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Companies must follow a common set of rules when reporting sales, earnings, profit margins, and company growth. As management  of publicly traded companies fall under greater pressure to please Wall Street, the rules are sometimes compromised. Though most company executives go out of their way to avoid any misrepresentation of financial statements, a slate of […]

GAAP permits two methods for estimating the bad debt expense and the allowance for doubtful accounts: a percentage of credit sales and the method discussed in this section, a percentage of ending accounts receivable. Whereas the percentage of credit sales emphasizes matching the bad debt estimate with the same credit sales for the period, the […]

Net realizable value (NRV) refers to the amount of cash expected to be received from the selling of an asset. For accounts receivable, for example, net realizable value refers to the amount of cash the company expects to receive from its accounts receivable, which is the balance net of estimates for bad debts. Net Realizable […]

Fixed assets are recorded at historical cost per US GAAP requirements. Land The main difference between land and other property plant and equipment is that land is not subject to a depreciation expense, but retains its value at its historical cost for years or even decades. Land is recorded on a company’s balance sheet at […]

Accountants in the U.S. are required to measure financial information using the historical cost principle. Reporting at historical cost is only the starting point. Asset values on the balance sheet follow a mixed set of accounting rules and regulations. This currently makes financial reporting somewhere in between reliable and relevant. The Accounting Medley, or Mixed […]

Accounts Receivable Definition Accounts receivable shows the amount owed to the company from customers who purchased products or services on credit. Accounts receivable is a current asset because it represents a claim to cash that a company expects to receive within one year. Accounts Receivable Description An extension of credit is offered from one company […]

Mark-to-market is a subset of fair value accounting. Fair value accounting refers to valuing assets and liabilities on the balance sheet at fair or market value. Mark-to-market is used interchangeably with fair value accounting, though technically it means bringing gains and losses of certain financial instruments onto the income statement. Mark-to-Market Accounting and the Financial […]

Thanks to the Small Business Jobs Act (SBJA) of 2010, qualifying businesses can now expense up to $500,000 of section 179 property for tax years beginning in 2010 and 2011. For example, if you purchased a computer in 2010, you can deduct the entire cost of the computer, including sales tax, set-up fees, and shipping […]