Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
using the asset. Since it is difficult to precisely match a productive asset’s cost to a company’s revenues, the asset’s cost is usually allocated to the years in which the asset is used. In other words,...
How is working capital defined and measured? Definition of Working Capital Working capital is defined as the amount of a company’s current assets minus the amount of its current liabilities usually as of the final...
How do you calculate an asset's salvage value? Definition of Asset Salvage Value In accounting, an asset’s salvage value is the estimated amount that a company will receive at the end of a plant asset’s useful...
, the net asset classifications temporarily restricted and permanently restricted have been combined into a single classification: net assets with donor __________ restrictions. 7. Classifying expenses into program...
A company’s balance sheet that shows each item’s amount after it has been divided by the amount of total assets. In other words, current assets will be shown as a percentage of total assets. This will allow...
that compared to the straight-line method, the depreciation expense will be faster in the early years of the asset’s life but slower in the later years. However, the total amount of depreciation expense during the...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
during the asset’s construction The interest on the debt related to the asset’s construction Adding the capitalized interest to the asset’s cost instead of reporting it as interest expense of the current...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
What does a balance sheet tell us? Definition of Balance Sheet A balance sheet reports the dollar amounts of a company’s assets, liabilities, and owner’s equity (or stockholders’ equity) as of midnight of the...
What is the current ratio? Definition of Current Ratio The current ratio is a financial ratio that shows the proportion of a company’s current assets to its current liabilities. The current ratio is often classified as...
What entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
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...
SONIPOIT Unscramble 3. Contributions received by a nonprofit are reported as part of the organization's ____________________. REVENUES EVNUERES Unscramble REVENUES UEEEVRNS Unscramble 4. When an asset is released...
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...
the classified balance sheet shows the total amount of the company’s current assets and the total amount of its current liabilities. A classified balance sheet is likely used by companies and is organized as follows:...
an accounting adjusting entry in which the account Depreciation Expense is debited and the contra asset account Accumulated Depreciation is credited. Effects of Depreciation The following are some of the effects for a...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
Is it acceptable for companies to use two methods of depreciation? Definition of Depreciation Methods There are various methods of depreciating assets that are used in a business. It is acceptable and common for...
What is accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation is the allocation of a plant asset‘s cost at a faster rate than straight-line depreciation. Compared to straight-line...
that the assets are presented on the left side or debit side. The liabilities and owner’s equity (or stockholders’ equity) are presented on the right side or credit side. Recall that the balance sheet reflects the...
What is owner's equity? Definition of Owner’s Equity Owner’s equity is one of the three main sections of a sole proprietorship’s balance sheet and one of the components of the accounting equation: Assets =...
What is the statement of financial position? Definition of Statement of Financial Position The statement of financial position is another name for the balance sheet. It is one of the main financial statements. The...
income This separate line within stockholders’ equity reports the corporation’s cumulative income that had been excluded from previous income statements. Examples include the results from currency translation,...
as right depreciation This is the systematic allocation of a plant asset’s cost to expense over the useful life of the asset in order to match an asset’s cost to the accounting periods in which the asset is used....
) effects on the accounting equation of the business or company. 2. The owner invests personal cash in the business. Assets Increase Right! The company's asset account Cash increases. Decrease Wrong. No Effect...
What is a liability? Definition of Liability A liability is an obligation arising from a past business event. It is reported on a company’s balance sheet. Liabilities are also part of the basic accounting equation:...
An account used in combination with another account. For example, the account Allowance for Doubtful Accounts is used with Accounts Receivable in order to present the net amount of the accounts receivable. The account...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
What is the bookkeeping equation? Definition of Bookkeeping Equation The bookkeeping equation (or accounting equation) is similar to the structure of the balance sheet: For a sole proprietorship: Assets = Liabilities +...
and intangible assets acquired, minus 2) the liabilities that were assumed. Goodwill is reported on the balance sheet as a long-term or noncurrent asset. Since 2001, U.S. companies are no longer required to amortize the...
is the difference between the total amount of assets and the total amount of liabilities as reported on the balance sheet, the corporation’s book value is not the market value of the corporation. Two reasons for the...
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
rate, the asset will also be recorded at $50,000. A long-term asset that will be used in a business (other than land) will be depreciated based on its cost. The cost will be reported on the balance sheet along with the...
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