, seasonal variations will be included. Using only the end of year point for two years is generally not indicative of the inventory levels in the months throughout the year. The 13-point average is also useful for...
, seasonal variations will be included. Using only the end of year point for two years is generally not indicative of the inventory levels in the months throughout the year. The 13-point average is also useful for...
). The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not be...
to be part of the cost of items purchased, since an asset’s cost is defined as all costs that are necessary to get the asset in place and ready for use. Join PRO to Track Progress Mark the Question as Read Must-Watch...
What is the difference between receivables and accounts receivable? Definition of Accounts Receivables Accounts receivable are usually current assets that result from selling goods or providing services to customers on...
Why is an amount in the cash flows from investing activities shown in parenthesis? An amount shown in parenthesis within the investing activities section of the cash flow statement indicates that cash was used to...
is paid, the following will occur: Current liabilities (Dividends Payable) will decrease Current assets (Cash) will decrease The income statement is not affected by the declaration and payment of cash dividends on...
with a reseller’s certificate, which allows the supplier to not charge the sales tax. If a sales tax is paid by the reseller and the sales tax could have been avoided, the sales tax would have to be expensed...
of a company’s financial position at the end of the accounting year. The reason is that all assets that were earned are reported and all liabilities that were incurred will be reported on the balance sheet. The...
In bookkeeping, why are revenues credits? In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting equation, Assets = Liabilities +...
What is disinvestment? In business, disinvestment means to sell off certain assets such as a manufacturing plant, a division or subsidiary, or product line. Disinvestment is sometimes described as the opposite of capital...
the reported amount of assets. Since the reported amounts reflect the cost principle and other accounting principles, the net result cannot be assumed to be the company’s worth. Join PRO to Track Progress Mark the...
in which the office furniture is recorded, such as Furniture and Fixtures or Office Furniture. In other words, the discount is a reduction of the asset’s cost. [If the discount is received by a retailer who is in the...
, their balances are on the right side of the accounts similar to their position in the accounting equation: assets = liabilities + owner’s equity. The revenue accounts (which are temporary accounts) also have credit...
current assets and the calculation of its cost of goods sold. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
to improve the internal control of its assets. Examples of Restrictive Endorsements The most common restrictive endorsement is the phrase For Deposit Only written along with the payee’s signature on the back of a...
What is separation of duties? What is Separation of Duties The separation of duties is one of various internal control techniques for safeguarding a company’s assets. By separating employee’s duties, the likelihood...
What is historical cost? Definition of Historical Cost Historical cost is a term used instead of the term cost. Cost and historical cost usually mean the original cost at the time of a transaction. The term historical...
asset turnover and fixed asset turnover are indicators of a company’s effectiveness in utilizing its assets. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
How do you amortize goodwill? Definition of Amortize Goodwill Prior to 2001, to amortize goodwill meant to consistently and in uniform increments move the reported amount of the intangible asset goodwill from the balance...
resources. The segregation of duties (or separation of duties) is part of a company’s internal controls for safeguarding its assets. Example of Segregation of Duties An example of the segregation of duties is a...
How do drawings affect the financial statements? Definition of Drawings Drawings are the withdrawals of a sole proprietorship’s business assets by the owner for the owner’s personal use. The drawings or draws by the...
marketable securities of $20,000 + accounts receivables of $93,000. This adds up to $120,000 of quick assets. If the company’s current liabilities amount to $100,000 the acid test ratio is 1.2:1. A large acid test...
of a company’s customers who were given 30 days in which to pay has filed for bankruptcy and the customer’s assets are close to $0. Therefore, there will be no amount left to pay any of the $4,000 it owes to the...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
: To have cash available for unforeseen events and for increases in its costs To reduce its long-term debt or repurchase shares of its common stock To increase inventory to expand, to purchase in larger quantities for...
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...
equation will remain in balance. (The accounting equation is: Assets = Liabilities + Stockholders’ Equity.) Types of General Ledger Accounts The accounts in the general ledger of a corporation consist of two major...
preferred stock with the __________ feature, it will have dividends in arrears. 15. If common stock is issued for assets other than cash, the transaction should be recorded at the fair __________ value of 1) the stock...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
name that is now considered to be its most valuable asset. On which financial statement and at what amount will you see the brand name reported? Balance Sheet At Its Present Value Wrong. Statement Of Comprehensive...
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...
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