Financial Accounting

The vertical analysis provides a correlation between one line item in a financial statement and its top-line or baseline item. It is calculated by adding a column in the financial statement and the results are shown in percentage terms. It offers valuable information to internal and external stakeholders and can be used in different situations. […]

Debt financing fee is amortized over the life of the debt under the GAAP rules. The borrower incurs different types of debt issuing or financing costs. Let us discuss what are financing costs and how they should be amortized over the period of the debt instrument. What are Financing Costs? Financing costs refer to the

A temporary account provides an accumulated balance of a specific account type for one accounting period only. It starts and ends with a zero balance for each accounting period. Let us discuss what is a temporary account, its different types, and its key differences from a permanent account. What is a Temporary Account? A temporary

A permanent account is an ongoing source of information for an entity. It reflects the carrying balance of a particular account on the balance sheet of an entity at any time. Once created, a permanent account is maintained throughout the life of a business. Its current balance is reconciled periodically to reflect the accumulated balances

Subletting and subleasing are similar rental agreements where a third party joins an existing arrangement between a landlord and a tenant. A sublet and sublease contract has some similarities and key differences. What is Sublet? A subletting contract allows a landlord or owner of a property to include a subletter in an existing leased contract

Deferred revenue is unearned income that a business received in advance. It is recorded as a current liability on the balance sheet of a business. Once the seller delivers the promised goods/services, the current liability is removed and turned into earned revenue in the income statement. Let us discuss what is deferred revenue, how it

Depreciation, amortization, and depletion are all cost allocation methods for different types of long-term assets owned by businesses. All of these are accounting terms with non-cash entries and effects on profits. These accounting methods help companies follow the accrual accounting principles of matching entries. Let us discuss what these terms and the key differences between

The current and quick ratios are good indicators of the short-term liquidity of a business. These ratios can also provide help in analyzing the long-term solvency as well. Both ratios use a similar form of current assets and current liabilities. However, the interpretation of both these ratios varies with some key differences. What is the

What is a Quick Ratio? The quick ratio is the short-term liquidity test of a business. It is an accounting ratio that measures the ability of a business to pay current liabilities using cash and cash equivalents. The quick ratio considers assets that can be converted quickly into cash, hence the name quick ratio. The

A nominal ledger is the primary source document for the accounting records of a business. It forms the basis of an accounting system in any business. Nominal ledger records all financial transactions categorizes them into different classes and provides useful information to the users. Let us discuss what is a nominal ledger, how it works,