Wednesday, September 24, 2008

Chapter 13: Corporations: Organization and Capital Stock Transactions

1903 stock certificate of the Baltimore and Oh...Image via Wikipedia

What is Authorized Stock?
Authorized stock is the number of shares that the State Department in Albany authorized the corporation to sell, and which is specified in the charter.

What is Book Value per Share?
Book value per share is the ownership or equity a common stockholder has in the net assets of the corporation. (NOTE: net assets equal the total amount of the stockholders equity section).

What are By-Laws?
By-laws are the internal rules and regulations that the corporation follows to administer its business.

What is Cash Dividend?
A cash dividend is a distribution of earnings by a corporation to its shareholders.

What is the Charter?
The charter is the legal document that the State Department issues and which authorizes the creation of the corporation.

What is Common stock?
Common stock is the outstanding stock when a corporation has issued only one class of stock.

What is the Definition of ‘Corporation’?
A corporation is a business organized as a legal entity separate and distinct from its owners under state corporation law.

How Did Justice John Marshall Define ‘Corporation’?
In 1819 Chief Justice John Marshall defined a corporation as “an artificial being, invisible, intangible, and existing only in contemplation of law.

What is Cumulative Dividend?
Cumulative dividend is a feature of preferred stock that requires that the corporation pay the stockholder the current and the unpaid prior-year dividends before common stockholders receive their dividends.

What is Cumulative Preferred Stock?
Cumulative preferred stock is a class of preferred stock that has a right to receive regular dividends that have been passed (not declared) before any common stock dividends are paid.

What is Nonparticipating Preferred stock?
Nonparticipating Preferred Stock is a class of preferred stock whose dividend rights are usually limited to a certain amount.


What is No-par Value Stock?
No-par value stock is capital stock that has not been assigned a value in the corporate charter.

What are Organization Costs?
Organization costs are various costs and expenses incurred in the formation of a corporation.

What is Outstanding Stock?
Outstanding stock is issued stock which is in the hands of stockholders.

What is Paid-in-Capital?Paid-in-Capital is the contributed cash and other assets paid by shareholders to a corporation in exchange for capital stock.

What is Par Value?
Par value is the monetary value assigned to a share in the corporate charter.

What is Preferred Stock?
Preferred stock is a class of stock with preferential rights over common stock.

What is a Privately Held Corporation?
A privately held corporation is a corporation that has only a few stockholders and whose stock is not available for sale to the general public.

What is a Publicly Held Corporation?
A publicly held corporation is a corporation that may have many stockholders and whose stock is traded in organized security markets.

What is Retained Earnings?
Retained earnings is the account into which the net income is transferred from the Income Summary Account.

What is Retained Earnings Statement?
The Retained Earnings Statement is a financial statement that summarizes the changes in the retained earnings of a corporation for s specific period of time, such as a month, quarter, or year.

What is Stated Value?
Stated value is a value similar to par value, approved by the board of directors of a coporation for no-par stock.

What is Stock?
Stock is a certificate of ownership in a corporation.

How do we Define Stockholders?
Stockholders are the owners of a corporation.

What is Stockholders’ Equity?
Stockholders’ Equity is the owners’ equity in a corporation; also called ‘net assets.’

What is Treasury Stock?
Treasury Stock is the corporation’s own stock that has been issued and then reacquired from shareholders.

Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers






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Monday, September 15, 2008

Chapter 12 Partnerships

View of Wall Street, Manhattan.Image via Wikipedia


What is a Partnership?
A partnership is an unincorporated business form consisting of two or more persons conducting business as co-owners for profit.

What is a General Partner?
A general partner is the partner who assumes unlimited liability in the partnership; as such the partner is personally liable for the debts of the partnership.

What is a Limited Partner?
A limited partner is a partner who has limited liability for the debts of the company; usually up to, and not exceed the amount of the partner’s investment in the business.

What is a Limited Partnership?
A limited partnership is a partnership in which the limited partners have limited liability. However, the partnership must have at least one general partner with unlimited liability.

What is a Limited Liability Company—LLC?
An LLC is a type of partnership that is usually organized for a limited period of time, with one or more general partners, and limited partners called members.

What is a Limited Liability Partnership?
A LLP is a partnership of professionals organized to protect the limited partners from unlimited liability, such as legal suits for malpractice.

What is Income (and Loss) Ratio?
The income ratio is the percentage or proportion used for dividing net income and net loss in a partnership.

What is Partnership Liquidation?
Liquidation is the winding up process when a partnership goes out of business.

Schedule of Cash Payments
Is a schedule that shows the distribution of cash to the partners in partnership liquidation.

What is Partnership Dissolution?
A partnership occurs when a new partner is accepted or when an existing partner leaves the company. However, such actions do not necessarily terminate the business, since in most cases the operating partners will opt to go on.

What is Capital Deficiency?
Capital Deficiency is the debit balance in the owner’s equity account of a partner.

What is No Capital Deficiency?
No Capital Deficiency occurs when all the partners’ capital accounts show credit balances.

What is a Partnership Agreement?
The partnership agreement is the formal written contract that creates a partnership.

What is Realization?
Realization is the sale of assets when a partnership is being liquidated.

What is a Statement of Partnership Equity?
It is a summary of the changes that have occurred—during a specific period of time—in each partner’s capital account. This statement is also called “Partners’ Capital Statement.”

What is Admission by Investment?
Admission by Investment occurs when a new partner joins the business by investing assets in the partnership, causing the total capital to increase.

What is Admission by Purchase of an Interest?
A new partner may buy an existing partner’s interest in the business, in a personal transaction. The total assets and total capital remain unchanged.

What is Withdrawal by Payment from Partners’ Personal Assets?
This situation occurs when a partner is bought out—and paid—by the other partners in a personal transaction, causing no change in either total assets or total capital.

What is Withdrawal by Payment from Partnership Assets?
This situation occurs when the withdrawing partner is paid with assets of the partnership, causing the total assets and total capital to decrease.

Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers




Friday, September 5, 2008

Updike and Hemingway, Use of Infinitives

Of all the nuances of the English language, what fascinates me the most are:

(1) The Infinitives and (2) The Absolutes.

Let's talk about Infinitives first; we'll talk of the latter some other time.

Why wordsmiths such as Wilkie Collins, Updike, and Hemingway write lyrical prose without appealing to adjectives? Such a troublesome question!

The answer is that they employ adjectives, but in a disguised manner.

Let’s say you find the following sentence:

Angelina Jolie’s are the lips to kiss.

'To kiss' is an infinitive (verbal) being used as an adjective since 'to kiss' modifies the noun lips. There are other twenty uses of the infinitive—but enough for today. In a soon to appear blog I will post my thoughts of how acrobats of the English language such as Hemingway and Updike, accelerate their prose by means of the masterful use of Absolutes.

Senada Selmani, model

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Wednesday, September 3, 2008

Ch9 Accounting for Receivables

What is an Account Receivable?
An account receivable is a claim against a customer created by selling merchandise or services on credit.

What is Accounts Receivable Turnover?
The accounts receivable turnover is the relationship between net sales and accounts receivable, computed by dividing the net sales by the average net accounts receivable; it measures how frequently during the year the accounts receivable are being converted to cash.

What is Aging the Receivables?
Aging the receivables means analyzing the accounts receivable and classifying them into groups according to how old or past due they are. The older the account has gone uncollectible the higher the probability that it will not be collected.

What is the Allowance Method?
The allowance method is the method of accounting for uncollectible accounts that provides an expense for uncollectible receivables in advance of their write-off.

What is Contra Asset?The contra asset is an asset offset against another asset.

What is Direct Write-off Method?
The direct write-off method is the method of accounting for uncollectible accounts that recognizes the expense only when accounts are judged to be worthless; it is a method preferred by small businesses.

What is a Dishonored Note Receivable?
A dishonored note receivable is a note that the maker fails to pay on the due date.

What is Maturity Value?
The maturity value is the amount that is due at the maturity or due date of a note.

What is Note Receivable?
The note receivable is a customer’s written document that contains the promise to pay an amount and possibly interest at an agreed-upon rate.

What is Number of Days’ Sales in Receivables?
The number of days’ sales in receivables is the relationship between sales and accounts receivable, computed by dividing the net accounts receivable at the end of the year by the average daily sales.

What is a Promissory Note?
The promissory note is a written and unconditional promise to pay a sum of money on demand or at a definite time.

What is Receivables?
Receivables is the name of the group of all money claims against other entities, including people, business firms, and other organizations.

What is Uncollectible Accounts Expense?
The uncollectible accounts expense is the operating expense incurred because of the failure to collect receivables.

What are the Two Bases of Estimating the Allowance?
The two bases or ways of estimating the allowance are: (1) percentage of sales, and (2) percentage of accounts receivable.

What does Write-Off mean?
Write off means to remove an account receivable that we feel it is worthless.

What do we mean by Trade Receivables?
Trade receivables are created by the sale of merchandise.

Assume the Direct Write Off method is used: How do you write off an uncollectible account receivable?
We write off the uncollectible account by debiting Bad Debts Expense and crediting Accounts Receivable.

Assume the Allowance method is used: How do you write off an uncollectible account receivable?

We write off the uncollectible account by debiting Allowance for Uncollectible Accounts and crediting Accounts Receivable.

What is the formula for Computing Simple Interest?
The formula is:
I = P x R x T
Where
I = interest
P = Principal
R = Rate (which may be expressed as (1) fraction 10/100 (2) decimal .10 (3) percentage 10%, or (4) In words: “Ten per cent.”

Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers




Ch8 Internal Control and Cash

What is Bank Reconciliation?
Bank reconciliation is the analysis that shows the items responsible for the difference between the cash balance reported in the bank statement and the balance of the cash account in the ledger.

What is Cash?
Cash is the medium of exchange that includes coins, currency (paper money), checks, money orders, and money on deposit that is available for unrestricted withdrawal from banks and other financial institutions.

What are Cash Equivalents?
Cash equivalents are highly liquid investments that are usually reported together with cash on the balance sheet. Examples: Treasury Bills and Commercial Paper.

What is Cash Short and Over Account?
The cash short and over account is the account into which we record errors in cash sales or errors in making change.

What is Doomsday Ratio?
The doomsday ratio is the ratio of cash and cash equivalents to current liabilities.

What is Electronic Funds Transfer (EFT)?
EFT is a system in which computers rather than paper (money, checks, etc.) are used to effect cash transactions. EFTs are also called 'Wire Transfers.'

What is Petty Cash Fund?
The petty cash fund is a special fund set up to pay small expenditures.

What is Voucher?
The voucher is a special form for recording relevant data about a liability and the details of its payment.

What is Voucher System?
The voucher system is a set of procedures for authorizing and recording liabilities and cash payments.

What are Outstanding Checks?
Outstanding checks are checks recorded in the ledger but not yet paid by the bank.

What are Deposits in transit?
Deposits in transit are deposits that are included in the general ledger, but not in the bank balance.
Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers




Ch11 Current Liabilities and Payroll Accounting

Price-Earnings Ratios as a Predictor of Ten-Ye...Image via Wikipedia

What is Defined Benefit Plan?
The defined benefit plan is a pension plan that promises employees a fixed annual pension benefit at retirement, based on years of service and compensation levels.

What is Defined Contribution Plan?
The defined contribution plan is a pension plan that requires a fixed amount of money to be invested for the employee’s behalf during the employee’s working years.

What is Discount?
The discount is the interest deducted from the maturity value of a note or the excess of the face amount of bonds over their issue price. (Bonds are studied in Accounting 2).

What is Discount Rate?
The discount rate is the rate used in computing the interest to be deducted from the maturity value of a note.

What is Employee’s Earnings Record?
The employee’s earning record is a detailed record of each employee’s earnings.

What is FICA Tax?
Federal Insurance Contributions Act (FICA) tax used to finance social security programs for old-age retirement, disability benefits, survivors (orphans/widows), and health insurance for the aged (Medicare).

What are Fringe Benefits?
The fringe benefits are benefits—such as dental, eye, medical, Blue Cross, pension— provided to employees in addition to wages and salaries.

What is Gross Pay?
Gross pay is the total earnings of an employee for an employee for a payroll period.

What is Net Pay?
Net pay is gross pay less payroll deductions; the amount the employer is obligated to pay the employee.

What is Payroll?

The payroll is the total amount paid to employees for a certain period.

What is Payroll Register?
The payroll register is a special journal, multicolumn, used to assemble and summarize payroll data at the end of each payroll period.

What are Proceeds?The proceeds are the net CASH available from discounting a note payable.

What are Quick Assets?
Quick assets include cash and other current assets that can be quickly converted to cash, such as marketable securities and receivables.

What is Quick Ratio?Quick ratio is a financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).

What is Working Capital?
Working capital is the excess of current assets of a business over its current liabilities.

What is Contingent Liability?
A contingent liability is a potential liability that may or may not come to pass.

What is “Take Home Pay?”
Take Home pay is the next pay in the employees payroll check, or the gross earnings less deductions.

What is Vesting?
Vesting is the date at which the employee is entitled to the pension contributions the employer makes on his or her behalf. If a company offers vesting after 5 years of service, this means that the employee must stay with the company at least five years to own the pension contributions the employer made.

Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers






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Tuesday, September 2, 2008

Ch7 Accounting Information Systems

What is an Accounting System?
An accounting system includes the methods and procedures used by a business to collect, classify, summarize, and report financial data for use by management and external users.

What is the Accounts Payable Subsidiary Ledger?
The Accounts Payable subsidiary ledger contains the individual ledger accounts of all suppliers, vendors, and creditors.

What is a Cash Payments Journal?
The Cash Payments Journal is a special journal in which all the cash payments made by check are recorded.

What is a Cash Receipts Journal?
The Cash Receipts Journal is a special journal in which all cash receipts are recorded.

What is a Controlling Account?
The Controlling account is the account in the general ledger that summarizes the balances of all the accounts in a subsidiary ledger. Another name used is “Control Account.”

What is the General Journal?The General Journal is the two-column form used for entries that do not “fit” in any of the special journals.

What is the General Ledger?
The General Ledger is the primary ledger that contains all of the balance sheet and income statement accounts.

What is the Purchases Journal?
The Purchases Journal is the special journal in which all items purchased on account are recorded.

What is the Revenue Journal?
The Revenue journal is the special journal in which all sales and services on account are recorded.

What are Special Journals?
Special Journals are designed to be used for recording transactions that are similar and therefore grouped to save time and effort in the recording process.

What is a Subsidiary Ledger?
A Subsidiary ledger is a ledger that contains individual accounts with a common characteristic.

What is a Schedule of Accounts Receivable Subsidiary Ledger?
A Schedule of Accounts Receivable is a list that contains the names and unpaid balances of customers. The total of the schedule must agree with the Accounts Receivable control account.

What is a Schedule of Accounts Payable Subsidiary Ledger?
A Schedule of Accounts Payable is a list that contains the names and open balance that a company owes to its creditors. The total of this schedule must agree with the Accounts Payable controlling account.

What are the Titles of the four earlier chapters we’ve studied?
Chapter 1, Accounting in Action
Chapter 2, The Recording Process
Chapter 3, Adjusting the Accounts
Chapter 4, Completing the Accounting Cycle.
Chapter 5, Accounting for Merchandising Operations
Chapter 6, Inventories

Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers




Ch6 Inventories

What is Average Cost Method?
The average cost method is the method of inventory valuation in which a weighted average unit cost is computed and used to arrive at the cost of the ending inventory.

What is First-in, First-out (FIFO) Method?
The FIFO method is the method of inventory costing based on the assumption that the Beginning inventory units and then the early purchases are sold first, leaving the later purchases in the ending inventory.

What is Last-in, First-out (LIFO) Method?
The LIFO method is a method of inventory costing based on the assumption that the last purchases are sold first, leaving the Beginning inventory units and the early purchases in the ending inventory.

What is Gross Profit Method?
The gross profit method is a method of estimating inventory cost that is based on the relationship of gross profit to sales.

What is Inventory Turnover?
The inventory turnover is the relationship between the volume of goods sold and inventory, computed by dividing the cost of goods sold by the average inventory. Low turonver is a sign of inefficiency or low sales.

What is Lower-of-cost-or-market (LCM) Method?
The LCM method is a method of valuing inventory that reports the inventory at the lower of its cost or current market value (replacement cost).

What is Net Realizable Value?
The net realizable value is the estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.

What is Number of Days’ Sales in Inventory?
The number of days’ sales in inventory is the relationship between the volume of sales and inventory, computed by dividing the inventory at the end of the year by the average daily cost of goods sold.

What is Physical Inventory?
The physical inventory is a detailed listing of merchandise on hand.

What is Retail Inventory Method?
The retail inventory method is a method of estimating inventory cost that is based on the relationship of gross profit to sales.
Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers




Ch5 Accounting for Merchandising Operations

What are the two forms of the balance sheet?
The two forms of the balance sheet are Account form and Report form. The account form resembles the basic format of the accounting equation, with assets on the left side and the liabilities and owner’s equity sections on the right side. The report form shows the assets, liabilities, and owner’s equity in a downward sequence.

What are administrative expenses?
Administrative expenses are general expenses incurred in the administration of the business.

How do you find cost of Goods sold in the Periodic System?
We find cost of merchandise sold by subtracting the ending inventory from cost of merchandise available for sale.

What is a credit memorandum?
A credit memo is a form used by a seller to inform the buyer of the amount the seller proposes to credit to the account receivable due from the buyer.

What is a debit memorandum?
A debit memo is a form used by a buyer to inform the seller of the amount the buyer proposes to debit to the accounts payable due the seller.

Who pays for the transportation or freight cost under FOB destination?
The seller pays for the freight cost (debit Transportation out or delivery expense).

Who pays for the transportation or freight costs under FOB shipping point?
The buyer pays for the freight cost (debit Transportation In or Freight In).

How do you find gross profit?
We find gross profit by subtracting cost of merchandise sold from net sales.

How do you find income from operations?
We find Income from Operations by subtracting the Operating Expenses from Gross Profit.

What is inventory shrinkage?
The amount by which the merchandise for sale, as indicated by the balance of the merchandise inventory account, is larger than the total amount of merchandise counted during the physical inventory.

What is an invoice?
An invoice is a bill that the seller sends to the buyer.

What kind of account is merchandise inventory?
Merchandise Inventory is an asset account that shows the merchandise on hand (not sold) at the end of the accounting period.

What are the two forms of Income Statement?
The two forms of the income statement are: single-step income statement and multiple-step income statement.

What is the periodic method?
The periodic method is the inventory system in which the inventory records do not show the amount available for sale or sold during the period. When merchandise is purchase we debit the Purchases account rather than the Merchandise Inventory account.

What is the perpetual method?
The perpetual method is the inventory system in which each purchase and sale of merchandise is recorded in an inventory account.

What are Purchases Returns and Allowances?
From the buyer’s side, Purchase returns and allowances are the amount owed to the buyer for merchandise returned because of defects or damages.

What are Purchases Discounts?
Purchase discounts are the percentages taken by the buyer for early payment of an invoice.

What are Sales Discounts?
Sales discounts are cash discounts that the seller offers to their customers to give them an incentive to pay their invoices right away.

What are Sales Returns and Allowances?
Sales Returns and Allowances are given by the seller (to the buyer) because of damaged merchandise.

What are selling expenses?
Selling Expenses are expenses that are incurred directly in the selling of merchandise.

What are trade discounts?
Trade discounts are discounts from the list price in published catalogs or special discounts offered to certain classes of buyers.

What is Gross Profit Margin?
It is the percentage of each dollar remaining once the company has paid for the cost of the merchandise sold. The formula is:

GPM = Gross Profit / Net sales

What is Profit Margin?
The Profit Margin the percentage of earnings generated from revenue. It provides an idea of the firm’s pricing, cost structure, and efficiency.

PM = Net income / Net sales

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Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers




Ch10 Plant Assets, Natural Resources, and Intangible Assets

What is Accelerated Depreciation Method?
The accelerated depreciation method provides for a higher depreciation expense in the first year of the asset’s use, followed by gradually declining amounts in subsequent years.

What is Amortization?
Amortization is the periodic allocation of the cost of an intangible asset to expense.

What is Book Value?
Book value is the cost of a fixed asset minus accumulated depreciation on the asset.

What is Boot?
“Boot” is the amount a buyer owes a seller when a fixed asset is traded in on a similar asset.

What is Capital Expenditure?
Capital expenditure is the cost of acquiring fixed assets, adding to a fixed asset, improving a fixed asset, or extending a fixed asset’s useful life.

What is Capital Lease?
A capital lease treats the leased assets as purchased assets, which are then carried in the balance sheet.

What is Component?
Component is a portion of a fixed asset that can be identified as a separate asset and depreciated over its own separate expected useful life.

What is Copyright?
Copyright is an exclusive right to publish and sell a literary, artistic, or musical composition.

What is Declining-balance Method?
The declining-balance method—also called Double Declining Balance method—provides for periodic depreciation expense based on the declining book value of a fixed asset over its estimated life.

What is Depletion?
Depletion is the allocation of the cost of natural resources to an expense account.

What is Depreciation?
Depreciation is the allocation of the cost of a fixed asset to expense over its useful life in a rational and systematic manner.

What are Fixed Assets?
Fixed (plant) assets are the assets that depreciate over time, such as equipment, tools, machinery, and buildings. Although land is considered a fixed asset, it is never depreciated.


What is Goodwill?
Goodwill is an intangible asset that is created from such favorable factors as location, product quality, reputation, and managerial skill.

What are Intangible Assets?
Intangible assets have no physical substance, but they have value. Usually intangible assets are long-term assets that are useful in the operations of a business, and are not held for sale.

What is Operating Lease?
Operating lease is the lease that does not meet the criteria for capital lease and thus is accounted for as operating expenses.

What are Patents?
Patents are the exclusive rights to produce and sell goods with one or more unique features.

What is Ratio of Fixed Assets to Long-term Liabilities?
The ratio of fixed assets to long-term liabilities is a leverage ratio that measures the margin of safety of long-term creditors, calculated as the net fixed assets divided by the long-term liabilities.

What is Residual Value?
Residual value is the estimated value of a fixed asset at the end of its useful life. Other names used for residual value are: trade in value, scrap value, and salvage value.

What is Revenue Expenditures?
Revenue expenditures are the costs that benefit only the current period or costs incurred for normal maintenance and repairs of fixed assets.

What is Straight-line Method?
The straight-line method is a method of depreciation that provides for equal periodic depreciation expense over the estimated life of a fixed asset.

What is Trade-in Allowance?
The trade-in allowance is the amount a seller allows a buyer for a fixed asset that is traded in for a similar asset. Other names for trade-in allowance are: scrap value, residual value, and salvage value.

How Do You Find Depreciable Cost?
We find depreciable cost by subtracting the scrap value from the cost of a fixed asset.

What is Trademark?
Trademark is a name, term, or symbol used to identify a business and its products.

What is Units-of-production Method?
The units-of-production method is a method of depreciation that provides for depreciation expense based on the expected productive capacity of a fixed asset.

What is Depreciation?
Depreciation is the allocation of a long-lived asset to expense over its useful life in a rational and systematic manner.

What are other names for Residual Value?Scrap value, salvage value, and trade-in value.

Ch1 Accounting in Action

Ch2 Recording Process

Ch3 Adjusting the Accounts

Ch4 Completing the Accounting Cycle

Ch5 Merchandising Operations

Ch6 Inventories

Ch7 Accounting Information Systems

Ch8 Internal Control and Cash

Ch9 Accounting for Receivables

Ch10 PP&E, Natural Resources, and Intangible Assets

Ch11 Current Liabilities and Payroll


Ch12 Partnerships

Ch13 Corporations

Ch14 Corporations:Dividends, RE

Ch15 Long Term Liabilities

Ch16 Investment

Ch17 Statement of Cash Flows

Ch18 Financial Statement Analysis

Plato and Accounting

Price/Earnings Ratio

Plant Assets

Luca Pacioli and DaVinci


The secrets of 'no-doze' prose:
Mary Duffy's Sentence Openers