Some investors also like to compare a company’s D/E ratio to the total D/E of the S&P 500, which was approximately 1.58 in late 2020 (1). It’s useful to compare ratios between companies in the same industry, and you should also have a sense of the median or average D/E ratio for the company’s industry […]
Temporary vs. permanent accounts can be a lot to digest. To help you further understand each type of account, review the recap of temporary and permanent accounts below. Now that you know more about temporary vs. permanent accounts, let’s take a look at an example of each. Your accounts help you sort and track your […]
A sales discount is the reduction that a seller gives to a customer on the invoiced price of goods or services in order to incentivize early payment. Hence, a sales discount is not an expense but a contra-revenue account that offsets revenue. Therefore, the natural balance of a sales discount is opposite to the natural […]
Often, when a smaller company is aiming to have a lower number of shareholders, it may choose to issue stocks with a face value of $1.00. This small amount can then function as a line item for accounting purposes. Bonds can be sold in the secondary market all the time, and their price will change based […]
The cloak of anticipation is lifted, and the financial ballet takes a turn. Common examples of prepaid expenses include leases, rent, legal retainers, advertising costs, estimated taxes, insurance, salaries, and leased office equipment. In this case the asset (pre paid rent) has been reduced by 1,000 and the income statement has a rent expense of […]
With FOB shipping point, the buyer pays for shipping costs, in addition to any damage during shipping. The buyer is the one who would file a claim for damages if needed, as the buyer holds the title and ownership of the goods. Contrary to some misconceptions, FOB terms are primarily concerned with the allocation of responsibilities […]
Investing in stocks is a simple calculation wherein stockholders are paid off before the owners are paid back from the company`s assets. It can be negative or positive depending on the business activities of the company. This is an important indicator of a company’s financial condition and makes the debt ratio an important representation of […]
Tax-Aide, launched in 1968, is billed as the nation’s largest free, volunteer-staffed program to help people prepare and file taxes, with more than 80 million taxpayers served. Free File, not to be confused with Direct File, is a much older IRS program that allows taxpayers with modest incomes to file taxes at no charge with […]
The costs of constructing the asset are accumulated in the account Construction Work-in-Progress until the asset is completed and placed into service. For example, if a company spends $500,000 on constructing a warehouse, those costs are tracked in the CIP account until the warehouse is operational. When the construction under progress is recorded proportionally in […]
In accounting, First In, First Out (FIFO) is the assumption that a business issues its inventory to its customers in the order in which it has been acquired. FIFO is the best method to use for accounting for your inventory because it is easy to use and will help your profits look the best if […]
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