Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
Why do you separate current liabilities from long-term liabilities? Definition of Current Liabilities and Long-term Liabilities Generally, current liabilities are a company’s obligations that are due within one year of...
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.
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...
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.
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.
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.
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 loan from a bank or other lender for which the borrower is not required to pledge assets as collateral for the loan.
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 net debit balance for the total amount of owner’s equity. It is the result of the reported amount of liabilities exceeding the reported amount of assets.
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...
Using debt in order to control more assets. Also known as financial leverage.
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.
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.
A balance sheet heading or grouping that includes both cash and those marketable assets that are very close to their maturity dates.
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.
Costs that have been used up or consumed. Expired costs are reported as expenses. (Costs that have not yet expired are reported as assets.)
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...
A dividend paid in assets other than cash.
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 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 book value of a company equal to the recorded amounts of assets minus the recorded amounts of liabilities. To learn more, see Explanation of Balance Sheet.
The balance sheet classification that is reported immediately after current assets and before property, plant, and equipment.
A company’s profit 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 on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
flows. Select... asset liability 11. Generally, a decrease in the balances of __________ accounts will result in an increase of cash on the statement of cash flows. Select... asset liability 12. Under the indirect...
such as gasoline. The delivery surcharges should not be reported as nonoperating revenues or other income. Nonoperating revenues or other income items would be outside the main activities of the retailer and...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
statements) at the time that an order is received: The company has not yet earned the revenue The company does not yet have a right to a receivable or other asset The revenues and a receivable will not be earned until...
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
Loan Repayment A bank loan repayment is likely referring to the loan principal balance (or part of the principal balance) that the borrower is paying the lender (bank). When the principal payment is made, the...
suppliers sell goods to customers and grant credit terms such as net 10 days. In those situations, a supplier is selling goods on account and the customer has purchased goods on account. The supplier has also increased...
What is petty cash? Definition of Petty Cash Petty cash or a petty cash fund is a small amount of money available for paying small expenses without writing a check. Petty Cash is also the title of the general ledger...
are sold, the costs of the products (raw materials, direct labor, and factory overhead) will be expensed as the cost of goods sold. Until the products are sold, the products’ costs will be reported as the current...
What is the entry when a company lends money to an employee? Definition of Employee Loan When a company lends money to one of its employees, the company is reducing its Cash and increasing another asset such as Other...
of the accounting department and are often distributed outside of the company. The balance sheet summarizes and reports the balances from the asset, liability, and stockholders’ equity accounts that are contained in...
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