Instead, it is reflected through the accumulated depreciation account, which is a contra-asset account that offsets the corresponding asset’s original cost. But despite how commonplace fixed assets are, accounting for them can be a challenge. A clear understanding of fixed asset depreciation and the corresponding journal entries can help make the process easier. A depreciation […]

For this analysis, it is assumed that only pretax dollars were contributed, and the entire withdrawal is taxed. Withdrawals before age 59½ are generally subject to an additional 10% federal tax (and may be subject to additional state and local tax), the impact of which is not shown. unearned revenue 10 Qualified withdrawals from a traditional […]

For example, a project with an initial investment of $1 million and a present value of future cash flows of $1.2 million would have a profitability index of 1.2. Based on the profitability index rule, the project would proceed, even though the initial capital expenditure required are not identified. Profitability index (PI) is the ratio […]

For example, Company A has been in business for five years, and its annual report indicates consistent growth and high retained earnings. This information can lead investors to believe that the company is profitable, less risky, and has a positive performance trend. It might also suggest that Company A prefers to reinvest its profits into […]

While the contribution margin is the total dollar value of the money left over after variable costs have been deducted. Enter the selling price per unit, variable cost per unit, and the total number of units sold into the contribution margin calculator. 3) You can use contribution margins for setting prices for different services offered […]

That means it takes the business on average 51 days to collect on their invoices. It’s assumed sales made on cash are collected upfront (and would have a DSO of 0 as a result). Days sales outstanding (DSO) is a metric that every finance team should watch closely. It can look for businesses with unusually […]

The formula for calculating the sum of terms in a finite or infinite geometric progression is different. A harmonic progression (HP) is a progression obtained by taking the reciprocal of the terms of an arithmetic progression. A geometric progression (GP) is a progression where every term bears a constant ratio to its preceding term. It […]

Sales returns, allowances, and discounts are the three main costs that can affect net sales. All three costs generally how do you calculate net sales must be expensed after a company books revenue. As such, each of these types of costs will need to be accounted for across a company’s financial reporting in order to […]

Therefore, companies must identify such accrued expenses following the accrual accounting principle. These are the expenses that have become due but have not yet been paid by the company. At month or year end, a company will account for the current portion of long-term debt by separating out the upcoming 12 months of principal due […]

In contrast, Clothing, Accessories, and Home Goods businesses report the lowest median DSOs among all sectors tracked by Upflow. Having a higher average collection period can lead to increased carrying costs, such as interest on borrowed funds, as well as reduced cash flow and potential lost opportunities for investment and growth. Every business has its […]