Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
of a new warehouse should be depreciated. Select... True False 3. The entry to record depreciation includes a credit to the account __________ Depreciation. 4. The depreciation method likely to be used on a company’s...
as a percent of total assets. The vertical analysis of an income statement results in every income statement amount being restated as a percent of net sales. Example of Vertical Analysis of a Balance Sheet If a...
. Current assets are reported on a company’s balance sheet in their order of liquidity. Since cash is the most liquid asset, it will appear first followed by the current assets that can be quickly turned into cash:...
depreciation expense is recorded. When an asset is disposed of (sold, retired, scrapped) the credit balance in Accumulated Depreciation is reduced when the asset’s credit balance is removed by debiting Accumulated...
an accrual adjusting entry that increases a company’s expenses and increases its current liabilities. The accrual of revenues and assets refers to revenues and/or assets that a company has earned, but the company...
to be renewed. Long-term (or noncurrent) liabilities are the obligations that are not due within one year of the balance sheet date and will not require a cash payment. Typically, companies issue classified balance...
What is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
. The bookkeeping or accounting equation is Assets = Liabilities + Owner's __________ Equity. 10. The book of original entry is the definition of a __________. Journal Right! Ledger Wrong. 11. When a sale is made on...
as the__________ price. 7. Asset turnover is calculated by dividing a division’s net__________ by its average amount of assets. 8. Goal __________ refers to a decentralized division taking an action that is best for...
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 reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
The balance sheet classification that is reported immediately after current assets and before property, plant, and equipment.
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 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...
Using debt in order to control more assets. Also known as financial leverage.
An action by a nonprofit organization’s board of directors to earmark an asset for a specified purpose. Since this is not a donor-imposed restriction, the designated asset is classified and reported as part of...
Repairs that do not improve an asset or extend the asset’s life. These repairs are charged to Repairs Expense or Maintenance Expense when incurred. Major repairs such as a complete engine overhaul that extends the...
The amount of an asset’s cost that will be depreciated. It is the cost minus the expected salvage value. For example, if equipment has a cost of $30,000 but is expected to have a salvage value of $3,000 then the...
A long-term asset account that reports the cost of real property exclusive of the cost of any constructed assets on the property. Land usually appears as the first item under the balance sheet heading of Property, Plant...
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.
This term is usually associated with assets that are depreciated. In the month that an asset is acquired or disposed, it is assumed to have occurred in the middle of the month.
An asset’s cost that has been assigned to Depreciation Expense.
A balance on the left side of an account in the general ledger. Typically expenses, losses, and assets have debit balances.
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.
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.
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 general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
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 report prepared by a professional appraiser with detailed information on the calculation of an asset’s current market value.
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.
The result of the sale of an asset for less than its carrying amount; the write-down of assets; the net result of expenses exceeding revenues.
A financial ratio that expresses the income statement effect from employing an asset as a percentage of the asset’s cost on the balance sheet.
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
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.
An amount remaining after another amount is subtracted. In the accounting equation, owner’s equity is the residual of assets minus liabilities.
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 balance sheet heading or grouping that includes both cash and those marketable assets that are very close to their maturity dates.
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