When should a company recognize revenues on its books?

July 9, 2024 No Comments

A: When a company makes revenues from its operations, it must be recorded in the general ledger and then reported on the income statement every reporting period. According to generally accepted accounting principles (GAAP), there are two criteria the company must meet before it can

When should I use depreciation expense instead of accumulated depreciation?

July 9, 2024 No Comments

A: The most basic difference between depreciation expense and accumulated depreciation lies in the fact that one appears as an expense on the income statement, and the other is a contra asset reported on the balance sheet. Both pertain to the “wearing out” of equipment,

What were the “browser wars”?

July 9, 2024 No Comments

A: When Netscape had its public offering on August 10, 1995, a last minute decision prompted the company to raise the offering price to $28 per share. The move was considered bold for a company looking to sell five million shares on the strength of

What would cause a decrease in accumulated depreciation?

July 9, 2024 No Comments

A: When a company’s accumulated depreciation decreases, it is normally due to the sale of a long-term fixed asset or group of long-term fixed assets. The accumulated depreciation is the total amount of periodic depreciation expenses for a fixed asset or group of fixed assets

When and why does goodwill impairment occur?

July 9, 2024 No Comments

A: Goodwill impairment occurs when a company decides to pay more than book value for the acquisition of an asset, and then the value of that asset declines. The difference between the amount that the company paid for the asset and the book value of

When and why should the terminal value be discounted?

July 9, 2024 No Comments

A: Typically, an asset’s terminal value is added to future cash flow projections and discounted to the present day. Discounting is performed because the terminal value is used to link money value between two different points in time. Though there are several terminal value formulas,

When are businesses required to use accrual accounting?

July 9, 2024 No Comments

A: Accrual accounting involves stating revenues and expenses as they occur, not necessarily when cash is received or paid out. In contrast, cash accounting systems do not report any income or expenses until the cash actually changes hands. In general, most businesses use accrual accounting,

When are expenses and revenues counted in accrual accounting?

July 9, 2024 No Comments

A: Under the accrual basis of accounting, revenues and expenses are counted when they are earned. This is different from the cash basis of accounting, where they are reported whenever cash actually flows in and out of the business. Most accountants consider the accrual accounting

When do you use installment sales method vs. the cost recovery method?

July 9, 2024 No Comments

A: There are four primary methods that accountants use to recognize business sales revenue: percentage of completion, completed contract, cost recovery and installment sales. In some circumstances, complications in a transaction make it uncertain as to how much revenue from a particular sale is collectible

When does Q4 start and finish?

July 9, 2024 No Comments

A: Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins on October 1st. Other companies have financial years that end on odd dates; the financial year for Nike ends on May 31, for example.

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