Self-Reflection Four Definitions and Explanations
1. Debits: the “… left-hand side [of the double-ledger system] is known as the debit column,” (Wagner, 2005, p. 1). Debits represent money that is transferred / paid out of an account (negative dollars).
2. Credits: “… a designation for the right-hand column of the double-ledger accounting system,” (Wagner, 2005, p. 1). Credit represents money that is received into an account (positive dollars).
3. Assets: “… an economic resource that a company owns,” (Wagner, 2005, p. 1). The term asset is used for both tangible and intangible property that provide current and future monetary value. Examples include: real estate, land, equipment, patents, and cash.
4. Liabilities: “… a resource that the company
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Amortization: “… a system that spreads the cost of an intangible asset, such as a patent, over the useful life of the asset,” (Wagner, 2005, p. 2). Amortization provides the same benefit as depreciation, but is specific to non-physical assets, giving a company the benefit of calculating overall net worth.
10. Fiscal year: “A company’s financial reporting year,” (Wagner, 2005, p. 2). Unlinked to the calendar year, the fiscal year typically coincides with tax requirements.
11. Profit margins: “… profit – what the company’s owners keep after paying all the bills – as a percentage of sales or revenue,” (Wagner, 2005, p. 2). This is ultimately what the company earns once all other debts / obligations are settled.
12. Receivables: “… money owed to the company, usually for goods and services,” (Wagner, 2005, p. 2). Receivables represent a value for the exchange of its production. An example being an electrical company charging $150 per man hour for a job. Upon the completion of the effort, if three man hours were required, $450 would be the receivables amount.
13. Payables: “… money the company owes to others, including suppliers,” (Wagner, 2005, p. 2). As they say, it takes money to make money. Payables is often the initial cost of setting up, sustaining, and producing business. An example of payables are business cards, brochures, and website
In the operating budget, the organization prepares to include the costs of acquisition of items to assist in providing goods and services in more than one fiscal year. In the case of Denison, the organization considers a capital purchase of $500,000 in oncology equipment to better serve their patients. The purchase of the new equipment will be paid immediately, however, the equipment maintains a five-year life span and expected to be used evenly over that life time (Finkler et al., 2013). After the five-year life of the equipment, the value amounts to zero because the capital item charges as an expense on a straight-line depreciation—the cost of asset spread over the useful life (Hui, 2013). The following graph illustrates the depreciation expense of the oncology equipment purchased by Denison Hospital.
The fair value of identifiable net assets includes four accounts classified under unrecognized intangibles. In order to determine which unrecognized intangibles is included in goodwill, ASC 805.20.55 was consulted. The Customer List had a fair value of $10M and was not included in goodwill. ASC 805-20-55-4 states that customer lists are licensed and can be sold; hence meeting the first criterion of an identifiable asset and not included in goodwill. Assembled Workforce was among the unrecognized intangibles. According to ASC 805-20-55-6, assembled workforce is included goodwill because it does not meet neither of the identifiable asset criterions. Trademark is not included into goodwill due to the fact that it meets the first criteria of an identifiable asset (ASC 805-20-55-17). The Licensing Agreement is a contractual agreement, meeting the second criteria of the identifiable asset; therefore not incorporated into goodwill (ASC 805-20-55-31). Lastly, In-Process Research & Development is not subsumed into goodwill because technology processes can be sold or exchanged; meeting the first criteria of an identifiable asset (ASC
Accrued expense is a liability that exists for a pending obligation that payment is due for goods or services that have been received. The cash will be paid in a latter accounting period when the payment amount w...
Every asset has an intrinsic value that can be projected if cash flows, growth and risk are known.
Current assets are a major financial position statement item and especially significant to smaller firms. Mismanagement of working capital is therefore a common cause of business failure, e.g.:
In definition, first let’s break down what an intangible asset is. Intangible assets are not tangible meaning they are not able to be physically touched which makes them long-lived.
According to Buffett, intrinsic value is an all-important concept that offers the only logical approach to evaluating the relative attractiveness of investments and businesses. Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life.
Accounting: From Clay Tablets to the Cloud, How Technology has Changed the Accounting Profession Every business professional knows that accounting is the language of business. The language of business has especially been transformed in the last 38 years due to the almost constant change in technology and technology. Accounting professionals have become the interpreters for the language of business, a language that all business professionals must understand to be successful. in today’s highly competitive market.
In accounting terms, any tangible (physical resources) or intangible (nonphysical resources) that can be possessed or controlled to create positive monetary value is known as Asset. In other words, anything that can be transformed into cash value is termed as asset. This includes:
A financial budget outlines how a business receives and spends money on a corporate scale, including revenues from core business plus income and co...
From an accountant's perspective, goodwill appears in accounts of a company only when the company has purchased some intangible and valuable economic source. Intangibles such as patents and copyrights are examples of identifiable intangible assets. On the other hand, intangibles such as favorable government regulations, outstanding credit ratings, superior management and good labor relations are examples of unidentifiable intangible assets (Tweedie, 27). Goodwill comprises the complete set of unidentifiable intangible assets held by the reporting entity. Generally, goodwill has appeared to be an umbrella concept embracing many features of a company's activities that could lead to superior earning power, such as excellent management, an outstanding workforce, effective advertising and market penetration.
The statement of profit or loss is also known as income statement and it’s equation is revenue minus expenses equals profit or loss. The statement of profit or loss summarize the revenues and expenses of a business and also shown the ability of a business to generated business. The total profit or loss that generated in an organization during an accounting period can be seen through the income statement. For example, if the expenses of the company are higher than revenues, the company will get a loss in the business. However, the company will generate a profit when the revenues are greater than the
The main method used by businesses to classify assets is to split them into tangible assets, which have a separate existence from the business (examples of which would include buildings, land and machinery), and intangibles which do not. Some clear examples of intangibles include goodwill, patents, research and development expenditure and trademarks. Intangible assets are usually created within the organisation over a period of time, by the company itself, rather than acquired from an external source and are rarely sold off individually they can normally only be sold in conjunction with associated tangible assets.
Assets are those things that are owned by an organization which have future economic value that are measurable and expressed in terms of monetary value. Basically assets are those resources which are acquired by a company through various transactions. (accounting coach, 2016)
Accounting itself is a system that people has been using for thousands of years, the system records financial information about a person or business, businesses use it in order to be able to keep and track their financial accounts and other financial information in a safe and efficient way. (Brooks, 2012)