What determines ability to delay gratification?
What determines ability to delay gratification? Like almost every other complex human ability, the capacity to delay gratification has both environmental and genetic causes. There is no way to specifically quantify the relative contribution of each factor. Depending upon the theoretical and political orientation of the researchers you will see different percentage allocations. Some theorists […]
What are the first three steps to retirement planning?
First, realistically estimate your future retirement needs. Second, consider your savings and investment options considering your tolerance for risk. Finally, start and keep saving until you have accumulated sufficient resources to meet your retirement needs. I do not believe that there are five clear stages to retirement. There is simply too much variation in people […]
What are the four types of savings?
What are the four types of savings? If by savings, you mean investment options here is a list of common general categories: Money Market, CDs Savings Accounts Annuities Equities Fixed income securities Real Estate Collectables Crypto Currency Of course, within each category, there are many subcategories. Just as an example under the category of fixed […]
What are the 4 principles of GAAP?
What are the 4 principles of GAAP? GAAP specifies many rules on accounting measurement pertinent to commonly encountered transactions in the modern business and not-for-profit environment. There are currently 168 separate standards called Statements of Financial Standards (SFAS). However, there are ten general standards that at least in theory underlie the foundation of the specific SFAS. […]
Who is required to have a statement of functional expenses?
Who is required to have a statement of functional expenses? GAAP requires the preparation of a Statement of Functional Expenses for all not-for-profit organizations. Organizations required to file IRS form 990 must include a Statement of Functional Expenses. As an alternative to the income statement, the Statement of Functional Expenses (SFE) attempts to measure a […]
What is anti fraud management?
What is anti fraud management? The primary method used to prevent fraud is the adoption of adequate internal controls. Internal controls are the policies and procedures that a business can take to safeguard its assets, ensure accuracy of financial reporting, and prevent fraud. There are several widely used internal control procedures to prevent employee theft. […]
Do audit firms have to rotate?
The Sarbanes-Oxley Act of 2002 only requires mandatory rotation of the lead audit partner by prohibiting the same partner from performing audit services of a publicly traded company for more than five consecutive fiscal years. Thus, the same CPA firm can keep auditing a firm in perpetuity as long as it rotates out the audit […]
What is interpreting in financial accounting?
What is interpreting in financial accounting? Answers Accounting’s imprecision and thus its constraints derive primarily from four factors. First, it is difficult to pin down exact criteria for measuring economic performance and economic condition. Second, accounting uses money as its fundamental measurement unit, and money’s unit value is not stable over time. Third, accounting rule […]
What are the 4 main risks of investing?
What are the 4 main risks of investing? Answers: There are actually five frequently identified components of investment risk: business risk financial risk liquidity risk exchange-rate risk country-specific risk Business risk relates to the uncertainty of a company’s future cash flows. Financial risk concerns a company’s ability to manage the financing of its operations. Liquidity […]
How do you value goodwill for a small business?
How do you value goodwill for a small business? Answers: The goodwill value of a business reflects the fair market value of a firm’s tangible assets plus the value of its competitive advantage that would be available to a new owner. Competitive advantage is usually a function of the firm’s previous and continued success in […]
What is the difference between book value and liquidation value?
What is the difference between book value and liquidation value? Answer: Book value represents the difference between assets valued at historical cost less liabilities. Liquidation value represents the difference between the fair market value of assets sold on a piecemeal basis and less liabilities. Rarely are the two standards of value equal. What is the […]
Is compensation a profit?
Video: Profit vs. Compensation Is compensation a profit? Answer: Distinguishing between profit and compensation expense can be problematic. In many, if not most, small firms the owners are actively engaged in operating the business. These owners contribute investment dollars and many hours of full-time service to their businesses. Is compensation a profit? Cash payments from […]
benefits of tax incentives
benefits of tax incentives Answer: Congress creates special tax provisions rewarding certain types of taxpayer behavior. Investment in the stock market is rewarded by taxing long-term capital gains and dividends at a lower rate than other forms of income. Attending college is incentivized by giving tax credits for tuition payments. Climate change abatement is incentivized […]
What is the liquidity meaning?
Video: Liquidity and Collateral What is liquidity meaning? Answer1: Liquidity refers to the availability of cash to the business. Liquidity is mainly a function of profitability. Ordinarily, the more profitable the business, the more cash available. However, liquidity is not simply a function of profitability, and firms of comparable profitability do not necessarily have […]
How can you ensure the reliability of its financial statements?
Video: Internal controls and reliability of financial statements How can you ensure the reliability of its financial statements? Answers: There is no greater example of the garbage in, garbage out principle than financial statement preparation. The problem is that financial statement users cannot usually assess the presence of garbage simply by reading the statements. The […]
What are the main steps of the accounting cycle?
Video: The Accounting Cycle What are the main steps of the accounting cycle? Answer: Traditionally the accounting cycle included these steps: Entering transactions in the books of original entries such as disbursement journals. Posting entries to the general ledger. Preparing any needed adjusting entries at the end of the accounting period. Preparing financial statements. […]
Do fixed assets have depreciation?
Video: Fixed Assets and Depreciation Do fixed assets have depreciation? answer: The matching principle dictates that the cost of fixed assets such as machinery, furniture, and real estate ought to be spread over the number of periods that they will help generate revenue. The matching principle states that the timing for recognizing revenue and expenses […]
What is lower of cost or market rule discuss with examples.
What is lower of cost or market rule discuss with examples. Answers: Ending inventory is recorded and reported at its cost to the firm. This means that the inventory reported on the balance sheet does not reflect its retail value. There is one circumstance in which GAAP requires a firm to adjust its inventory to […]
What are the two basic procedures for accounting for inventory?
What are the two basic procedures for accounting for inventory? Answers: There are two different bookkeeping methods for inventories: the perpetual and periodic methods. Both methods lead to the same results, so the choice mainly depends on the sophistication of the firm’s accounting system. In the perpetual method, all inventory acquisitions are recorded as asset […]
How do you calculate cost of goods sold for inventory?
Video: Inventory and cost of goods sold How do you calculate the cost of goods sold for inventory? Answers: Cost of Goods Sold = Beginning Inventory + Purchases – Ending Inventory: Usually ordinary and recurring losses in inventory due to spoilage and small amounts of theft are included in the cost of goods sold. […]
What is the Difference Between prepaid Expenses and deferred Revenue expenses?
Video: Prepaid expenses and deferred revenue What is the Difference Between Prepaid Expenses and deferred Revenue expenses? Answers: Some businesses are in the fortunate position to be able to demand cash payments in advance of providing goods or services. For example, building lessors typically require a month’s rent in advance and insurance companies collect […]
What is the difference between accounts payable and payroll?
Video: Accounts payable and wage withholding What is the difference between accounts payable and payroll? Answers: Accounts Payable represents amounts owed to third-party non-governmental vendors. Payroll tax liabilities are amounts owed to governmental units for liabilities arising out of wage payments to a company’s own employees. Withholding payables are most definitely liabilities! In fact, […]
What are the basic problems that occur in the valuation of accounts receivable?
What are the basic problems that occur in the valuation of accounts receivable? Answers: Sometimes customers fail to make good on what they owe. This failure to pay may be willful, but often it is not. Usually, customers intend to pay for the goods and services they acquire, but due to unforeseen economic setbacks or […]
What is considered as accounts receivable?
Video: Accounts Receivable What is considered accounts receivable? Answers: In accrual accounting, revenue is recorded when earned, and expenses are recorded when incurred. A customer’s obligation to later pay for goods and services previously provided is called accounts receivable. An accounts receivable clerk prepares, posts, verifies, and records customer payments and transactions related to accounts […]
Which is better accrual or cash basis accounting?
Which is better accrual or cash basis accounting? Answers: Because of the potential economic distortions caused by recording only cash transactions, GAAP requires revenue and expenses to be recorded on an accrual basis. This means that a business records revenue when the earning process is complete, not necessarily when cash is received. For example, a […]
What are cash and credit transactions?
What are cash and credit transactions? Answers: Cash transactions involve receipt and disbursement of checks, cash, and coins. Credit card receipts are also considered cash transactions. When goods or services are rendered to customers the cash account is debited and a revenue account is credited.
How do you enter cash disbursement?
How do you enter cash disbursement? Answers: A cash disbursement journal is sometimes called a check register. A cash disbursement journal is designed to capture all the important elements of each cash disbursement. Below is an example of a cash disbursement journal. The first column indicates the date of the payment. The second column indicates […]
What are transactions examples?
What are transactions examples? Answer. Here is an example of some common transaction postings. Transaction 1. Jim Morrison, a licensed pilot, starts an air transport company called Joint Ventures. The company specializes in delivering agricultural products between Central America and the southern United States via small planes. His business will be organized as a proprietorship. […]
What are the three rules of debit and credit?
What are the three rules of debit and credit? Answer: Debit and Credit posting rules can be summarized in this table: Analyzing Transactions: Revenue and Expenses : The most common transactions involve revenue and expense accounts. When a firm sells products or provides services it earns revenue, so a revenue account must be increased. This […]
What are the three accounts in an income statement?
What are the three accounts in an income statement? Answers: There are numerous types of revenue and expense accounts. Some of the more typical revenue and expense accounts are described below. Revenue Accounts Sales: income from selling goods to customers. Interest Income: income from lending money or extending credit to customers. Rental Income: income from […]
what Differences Between Debit and Credit in Accounting?
Video: Debit and Credits Answer: what Differences Between Debit and Credit in Accounting? The collection of all accounts is called the general ledger. All general ledger accounts should be thought of as specially formatted records shaped as a big “T”. For example, think of the Cash account as looking like this: The importance of the […]
How do you do balance sheet and income statement?
How do you do the balance sheets and income statements? Answers: After all, adjustments are made, the final trial balance can be used to prepare the balance sheet and income statement. A balance sheet reports what a business owns (assets), what it owes (liabilities) and what remains for the owners (equity) as of a certain […]
Which is the fundamental accounting equation?
Video: The Fundamental Accounting Equation Which is the fundamental accounting equation? Answer: Assets = Liabilities + Equity You also see this equation based on the above: Equity = Assets – Liabilities Sometimes you see this equation for simple cash basis accounting Ending Cash = Beginning Cash + Cash Deposits – Cash Withdrawals
How do you make projections of financial statements?
Video: Financial Statement Projections How do you make projections of financial statements? Answer Typically, projections are made based on past performance reflected in prior financial statements. However, there is wide variation in how these past financial statements are used. The simplest method starts by applying fixed percentage adjustments to the most recent period results. So, […]
What is a non sunk costs?
What are a non sunk costs?Answers: Assets are sometimes referred to as unexpired costs to emphasize the fact that the expenditure will create benefits for future accounting periods. But these assets (unexpired costs) also come in two flavors: recoverable assets versus nonrecoverable assets. Most assets are recoverable at least to a degree. You buy a […]
What is break-even analysis with examples?
What is break-even analysis with examples? answer; to compute the breakeven point, the amount of sales volume needed to breakeven, the following formula is used: Breakeven Point In Dollars = (SP-VC)*X – FC X= Units needed to breakeven SP= Unit selling price VC = Unit variable costs FC= Total annual fixed costs Often the difference […]
What is an example of a sunk cost?
What is an example of a sunk cost? Answer: Sunk costs are incurred in the past that cannot be recovered and thus are irrelevant for decision-making. Here is an example. Example You invest $2,000,000 in special equipment to manufacture a certain model of a desk lamp. Excluding the original investment of $2,000,000, the unit cost […]
What are the methods of time value?
What are the methods of time value? All time value computations are derived from the basic compound interest formula with modifications for special applications, Here are the most common time value applications: Compound Interest Computations. Mortgage and Other Fixed Interest Payment and Amortization Computations. Bond Pricing. Defined Benefit Pension Planning. Capital Budgeting Forecasts A complete list […]
What are the five basic functions of time value of money?
What are the five basic functions of the time value of money? Answer The most common uses of time value are as follows: Compound Interest Computations. Mortgage and Other Fixed Interest Payment and Amortization Computations. Bond Pricing. Defined Benefit Pension Planning. Capital Budgeting Forecasts. The formulas used are as follows:
How do you avoid numerical error?
How do you avoid numerical errors? user interfaces (GUIs) in which you must enter each parameter in a different cell. If you do not provide the correct parameter or the parameter in the correct format you could easily get a wrong answer and not realize it. It’s the old garbage in garbage out problem. Sometimes […]
What do you mean by capital budgeting?
Video: Capital budgeting What do you mean by capital budgeting? Capital budgeting is the process a business uses to decide what services or products to develop or support and which ones not to. Capital budgeting also involves decisions on how best to provide or support a product or service, A typical capital budgeting process is […]
What is bond price example?
Video: Bond price What is bond price example? Bonds that can be easily bought and sold in securities markets are known as publicly traded bonds. Time value formulas come into play in determining the fluctuating prices of these bonds. It is generally true that when bonds are initially issued and sold the face value of the […]
How long is a mortgage amortized?
Video: Mortgages and Fixed Payment Loans How long is a mortgage amortized? In today’s mortgage markets borrowers have a wide variety of choices. They can choose 15- or 30-year fixed interest rate mortgages, which means that the balance is paid off in 15 or 30 years at a fixed interest rate. The short-term and long-term […]
How is interest rate determined or set?
Video: Interest rate setting How is interest rate determined or set? Perhaps the most important interest rates in modern economies are determined not directly by market forces but by fiat through the actions of powerful central banks. In the United States, the Federal Reserve Bank (The Fed) sets benchmark interest rates that chartered banks apply in […]
How do you calculate compound interest?
Video: Compound Interest How do you calculate compound interest? There are two methods by which a bank might pay you interest: simple and compound. Suppose you deposit $5,000 in a savings account. The simple method is based only on your original $5,000 deposit. The more typical way banks credit interest is the compound interest method. […]
What is the journal entry for lease?
What is the journal entry for lease? Businesses can enter into two types of leases: operating and capital or financing leases. Typical operating leases include office or retail space rental or short-term equipment rental. Financing or capital leases look like operating leases on the surface but are in economic substance financed asset sales. GAAP specifies […]
What are the 2 basic type of frauds?
What are the 2 basic type of frauds? Two basic accounting frauds involve inventory and account receivable. The accounts receivable balance that shows up in the asset section of a balance sheet is almost always an estimate of what accounts are actually collectible. It is an estimate because even if management can identify the precise […]
What is corporate restructuring with example?
What is corporate restructuring with example? Restructuring occurs when a company makes significant changes to its financial or operational structure, usually while under financial duress. Typical strategies include debt consolidation, spin-offs of operating divisions, plant closings, and layoffs. Example Having experienced declining market share and profits Mizer Pharmaceuticals lays off 30% of its staff, closes […]
Why is integrity important to CPA?
Why is integrity important to CPA? CPAs are responsible for ensuring the accuracy and completeness of financial information needed to efficiently allocate resources in a market economy. CPAs also are often responsible for compliance with tax and regulatory requirements. Failure by CPAs to fulfill these responsibilities can create a major loss of trust in financial […]
Advantages of unlimited liability company
Advantages of unlimited liability company Unlimited liability firms include sole proprietorships and general partnerships. In these firms, the owners have unlimited liability for the actions of the business. The distinction between limited and unlimited liability businesses boils down to the extent to which an owner can be sued for the actions of the business. Limited […]
