What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
What are some examples of financing activities on the cash flow statement? Definition of Financing Activities Financing activities reported on the statement of cash flows (SCF) involve changes to the long-term...
Is the reversal of a previous year's accrued expense permanent? Definition of Reversal of Accrued Expense An accrued expense typically requires an accrual adjusting entry recorded at the end of an accounting year (or any...
What is the difference between bad debt and doubtful debt? Definition of Bad Debt and Doubtful Debt In accounting, the terms bad debt and doubtful debt usually refer to the amounts owed by a company’s customers who...
Can I capitalize this year's R&D? Generally, R&D costs cannot be capitalized for U.S. financial statements according to the Statement of Financial Accounting Standards No. 2, Accounting for Research and Development...
Where can I find an illustration of a common size balance sheet? You will find an illustration of a common size balance sheet under AccountingCoach.com’s Explanation of Financial Ratios. The common size balance sheet...
What is the accounts receivable turnover ratio? Definition of Accounts Receivable Turnover Ratio The accounts receivable turnover ratio (or receivables turnover ratio) is an important financial ratio that indicates a...
How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
What is the full disclosure principle? Definition of Full Disclosure Principle The full disclosure principle requires a company to provide the necessary information so that people who are accustomed to reading financial...
What is periodicity in accounting? Definition of Periodicity Periodicity is an accounting assumption made by accountants so that a company’s complex and ongoing activities can be divided up into annual, quarterly, and...
How do I start a petty cash fund? Definition of Petty Cash Fund A petty cash fund is a small amount of money available to pay small amounts without requiring the processing of a business check. Example of Starting a...
What is the debt ratio? Definition of Debt Ratio The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio. Hence, the formula for the debt ratio is: total liabilities divided by...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
Is a money market account a current asset or a fixed asset? A money market account is a current asset unless it is restricted for a long-term purpose. The amount of an unrestricted money market account will likely be...
What is the difference between a debit and a debit balance? Definition of Debit A debit is an entry on the left side of a T-account. A debit entry is used to record assets, expenses, losses, and owner’s draws in their...
How do you calculate accrued vacation pay? Definition of Accrued Vacation Pay Accrued vacation pay is the amount of vacation pay that a company’s employees have earned, but the company has not yet paid. Example of...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
How do you write off a bad account? Definition of the Write-off of a Bad Account The write-off of a bad account usually refers to eliminating an account receivable due to the customer’s inability to pay the amount...
How does the aging of accounts receivable determine bad debts expense? Definition of Aging of Accounts Receivable The aging of accounts receivable sorts the amounts that a company is owed (from customers who had...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
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 meaning of debit? Definition of Debit The term debit is similar to the term used in Italy more than 500 years ago when the double entry accounting system was documented. What you need to know today is that...
What is an account payable? Definition of an Account Payable An account payable is an amount owed to a supplier or vendor for goods or services that were provided in advance of payment. However, some people use the term...
What is the earnings per share (EPS) ratio? Definition of Earnings per Share The earnings per share ratio, or simply earnings per share, or EPS, is a corporation’s 1) net income (or earnings) after tax that is...
How do I determine my payroll tax liabilities? Your payroll tax liabilities will include the following: Federal, state, and local income taxes withheld from employees’ wages, salaries, bonuses, etc. but not yet...
Why is prepaid insurance a short term asset? Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums are rarely billed for periods...
What is the difference between stock dividend and cash dividend? Definition of a Stock Dividend A stock dividend is a dividend consisting of additional shares of stock. Assume that before a corporation declares a stock...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
What are adjusting entries? Definition of Adjusting Entries Adjusting entries are usually made on the last day of an accounting period (year, quarter, month) so that a company’s financial statements comply with the...
Where can I find the amount of income taxes paid by a corporation? Definition of Income Taxes Paid by a Corporation The amount of income tax paid by a corporation is different from the amount of income tax (income tax...
What is stockholders' equity? Definition of Stockholders’ Equity Stockholders’ equity (also known as shareholders’ equity) is reported on a corporation’s balance sheet and its amount is the difference between the...
What is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
Should an owner's compensation be recorded as an expense or in the Drawing account? If the enterprise is a sole proprietorship, the owner’s compensation should be debited to the Drawing account. If the enterprise is a...
If a customer pays for the same invoice twice, should the customer be informed? I say yes. If you become aware of the double payment when posting the customer’s second remittance, I would double check your records...
What is OEM and EOM? OEM is the acronym for original equipment manufacturer. EOM is the acronym for end of month. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting...
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