Current liabilities are essentially the opposite of current assets; they are anything that reduces a company’s spending power for one year. Examples include short term debts, dividends, owed income taxes, and accounts payable. If current liabilities exceed current assets, it could indicate an impending liquidity problem. To compute the annual …
If we were to look at the accounting cycle through the lens of an accountant today, the process would look a little different. For example, the general ledger doesn’t exist in the same form today, so there’s no need to post transactions to it. We’ve pointed out areas where technology has pushed some aspects of […]
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Marilyn now explains to Joe the basics of getting started with recording his transactions. Let’s say you just bought $10,000 of pet food inventory on credit. “It was just a whole revolution in the way of thinking about business and trade,” writes Jane Gleeson-White of the popularization of double-entry accounting in her book Double […]
Fixed assets include land, machinery, equipment, buildings, and other durable, generally capital-intensive assets. Marketable securities are equity and debt securities for which there is a liquid market. Balance sheets can be used with other important financial statements to conduct fundamental analysis or calculating financial ratios. …
The term “present value” refers to the application of time value of money that discounts the future cash flow to arrive at its present-day value. The discounting rate used for the present value is determined based on the current market return. The formula for present value can be derived by discounting the future cash flow […]