The difference is the amortization that reduces the premium on the bonds payable account. It is also true for a discounted bond, however, in that instance, the effects are reversed. The redemption amount generally equals how much the original investor paid to acquire the bond. However, the redemption amount can be different than the acquisition cost.
In other words, the bond trading at a premium will offer less risk than the bond trading at a discount if rates rise any more, which can make up […]
The sum of all outstanding amounts owed to vendors is shown as the accounts payable balance on the company’s balance sheet. An accounts receivable subsidiary ledger shows the transaction and payment history of each customer to whom the business extends credit. A subsidiary ledger (sub-ledger) is a sub-account related to a GL account that traces the transactions corresponding to a specific company, purchase, property, etc.
When the amounts owed to suppliers and other third parties are not […]
Percentage-of-receivables method The percentage-of-receivables method estimates uncollectible accounts by determining the desired size of the Allowance for Uncollectible Accounts. Rankin would multiply the ending balance in Accounts Receivable by a rate based on its uncollectible accounts experience. In the percentage-of-receivables method, the company may use either an overall rate or a different rate for each age category of receivables. Another way to estimate the amount of uncollectible acc […]
In economic theory, a firm will continue to expand the production of a good until its marginal cost of production is equal to its marginal product . In a beverage company, water would be used as a direct material that goes into the bottle. But water could also be used as an indirect material to wash the bottles or equipment. It is necessary to keep these types of consumption separate for accounting purposes. It is an essential metric for understanding the productivity and profitability (more&he […]
The methods for estimating incremental amounts (ie, the values for a nonprofit relative to a for-profit) are described in the text. Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate is compensated in exchange for featured placement of sponsored products and services, or your clicking on links posted on this website. This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all availabl […]
For example, a company may avoid a project that is expected to return 10% per year if it costs 12% to finance the project or an alternative project is expected to return 14% per year. If an investor knew they could earn 8% from a relatively safe investment over the next year, they would choose to receive $100 today and not the $105 in a year, with the 5% rate of return. Since $1,100 is 110% of $1,000, then if you believe you can make more than a 10% return on (more…) […]
A budget analysis can help you understand where a business is making money, where money is going out of the business and how to maximize profits. In this article, we explain how to plan a budget analysis and offer some times for doing your own budget analysis. Additions that meet the entity’s criteria for “capital” items are almost always long lasting, expensive items, which contribute to the value of Balance sheet assets. Firstly, capital and operating budgets usually apply d […]
The calculation of depreciation expense follows the matching principle, which requires that revenues earned in an accounting period be matched with related expenses. If the vehicle is sold, both the vehicle’s cost and its accumulated depreciation at the date of the sale will be removed from the accounts. If the amount received is greater than the book value, a gain will be recorded. If the amount received is less than the book value, a loss is recorded. Accumulated amortization and accumu […]
If a company has excess earnings and decides to pay a dividend to common shareholders, an amount is declared along with a payable date. Usually, this is determined quarterly after a company finalizes its income statement and the board of directors meets to review the financials. Bench gives you a dedicated bookkeeper supported by a team of knowledgeable small business experts. We’re here to take the guesswork out of running your own business—for good. Many people refer to this measurement […]
The two ways to account for inventory go by different names in different parts of the world, so for consistency we’ll call these “Periodic” and “Cost of Sales”. Your accountant should be able to advise you on which is the best method for your business. This guide aims to equip you with the knowledge you need to accurately report on your inventory financials. After all, your inventory is your most valuable asset within your business. Now, let’s put it all toge […]
