To begin, the periodic cash flows of a project must be estimated and shown by each period in a table or spreadsheet. These cash flows are then reduced by their present value factor to reflect the discounting process. This can be done using the present value function and a table in a spreadsheet program. The […]
Suppose we are considering lending to, or investing money in, a manufacturer for an expansion. We want to decide if the company has generated enough net profit and accumulated the capital necessary to support growth. We aim to understand our credit or investment risks and come to agreeable terms. Members of financial accounting can carry […]
As a result of inventory write-downs, which are reflected as expenses, the company’s net income falls. This $150 million write-down hits the income statement as an impairment loss. On the balance sheet, the goodwill asset account is reduced to the revised $150 million value. This case shows how goodwill write-downs directly impact financial statements. This […]
The high-low method provides a simple way to split fixed and variable components of combined costs using a few formula steps. First you calculate the variable cost component and fixed cost component, then plug the results into the cost model formula. If the variable cost is a fixed charge per unit and fixed costs remain […]
To simplify the math, we will assume every month has 30 days and each year has 360 days. There are two situations where a company may receive a short-term note. The ability to raise cash in this way is important to small and medium-sized businesses, which may have limited access to finance. Our work has […]
It also shows that the company can effectively sell the inventory it buys. It is vital to compare the ratios between companies operating in the same industry and not for companies operating in different industries. An overabundance of cashmere sweaters, for instance, may lead to unsold inventory and lost profits, especially as seasons change and […]
Each favorable and unfavorable variance needs to be examined individually, as noted in the popcorn example in the video! Analysis is the key to making sure that increases (favorable variances) in revenue https://business-accounting.net/ or increases (unfavorable variances) in expenses are appropriate. Unfavorable variance is an accounting term that describes instances where actual costs are greater […]
This cloud-based payroll service offers a free trial, 1099 contractor payments, an employee portal, and additional time tracking tools. To find the best small business payroll companies, I looked at our payroll-related buyer’s guides and compiled a list of providers that often appear in those guides. I also included those that offer specific payroll services, […]
As you’ve learned, not only are warranty expense and warranty liability journalized, but they are also recognized on the income statement and balance sheet. The following examples show recognition of Warranty Expense on the income statement (Figure) and Warranty Liability on the balance sheet (Figure) for Sierra Sports. The measurement requirement refers to the company’s […]
The beginning period retained earnings are thus the retained earnings of the previous year. Now, you must remember that stock dividends do not result in the outflow of cash. In fact, what the company gives to its shareholders is an increased number of shares. Accordingly, each shareholder has additional shares after the stock dividends are […]