Friday, June 27, 2008

Cash Flow Operating Activties

What items are considered to be operating activities on a statement of cash flows?

The Following Cash Inflows are Considered Operating Activities:

  1. Sale of goods or services
  2. Sale of investments or trading securities
  3. Dividend revenue
  4. Interest revenue
The Following Cash Outflows are Considered Operating Activities:
  1. Interest payments
  2. Payments for Inventory
  3. Wages, rent, taxes, utilities, insurance
  4. Purchase of trading securities

Wednesday, June 18, 2008

Calculate Ending Inventory

How to Calculate Accounting Ending Inventory?

Accounting Equation:

Ending Inventory= Beginning Inventory + Net Purchases - Cost of Goods Sold (COGS)

Tuesday, June 17, 2008

Calculate Cost of Goods Sold

How to Calculate Cost of Goods Sold?

Accounting Equation:

Cost of Goods Sold (COGS) = Beginning Inventory + Net Purchases - Ending Inventory

Sunday, June 15, 2008

What is Inventory?

In Accounting, Inventory is a class of asset that is intended for sale, in production for sale, or used in the production of an item for sale.

Thursday, June 12, 2008

What is External Reporting?

External Reporting is reporting to parties external of the company such as stockholders and the public. The opposite of external reporting is internal reporting which is for the management's benefit.

Wednesday, June 11, 2008

What is Bad Debt?

A Bad debt is all or a portion of an account receivable, note receivable, or loan that will not be collected. Management has deemed the debtor unable to pay, therefore it is a bad debt. For example, a customer who has recently declared bankruptcy would have his accounts receivable considered bad debts.

Accounting Examples about Bad Debts:
Percent of Accounts Receivable Method for Estimating Bad Debts Expense
Percent of Sales Method to Calculate Debt Expense

What is FOB Destination?

The abbreviation refers to Free On Board. It is a type of shipping arrangement between and buyer and seller. Free on Board (FOB) indicates the party responsible for paying the transportation costs and the point at which the ownership of goods occurs from shipper to the buyer. FOB Shipping is commonly used between many commercial companies.

Tuesday, June 10, 2008

What are Short Term Notes Payable?

A Short Term Note Payable is a written promise by a company to pay a specified amount on a definite future date within one year or the company’s operating cycle, whichever is longer.

Monday, June 9, 2008

What is a Municipal Bond?

A Municipal Bond is a bond issued by any level of government, the interest paid on a municipal bond is generally exempt from taxation. This is the main reason to purchase one.

Purchase Texas Instruments BA II Plus Professional Financial Calculator
Purchase HP 10bII Financial Calculator
Purchase Texas Instruments BA II Plus Financial Calculator

Sunday, June 8, 2008

Expanded ROA Equation

Expanded Return on Assets (ROA) Equation

There ROA equation is very useful when conducting financial ratio analysis. It determines how effective a company is at using their assets to generate sales. The percentage can be compared to competing firms.

Return on Assets (ROA) = Net Profits / (Average Assets)
Return on Assets (ROA) = (Asset Turnover) x (Net Profit Margin)

Expanded Return on Assets (ROA) Equation

Return on Assets (ROA) = [(Sales) / (Average Assets)] x [(Net Profits) / (Sales)]

Purchase Texas Instruments BA II Plus Professional Financial Calculator
Purchase HP 10bII Financial Calculator
Purchase Texas Instruments BA II Plus Financial Calculator

Friday, June 6, 2008

What are Cash Equivalents

Accounting Definition Cash Equivalents are Short-term (redeemable in less than three months), highly liquid investments and assets that are convertible to known amounts of cash quickly. For example, certain accounts receivables are considered cash equivalents. A 3-month CD would also be considered a cash equivalent.

Tuesday, June 3, 2008

What is Accounting General Ledger?

The accounting general ledger is a record containing all accounts used by the company. It is the main source of a companies financial records, the general ledger may also be known as the chart of accounts.

This general ledger for bookkeepers includes all accounts that make up the accounting equation, A=L+E The accounting general ledger is a collection of all accounts in a company's information system. A company’s size, nature of business, and diversity of operations dramatically affect the number of accounts needed in the ledger.

Sunday, June 1, 2008

What is Lump Sum Asset Purchase?

A Lump Sum Asset Purchase is that total cost of a combined purchase of land, building, or machinery and is allocated to the specific assets according to their relative market values.

Popular Accounting Problems

The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.