Bookkeeping

Though this seems ideal, the company might have had a negative gross profit margin, a decrease in liquidity ratio metrics, and lower earnings compared to equity than in prior periods. This means the company is performing below its competitors in spite of its high revenue. The return on assets ratio, also called return on investment, […]

Evaluating leverage helps management eligible child assess the balance between debt financing and equity financing. Maintaining an optimal leverage structure promotes growth while avoiding excessive interest expenses that create financial distress. Tracking leverage over time provides a benchmark to inform financing decisions and evaluate financial health. One of the uses of ratio analysis is to

A periodic inventory system is a bookkeeping method based on counting and marking down your items. It means updating the inventory balance periodically, at the beginning and at the end of an accounting period. Let’s suppose the value of a company’s inventory is $500,000 on January 1. The company purchases $250,000 worth of inventory during

In addition, since there are fewer physical counts of inventory, the figures recorded in the system may be drastically different from inventory levels in the actual warehouse. A company may not have correct inventory stock and could make financial decisions based on incorrect data. There are several ways that companies can account for their inventory.

That’s because every transaction is recorded in real-time under a perpetual inventory system. If inventory is central to your business, it must be managed, and to do that it, must be measured. It also wouldn’t make sense for small businesses that sell their inventory as a side project to use perpetual inventory. An appliance repair

There are three contra asset accounts that commonly appear in an organization’s chart of accounts. However, that $1.4 billion is used to reduce the balance of gross accounts receivable. Therefore, contra accounts, though they represent a positive amount, are used to net reduce a gross amount. Equity Contra Account In order to keep the accounts

Examples of deferred unearned revenue include prepaid subscriptions, rent, insurance or professional service fees. Get instant access to video lessons taught by experienced investment bankers. Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts. Master accounting topics that pose a particular challenge to finance professionals. What Are Examples of a Contra Asset Account?

However, the “Allowance for Doubtful Accounts” (or “Allowance for Uncollectible Accounts”) is a contra account related to the concept of bad debts. This contra-asset account reduces the accounts receivable balance on the balance sheet to its net realizable value. The Allowance for Doubtful Accounts carries a credit balance that reduces the total amount of accounts