How is computer software classified as an asset?

June 30, 2024 No Comments

A: Computer software can be considered a long-term asset that falls under fixed assets like buildings and land. However, there are times when software should not be considered a long-term asset. In this article, we’ll review the accounting standards that are in place to classify computer software. Intangible assets are typically

How does a share premium account appear on a balance sheet?

June 30, 2024 No Comments

A: A share premium account shows up in the shareholders’ equity portion of the balance sheet. The share premium account represents the difference between the par value of the shares issued and the subscription or issue price. For example, say a company issued 1,000 shares

How does accrual accounting differ from cash basis accounting?

June 30, 2024 No Comments

A: The main difference between accrual and cash basis accounting lies in the timing of when revenue and expenses are recognized. The cash method is a more immediate recognition of revenue and expenses while the accrual method focuses on anticipated revenue and expenses. The Cash Method Revenue

How does accumulated depreciation affect net income?

June 30, 2024 No Comments

A: Accumulated depreciation does not directly affect net income but is instead the total amount of a company’s depreciation expenses charged against its net income over the lifetime of an asset or group of assets. Accumulated depreciation is an asset account on the balance sheet

How does additional equity financing affect existing shareholders?

June 30, 2024 No Comments

A: Additional equity financing dilutes existing shareholders. There are two types of candidates for equity financing. One is an early-stage growth company looking to take advantage of favorable market conditions to raise money. The other is a struggling company that cannot access credit markets and

How do you calculate shareholder equity?

June 30, 2024 No Comments

A: Shareholder equity is listed on the balance sheet is a common financial metrics employed by analysts to determine the financial health of a company. Shareholders’ equity represents the net value of a company, or the amount that would be returned to shareholders if all the company’s assets were liquidated and all its debts

How do you calculate the ratio between debt and equity in the cost of capital

June 30, 2024 No Comments

A: The ratio between debt and equity in the cost of capital calculation should be the same as the ratio between a company’s total debt financing and its total equity financing. Put another way, the cost of capital should correctly balance the cost of debt

How do you calculate variance in Excel?

June 30, 2024 No Comments

A: Variance is a measurement of the spread between numbers in a data set. The variance measures how far each number in the set is from the mean. Using a data set chart, we can observe what the linear relationship of the various data points,

How do you find the break-even point using a payback period?

June 30, 2024 No Comments

A: It does not make sense to find the breakeven point using a company’s payback period. A company’s payback period is concerned with the number of periods needed to pay back an initial investment with positive net income, while a company’s breakeven point is concerned

How do you get a hard copy of a stock certificate?

June 30, 2024 No Comments

A: Before online brokers and personally-directed accounts, holding a physical stock certificate was a necessity, as this was the only way to authenticate stock ownership. This is not the case anymore. Although you may not need to hold a stock certificate, you may request one.

All Rights Reserved