What is the Accounting Cycle? The accounting cycle is the holistic process of recording and processing all financial transactions of a company, from when the transaction occurs, to its representation on the financial statements, to closing the accounts. One of the main duties of a bookkeeper is to keep track of the full accounting cycle…
What is Stockholders Equity? Stockholders Equity (also known as Shareholders Equity) is an account on a company’s balance sheet that consists of share capital plus retained earnings. It also represents the residual value of assets minus liabilities. By rearranging the original accounting equation, Assets = Liabilities + Stockholders Equity, it can also be expressed as Stockholders…
What is a Non-Controlling Interest (NCI)? A non-controlling interest (NCI) typically occurs when a company owns more than 50% of another company but less than 100%. Since the first company (parent company) effectively controls the second company (subsidiary company), the parent will fully consolidate the subsidiary’s financials with its own. Accounting Treatment of Non-Controlling Interest…
What is the % Difference Formula? The % Difference Formula allows us to find the percentage difference between two numbers with either of the numbers used as the base number. The % difference formula takes as input two numbers – the base number and the new number – and gives as output the percentage difference…
What are the Qualitative Characteristics of Accounting Information? The demand for accounting information by investors, lenders, creditors, etc., creates fundamental qualitative characteristics that are desirable in accounting information. There are six qualitative characteristics of accounting information. Two of the six qualitative characteristics are fundamental (must have), while the remaining four qualitative characteristics are enhancing (nice…
What are Pro-Rata Participation Rights? Pro-rata participation rights, or pro-rata investing rights, guarantee existing investors the right to participate in future fundraising activities. Pro-rata participation rights allow private investors to maintain and/or expand their share of a business by participating in future funding rounds. As a result, the rights allow private investors to protect against…
What is Interest Expense? Interest expense is one of the core expenses found in the income statement. A company must finance its assets either through debt or equity. With the former, the company will incur an expense related to the cost of borrowing. Understanding a company’s interest expense helps to understand its capital structure and…
What is a Forensic Audit? A forensic audit is an examination of a company’s financial records to derive evidence which can be used in a court of law or legal proceeding. For example, Telemart, on the recommendation of its Chief Financial Officer (CFO), entered into a contract with RJ Inc for the supply of carts….
