing prices on its inventory and its property, plant and equipment. (In the late 1970’s the U.S. was experiencing double-digit...
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 the difference between liquidity and liquidation? Definition of Liquidity Liquidity usually refers to a company’s ability to pay its bills when they become due. Liquidity is often evaluated by comparing a...
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...
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 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...
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...
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...
, fundraising, and management and general The change in net assets resulting from the previous two bullet points The statement of activities will have multiple columns in order to report the amounts for each of the...
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...
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 is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
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 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 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...
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...
Featured Review
"I am a 24 year Army Reserve Veteran who decided to make a career change by pursuing a MBA with a specialization in Accounting and Finance a few years ago. I had zero accounting knowledge and my curriculum was extremely tough so I really needed to grasp basic concepts fast. When I stumbled upon AccountingCoach online I quickly discovered a treasure chest of information that helped build my accounting foundation. This past August I graduated with a 3.83 gpa and will pursue my CPA within the next four years and I owe a great deal of credit to AccountingCoach." - Datron P.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: