accommodation in BournemouthThe following are brief descriptions and explanations of terms and concepts related to financial statements. Accrual Basis of Accounting This methodology recognizes revenue and expenses when a service is performed or goods are delivered, regardless of when payment is received or made. This method allows what accountants call the matching of revenues and associated expenses. Revenue example: If a store sells $500 worth of radios in a day, $500 of revenue is earned and entered in the books even though the proceeds of the sale may not be collected for a month or longer. Expense example:Hoteles de estadia nocturna Bologna If the store clerk earns a $10 commission on the day of the radio sale, this expense to the business is recorded that day even though it may not actually be paid until the next payroll day. Receivables Aging This report lists a customer's name, credit limit, total balance and any amounts 30, 60, 90 or more than 90 days past due. By preparing this report once a month, an owner can spot trends and plan next month's collection efforts. Amortization Amortization is the gradual reduction of debt by means of equal periodic payments sufficient to meet current interest and liquidate the debt at maturity. It includes the process of writing off against expenses the cost of a prepaid, intangible asset over a fixed period. Appreciation Appreciation is any increase from the acquisition price of a fixed asset or investment to current appraised market value. However, for financial statement purposes, appreciation is not considered because of the following four accounting concepts: - The Objectivity Principle: This necessitates an appraisal of each asset's market value per accounting period and is a costly and highly variable endeavor.
- The Continuing AssumptionCasino bonussen: This assumes that fixed assets are acquired for continuing business operations and not for resale.
- The Principle of Conservatism: Given a choice of values, an accountant will always choose the more conservative.
- Financial statements reflect the original costs.
Cash Basis of Accounting As its name implies, this method recognizes revenue and expenses only when cash payment is actually received or made. Because it does not properly match income and expenses (see Accrual Basis of Accounting in this section), the cash basis does not always provide an accurate picture of profitability and is less commonly used than the accrual basis. The Internal Revenue Code places certain restrictions on the use of cash basis accounting for computing income tax liability. For further information, contact a tax advisor. Cash Flow Cash flows fall into two categories: inflows and outflows. Inflows include revenues from sales, proceeds from loans and capital injections by owners. Outflows include costs of sales, operating expenses, income taxes, repayment of loans and distribution to owners. Cash is used to purchase materials, to pay for overhead expenses, to pay labor and to market merchandise. By studying a company's individual cash flow cycle, the owner can determine the firm's working cash needs. These will include day-to-day needs, as well as possible increases in the costs for materials, labor and overhead. By being aware of these cash needs, the owner can achieve a balance between cash use and profits. Common-Size This is a term applied to financial statements that use 100 percent of one category as the basis for determining the proportion that other statement items represent. Net sales is used as the basis figure for Income Statements, and total assets is used for Balance Sheets. Since the total always sums to 100 percent, the statements prepared in this manner are referred to as "common-size." This form of comparative statement enables the analyst to see at a glance the Balance Sheet trends and the proportionate changes taking place in the individual accounts from one statement period to the next. Depreciation This is a universal accounting assumption holding that all fixed assets—with the exception of land—deteriorate, wear out or become obsolete. This process represents a decline in value that is called depreciation. It is calculated by apportioning an asset's original acquisition price, minus any expected salvage value, over the asset's expected years of useful life. (For accounting purposes, land is always valued at its original purchase price.) On the Income Statement, depreciation incurred during the accounting period is detailed as an expense. On the Balance Sheet, depreciation is reflected by an asset's listed net book or net carrying value (cost less accumulated depreciation). The simplest means of calculating depreciation is by the straight-line method. Using it, accountants divide the estimated useful life of an asset into its purchase price minus any applicable salvage value. For example, an $11,000 machine has a $1,000 salvage value and an expected useful life of 10 years. Annual depreciation = ($11,000 - $1,000) 10 = $1,000. In five years, straight-line accumulated depreciationhoteles Goteborg would be $5,000. There are other common calculation methods that allow more accelerated depreciation of fixed assets. These methods distribute the original acquisition cost more heavily during an asset's early years. Accountants can show owners the various means to determine this depreciation, which is more complex than straight-line. Depreciation computed according to the GAAP rules is not necessarily the same as that computed to comply with the Internal Revenue Code. For further information, consult a tax advisor. Inventory Valuation Because inventory units are usually purchased at varying prices, methods have been established to calculate the cost of goods sold and the value of remaining inventory. Three widely used methods are: Average Cost: The total number of units of goods available is divided into the total manufacturing or acquisition cost (including freight charges to get the raw materials to the manufacturer's or supplier's location). FIFO: An acronym for "first in, first out." This method is based on the assumption that the inventory acquired first is sold first. Consequently, the ending (remaining) inventory consists of the most recently purchased items. An advantage of this method of valuation is that it reflects recent costs of inventory on the Balance Sheet. LIFO: An acronym for "last in, first out." This method of valuation assumes that those items of inventory most recently acquired are sold before the older acquisitions. As a result, the ending inventory figure consists of the older purchases. Proponents of this valuation method argue that by representing current prices in the cost of goods sold, matching is more accurately accomplished. Example:
The first item in costs $100, the second costs $300 and the third costs $500. Two of these units are sold. Calculated by average cost:
$100 + $300 + $500 = $900 3 = $300. Therefore, the cost of goods sold = $600 (2 units x $300); the remaining inventory is valued at $300. Calculated by FIFO, the cost of goods sold is $100 + $300 = $400; the remaining inventory is valued at $500. Calculated by LIFO, the cost of goods sold is $500 + $300 = $800; the remaining inventory is valued at $100. Leverage Leverage is the concept of borrowing heavily for financing needs in order to minimize the capital investment and maximize the return on investment. Liquidate To liquidate is to convert non-cash assets into cash. It also means to close the business by selling all assets and paying all debts. Liquidity This refers to the ease with which items can be converted into cash without loss. Negative Cash Flow This refers to cash receipts that are insufficient to meet ongoing costs and other cash needs, such as necessary investment in fixed assets or expanded inventory. Working Capital Working capital is the difference between total current assets and total current liabilities. It is also the resulting pool of resources readily available to maintain normal business operations. | 
