0
Financial Statements
A financial statement is a record of the financial activities of a person or business entity where all related financial information are presented in an orderly manner and can be easily understood.
5,583 Questions
What is the journal entry to record sale of obsolete inventory?
Debit cash / bank
debit loss (if any)
Credit inventory account
The SCF is dated in the title for a period of time.
Where does accrued interest on notes receivable go on a balance sheet?
Accrued interest which is to be received within 12 months is a current asset.
How are variable expenses different from fixed expenses?
Variable expenses are those expenses which vary according to production level while fixed expenses are those expenses which have no effect of production level and remain same.
Does goodwill only appear on the consolidated balance sheet?
That is correct. Goodwill as an asset appears on the balance sheet of a consolidated company to represent any premium that the acquiring company paid for a subsidiary company that is in excess of the fair value of the company's net assets. Therefore, Goodwill would only show up on the consolidated balance sheet, as the subsidiary's net assets are not reflected on the acquiring company's balance sheet until the consolidation process.
Does a cash dividend affect the balance sheet?
A cash dividend reduces cash (asset, debit on balance sheet) and reduces retained earnings (part of equity, credit on balance sheet).
Why are retained earnings reported as part of shareholders' equity?
Retained earnings is part of shareholders' equity. It is considered part of equity because it represents the profits that are retained in the company to fund growth. If a company would have paid out all past profits as dividend, then total assets (cash) would be lower, and retained earnings would have a zero balance.
Because net income is computed after claims of third parties (interest, wages, etc), there is no claim of third parties on profits that are retained. So, retained earnings are not a liability.
It depends. With ratio analysis it is important to consistently apply the ratio over time and/or across companies.
The unadjusted ROA ratio is computed as net income divided by assets, while the adjusted ROA ratio is NOPAT divided by assets. (NOPAT = net income plus net interest expense after tax).
Many people would say the NOPAT based ROA is a better measurement of the profitability of the assets, since the cost of debt is excluded. In other words, the way the assets are financed does not affect the profitability of the assets.
Most likely, when analyzing a firm's profitability over time, both ratios will show the same trend. In this sense it probably doesn't matter much which ratio is used.
A similar reasoning can be applied to return on equity (ROE). Preferred shares legally qualify as equity, but economically often behave like debt. An adjusted ROE (with subtracting preferred dividends from income and dividing by the number of common shares outstanding) will more closely reflect the 'true' profitability of common equity. If used in practice, both regular ROE and adjusted ROE will probably give similar insights into the firms profitability. (From a statistical point of view the two measures of ROE are highly correlated.)
What is non-trapped cash in the context of corporate finance?
Non-trapped (aka untrapped, available and free) cash in the context of corporate finance is defined as cash available for use by the company that may be used for any reason.
A simple example of untrapped cash is a bank account with a positive balance. Cash available in that account may be used by the business for a variety of reasons.
A more complex example of untrapped cash is that cash made available by choosing not to pay one's creditors immediately. When buying on credit, an "accounts payable" account is increased, freeing up the cash that MIGHT have been used to pay for goods/services to be used for something else.
In almost all circumstances, untrapped cash is "found" in short-term investments and bank accounts since the actual "cash" does not always exist (e.g., through the use of credit or well-managed working capital).
Why the trial balance may not balance?
The trial balance is a list of all T-accounts and their balances. As the underlying journal entries need to balance out (total debits equal total credits), the balances of the trial balance also need to balance. If this is not the case, it means that an error has been made. It means that some journal entry has been entered into the ledger which did not balance.
With computerized bookkeeping, this purpose (checking for errors) has been lost (at least for the user, the software may still use the trial balance to check for consistency).
What type of account is Owner's Equity?
Owners equity account records the initial investment of the owner in the business plus additional investments. This is adjusted for any incomes and losses and thus its balance may change over time.
How do you find the net income when assets are given?
Assets could have dropped as a result of losses, or gained as a result of gains. As a complicating factor, assets can still drop if there has been a profit, for example, when the profits have been used to pay down debt.
Would a purchase of treasury stock affect retained earnings?
When the company owns treasury stock, then 'treasury stock' has a debit balance. It is nevertheless presented under equity, with a negative sign.
(Technically, when a T-account switches from debit to credit - or the other way around - the sign flips.)
Nevertheless, a subsequent sale of treasury stock can affect retained earnings when the amount received is below the cost (a loss is made). This loss is subtracted from retained earnings if there are no cumulative gains on prior sales of treasury stock.
Why is there a difference between net and gross profit?
Gross profit is the total amount of money that you get. And net profit is the amount left after you subtract your costs. For example, if you sold a toy on Ebay for 100.oo dollars. Your gross profit would be 100. You spent 30 dollars on the items and 6 dollars to list on ebay. subtract your expenses from you gross profit and then that is your NET Profit.
Which of the following items will increase inventoriable costs for the buyer of goods?
freight charges paid by the buyer
Relining expenses are expenses incurred to protect and preserve the insulation layer of the Kiln which gets damaged and worn out on account of high temperature and constant wear and tear.
