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 …

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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. …

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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 …

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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 …

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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 …

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After tax cost of debt The after-tax cost of debt is an important financial metric for evaluating the financing cost of the business. It provides strong insights to assess financial leverage and interest rate risk for investing in the specific business as a lender. From a business perspective, tax-deductibility on payment of interest is considered …

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Accrued expenses comprise all expenditure that a company by obligation is expected to pay in the future for goods and services already received. This type of expense is recorded as current liabilities in the company’s balance sheet at the end of an accounting period. Accrued expenses are an essential concept in accrual accounting. Accrued expenses …

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Office Supplies are expenses that are incurred during operations within the company. It can be seen that there are numerous different needs in regular office work that needs to be catered to by the organization. These expenditures, although not significant stand-alone, tend to be significant when amalgamated as per yearly totals. Hence, they are rudimentary …

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Introduction A prepaid expense by definition is an expense that has been paid for by the business in advance, that is, before the services for that expense have been availed. In this case, the business must record such expenses as prepaid expenses. As the business begins to use the service, the expense begins to accrue, …

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Definition The advance to employees is essentially a short-term, interest-free loan to the employee. It is usually cash-based and, in this case, the employee who is the borrower gets an advance payment of their earnings from the lender, which is the employer. It is most likely that this amount will be repaid by the employee …

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