Accounting

Introduction Dividends, whether cash dividends or stock dividends are not written down as an expense in the company’s financial statements. This is because they do not affect the profit in the income statement of the company. They are rather written down under the shareholder equity section of the company and hence affect the balance sheet. […]

Introduction The company buys fixed assets for long-term use. They are not sold for cash in the short term, which means they essentially last longer than 12 months. Such assets would include land, building, or equipment owned by a business. A misrepresentation of fixed assets can lead to an imbalance of the balance sheet on

Definition As part of an accounting procedure, amortization is the process of lowering the book value of an asset or loan over a finite period of time. During the amortization of a loan, payments are spread out over a period of time. This concept is similar to depreciation and amortization that reduces book value with

Definition An annuity is an arrangement where parties agree to pay/receive the fixed amount after a fixed time. In other words, it’s a system where a series of equal payments is made at equal intervals for a specific period under consideration. The payment frequency of an annuity may vary depending on the contract between parties,

What is meant by Amortized Cost? Amortized Cost can be defined as the amount at which certain assets and liabilities are measured at initial cost, adjusted for principal repayments. They comprise of a number of things, which mainly include the following: Initial Recognition Amount Subsequent Recognition of Interest Income and Expense Repayments Credit Losses Amortization

Definition of Amortization of Bond Discount? Amortization can be defined as a process that is carried out to reduce the cost base of a given bond for each subsequent period in order to reflect the nearing maturity date of the relevant financial statement. The amortization process is done at the face value of the bond.

Definition of Altman Z-Score The Altman Z-Score is used to calculate the probability and likelihood of a business being bankrupt in the coming two years. From an investor’s perspective, Altman Z-Score reflects the relative safety of the given investment of the company. The Altman Z-Score is calculated using components in the financial statements of the

Under the allowance method, if the business feels a specific account balance cannot be recovered, it’s removed from books of accounts. This write-off entry only impacts the balance sheet as allowance for receivables is debited, and accounts receivable is credited from books. It’s important to note that the creation of allowance in the balance sheet

Definition The allowance method is used in accounting to create contra for the debtors that are expected to be uncollectible. Sometimes, the direct write-off for the account balance does not seem logical as the business may be unable to locate which debtor should be written off. So, the allowance method allows organizations to create a