Taking out a loan or issuing bonds in order to acquire an asset or another business.
Taking out a loan or issuing bonds in order to acquire an asset or another business.
Using capital stock (common stock or preferred stock) instead of debt in order to finance an investment such as a plant asset.
An asset account which reports the carrying amount of a company’s investment in another enterprise.
A current asset account that represents an amount of cash for making small disbursements for postage due, supplies, etc.
An asset account in a bank’s general ledger that indicates the amounts owed by borrowers to the bank as of a given date.
The amount received from the sale of an asset, from the issuance of bonds or stock, or from a bank loan.
A loss from holding an asset and the loss has not yet been reported in the financial statements.
A non-operating item that results from the sale of a long-term asset at an amount greater than the carrying amount (book value) of the truck at the time it is sold.
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
Usually a change in the estimated useful life of an asset or a change in the estimated salvage value. The change usually causes a change in the depreciation expense for the current year and subsequent years. The...
A current asset account which contains the amount of investments that can and will be sold in the near future.
Investments in common stock, preferred stock, corporate bonds, or government bonds that can be readily sold on a stock or bond exchange. These investments are reported as a current asset if the investor’s intention...
A long-term asset account that reports a company’s cost of automobiles, trucks, etc. The account is reported under the balance sheet classification property, plant, and equipment. Vehicles are depreciated over...
An income statement account used to record the amount that the asset Inventory is reduced during the accounting period because the net realizable value of the inventory is less than its cost.
Amount of depletion charged to expense on the income statement for the period indicated in its heading. The amount is also credited to the contra asset account Accumulated Depletion.
The borrower who provides to a lender an asset as collateral for a loan.
A cost that has been recorded in the accounting records and reported on the balance sheet as an asset until matched with revenues on the income statement in a later accounting period.
The reduction or removal of an asset amount. For example, an account receivable will be removed or written off if the customer is not able to pay the amount owed to the company.
Also referred to as the useful life. This differs from the physical life of an asset. For example, a computer may have a physical life of 50 years, but its economic or useful life might be five years.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
An intangible asset that is reported at cost (or lower) on the balance sheet. It might consist of a name or a logo. Trademarks should be registered with the U.S. Patent and Trademark Office. Also see trade names.
The current asset that represents the amount of interest revenue that was reported as earned, but has not yet been received.
A non-operating item resulting from the sale of this long-term asset for less than its carrying amount (or book value).
A contra asset account arising when the present value of a note receivable is less than the face amount of the note. The credit balance in this account will be amortized to interest revenue over the life of the note.
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
Additions or changes to a rented building that are made by the tenant rather than by the landlord. The tenant will record the cost of these changes in the long term asset account Leasehold Improvements. The cost of these...
An asset account in a bank’s general ledger that indicates the amount at which the bank is reporting or carrying its investments.
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
A loan from a bank or other lender in which the borrower has pledged an asset as collateral in case the loan cannot be repaid in full.
A type of financial analysis involving income statements and balance sheets. All income statement amounts are divided by the amount of net sales so that the income statement figures will become percentages of net sales....
Where is a manufacturer's inventory reported in the balance sheet? A manufacturer’s inventory will be reported in the current assets section of the balance sheet and in the notes to the financial statements. In the...
What is the difference between reserve and allowance? More than 60 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable....
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
What is illusory profit? Illusory profit, also called phantom profit, is the difference between 1) the profit reported using historical costs required by US GAAP, and 2) the profit computed using replacement costs....
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
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