What is Depreciation Expense? When a long-term asset is purchased, it should be capitalized instead of being expensed in the accounting period it is purchased in. Assuming the asset will be economically useful and generate returns beyond that initial accounting period, expensing it immediately would overstate the expense in that period and understate it in…
What is Current Debt? Current debt includes the formal borrowings of a company outside of accounts payable. This appears on the balance sheet as an obligation that must be paid off within a year’s time. Thus, current debt is classified as a current liability. This is not to be confused with the current portion of…
What is Accounts Payable (AP)? Accounts payable (AP) refers to the amount of money a business owes to its suppliers or vendors for goods and services received but not yet paid for. They are considered short-term liabilities and are typically due within 30 to 90 days. AP is considered one of the most current forms…
What are Intangible Assets? According to the IFRS, intangible assets are non-monetary assets without physical substance. Like all assets, intangible assets are expected to generate economic returns for the company in the future. As a long-term asset, this expectation extends for more than one year or one operating cycle. Intangible assets lack a physical substance…
What are the Objectives in Accounting for Income Taxes? Tax accounting is one of the largest subsets or specializations within the field of accounting. In terms of corporate finance, there are several objectives when it comes to accounting for income taxes and optimizing a company’s valuation. Main Objectives The three main objectives in accounting for…
Net Income Explained: How It’s Calculated and Where It’s Found Net Income Definition: Net income is the amount of accounting profit a company has left over after subtracting all of its expenses. It connects directly to the balance sheet and cash flow statement and is a key measure of financial performance. Also called net profit…
What is Earnings Before Tax (EBT)? Earnings before tax, or pre-tax income, is the last subtotal found in the income statement before the net income line item. The EBT metric is found after all deductions – except taxes – that have been made against sales revenue. These deductions include COGS, SG&A, depreciation and amortization, and…
What is Gross Profit? The Gross Profit (GP) of a business is the accounting result obtained after deducting the cost of goods sold and sales returns/allowances from total sales revenue. GP is located on the income statement (sometimes referred to as the statement of profit and loss) produced by a company and used to determine a…
What is Sales Revenue? Sales revenue is the income received by a company from its sales of goods or the provision of services. In accounting, the terms “sales” and “revenue” can be, and often are, used interchangeably to mean the same thing. It is important to note that revenue does not necessarily mean cash received….
