Category Archives: Bookkeeping

Normal Balance of Accounts: Definition and Examples

Here’s a table summarizing the normal balances of the accounting elements, and the actions to increase or decrease them. Notice that the normal balance is the same as the action to increase the account. When you place an amount on the normal balance side, you are increasing the account. A normal balance is the side […]

Financial Ratios

This measure is used to gauge the efficiency of the business before taking any financing means into account (such as debt financing and tax considerations). This ratio is often used to compare the operating efficiency between similar businesses. Determining individual financial ratios per period and tracking the change in their values over time is done […]

LO 5 2 Prepare a Post-Closing Trial Balance v2 Principles of Accounting Financial Accounting

There are three main types of trial balance reports that you can run, with each trial balance run during a specific part of the accounting cycle. After posting the above entries, all the nominal accounts would zero-out, hence the term “closing entries”. Here are a few key differences between the adjusted trial balance and closing-trial […]

Introduction to Financial Statement Analysis

Much of the annual report is based on the 10-K, but contains less information and is presented in a marketable document intended for an audience of shareholders. Securities and Exchange Commission or SEC and tends to contain more details than other reports. Generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS) are used to prepare financial statements. […]

Par value stock definition, explanation, journal entries and example

Get instant access to video lessons taught by experienced investment bankers. Learn financial statement modeling, DCF, M&A, LBO, Comps and Excel shortcuts. Notably, par value for a bond is different, referring to its face value, or full value at maturity. Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and […]

Degree of operating leverage definition

Companies use DCL to figure out what their best levels of financial and operational leverage are so they can maximize their profits. Even a rough idea of a firm’s operating leverage can tell you a lot about a company’s prospects. In this article, we’ll give you a detailed guide to understanding operating leverage. You can […]

How to Calculate Overhead Costs in 5 Steps

The resulting figure, 20%, represents our company’s overhead rate, i.e. twenty cents is allocated to overhead costs per each dollar of revenue generated by our manufacturing company. Of course, management also has to price the product to cover the direct costs involved in the production, including direct labor, electricity, and raw materials. A company that […]