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Questions & Answers (Q&A)

Q&A Archive (1,090)

What is a post-dated cheque?

A post-dated cheque (or postdated check) is a check written with a future date. To illustrate, let's assume that on May 22 Jim owes a supplier $2,000 for purchases made 40 days ago. Since Jim does not have the money to pay… Read More.

What is operating income?

Operating income is also described as income from operations, operating earnings, or operating profit. Operating income will be shown as a subtotal on many corporations' income statements. The operating income will appear after the corporation's operating expenses are subtracted from the operating… Read More.

What is the cost of goods available?

For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods available for sale) for a year is the sum of the following: the costs in the beginning inventory (the prior… Read More.

What is the periodic inventory system?

The periodic inventory system does not update the general ledger account Inventory when a company purchases goods to be resold. Instead, the company debits the temporary account Purchases. Any adjustments related to these purchases of goods will be credited to a general… Read More.

What is the statement of stockholders' equity?

The statement of stockholders' equity (also known as the statement of shareholders' equity, statement of equity, statement of changes in stockholders' equity, statement of changes in shareholders' equity, and statement of changes in equity) is one of the five required financial statements… Read More.

How do you calculate ending inventory?

There are several ways to calculate the cost of a company's ending inventory. The first method is to 1) physically count the quantity of each of the items in inventory and then 2) multiply those quantities by each item's actual unit cost.… Read More.

What is 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 amount of current assets. Hence, the formula is: net working capital = current assets minus current liabilities.… Read More.

What is net purchases?

Net purchases is used to describe the combination of the amounts recorded in the following general ledger temporary accounts: Purchases, Purchases Discounts, and Purchases Returns and Allowances. These accounts are used by companies having inventories of goods and which use the periodic… Read More.

What is liquidity?

Liquidity refers to a company's ability to convert its assets to cash in order to pay its liabilities when they are due. Generally, the assets that are expected to turn to cash within one year are reported on the balance sheet in… Read More.

What is annualizing?

Annualizing means taking a partial year amount and converting it to a full year amount. We will use several examples to illustrate how this works. A person having a monthly salary of $4,000 is earning an annualized salary of $48,000 ($4,000 per… Read More.