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 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...
See post balance sheet event.
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
When calculating inventory turnover, do you use sales or the cost of goods sold? I calculate the inventory turnover by using the cost of goods sold. I use the cost of goods sold because inventory is in the general ledger...
What is the difference between the Cash Flow and Funds Flow statements? Definition of Cash Flow and Funds Flow Statements The cash flow statement, known formally as the Statement of Cash Flows, reports a company’s...
will reduce the corporation’s retained earnings which is reported in the stockholders’ equity section of the balance sheet. (A cash dividend also reduces the corporation’s current asset Cash.) Example of a...
What is a long-term liability? Definition of Long-term Liability A long-term liability is an obligation resulting from a previous event that is not due within one year of the date of the balance sheet (or not due within...
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...
What is reported as property, plant and equipment? Definition of Property, Plant and Equipment Property, plant and equipment is the long-term asset or noncurrent asset section of the balance sheet that reports the...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
What is the difference between the terms capitalize and depreciate? Definition of Capitalize In accounting, the term capitalize refers to adding an amount to the balance sheet as an asset (as opposed to immediately...
(as reported on the balance sheet) that is owed to creditors. The larger the debt ratio the greater is the company’s financial leverage. The appropriate debt ratio depends on the industry and factors that are unique...
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,...
30 for liability insurance for the six months that begins on January 1. For the next two days, none of the $600 will be reported as an expense. Instead, all $600 of cost is being deferred until the new year. Therefore,...
What is a noncurrent asset? Definition of Noncurrent Asset A noncurrent asset is an asset that is not expected to turn to cash within one year of date shown on a company’s balance sheet. (This assumes that the company...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
The accounting method under which revenues are recognized on the income statement when they are earned (rather than when the cash is received). The balance sheet is also affected at the time of the revenues by either an...
Why are some plastic cards called debit cards? I assume the name debit card relates to the reduction in the cardholder’s checking account balance at the time that the card is used. The checking account balances of a...
Where do dividends appear on the financial statements? Definition of Dividends Cash dividends are a distribution of a company’s profits. Financial Statements of a Corporation The main financial statements of a...
property, plant and equipment, it will be reported in the cash flows from investing activities as Capital expenditures….(350,000). The amounts appearing in parenthesis can be thought of as indicating the following:...
statement will report the commissions revenues and its balance sheet will report the commissions receivable. Accounting for Commissions Expense Under the accrual basis of accounting, the commissions do not have to be...
to as an outstanding check. In the bank reconciliation process an uncleared cheque (or outstanding check) is deducted from the balance shown on the bank statement to arrive at the correct or adjusted balance per bank....
with a debit entry, and Cash will be decreased with a credit entry. The credit balance in Accounts Payable is reported on the company’s balance sheet as a current liability. Join PRO to Track Progress Mark 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...
When are expenses credited? Definition of Expenses Credited Normally, the general ledger accounts for expenses are debited and are expected to have debit balances. The reason they are debited is they cause the normal...
Where is a contingent liability recorded? Recording a Contingent Liability A potential or contingent liability that is both probable and the amount can be estimated is recorded as 1) an expense or loss on the income...
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 a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
What journal entries are prepared in a bank reconciliation? Definition of Journal Entries in a Bank Reconciliation Journal entries are required in a bank reconciliation when there are adjustments to the balance per...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
? Balance Sheet Wrong. Income Statement Right! Statement Of Cash Flows Wrong. Statement Of Comprehensive Income Wrong. Statement Of Stockholders’ Equity Wrong. 5. Does the heading of a balance sheet indicate a period...
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 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...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
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...
a customer. A higher cash balance means more liquidity. However, working capital does not increase since both accounts receivable and cash are current assets. (Paying out cash to reduce accounts payable will reduce the...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
that are expected to be converted to cash within one year of the balance sheet’s date. (However, in industries having operating cycles that are longer than one year, the current assets are the resources that are...
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