Accounting Research

There are a number of ways companies can raise funds to finance upcoming projects, expansion and other high costs associated withoperation , the most common including debt and equity issues . Large corporations can choose which kinds of issues they offer to the public, and they base that decision on the type of relationship they want with shareholders , the cost of the issue and the need prompting the financing. When it comes to raising capital , some companies elect to issue preferred stock in addition to common stock or corporate bonds, but the reasons for this strategy vary among corporations. Preference shares act as a hybrid between common shares andbond issues . As with any produced good or service, corporations issue preferredshares because consumers -- investors in this case -- want them. Investors value preference shares for their relative stability and preferred status over common shares for dividends and bankruptcy liquidation. Corporations value them as a way to...

A security is a tradable financial asset . The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some jurisdictions the term specifically excludes financialinstruments other than equities and fixed income instruments. In some jurisdictions it includes some instruments that are close to equities and fixedincome, e.g. equity warrants . In some countries and languages the term " security" is commonly used in day-to-day parlance to mean any form of financial instrument, even though the underlying legal and regulatory regime may not have such a broad definition. In the United Kingdom, the national competent authority for financial markets regulation is the Financial Conduct Authority ; the definition in its Handbook of the term "security"[1] applies only to equities, debentures, alternative debentures, government and public securities, warrants, certificates representing certain securities, units, st...

What is Common Stock and Preferred Stock? Issuers of equity instruments can structure the rights associated with different classes of stock in any way that meets the needs of the company . Most common stock gives the owner one vote at shareholders' meetings , although not always. Some preferred stock grants one vote per share, while others provide more, fewer or no voting privileges at all. Preferred stock is given priority over common stock in the order in which creditors receive money in the event of a bankruptcy. Preferred shareholders receive funds after bondholders, but before common stock holders. Preferred stock also usually pays higher dividends than common stock. Some common stocks pay dividends, while others pay none. Younger, growing companies start-ups rarely issue dividends. Not paying a dividend does not necessarily reflect poorly on a company. However, abruptly reducing or eliminating a dividend after a long period of paying one can cause increase...

Statement  Of Cashflow In financial accounting , a cash flow statement, also known as statement of cash flows ,[1] is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents , and breaks the analysis down to operating, investing and financing activities. Essentially, the cash flow statement is concerned with the flow of cash in andout of the business . The statement captures both the current operating results and the accompanying changes in the balance sheet.[1] As an analytical tool, the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills . International AccountingStandard 7 (IAS 7), is the International Accounting Standard that deals with cash flow statements . People and groups interested in cash flow statements include: Accounting personnel, who need to know whether the organization will be able to cover payroll and other immediate ...

Solvency is the ability of a company to meet its long-termfinancial obligations . Solvency is essential to staying in business as it asserts a company’s ability to continue operations into the foreseeable future. While a company also needs liquidity to thrive , liquidity should not be confused with solvency. A company that is insolvent must often enter bankruptcy . BREAKING DOWN 'Solvency' Solvency directly relates to the ability of an individual or business to pay their long-term debts including any associated interest . To be considered solvent, the value of an entity’s assets, whether in reference to a company or an individual, must be greater than the sum of its debt obligations. Various mathematical calculations can be performed to help determine the solvency of a business or individual. Solvency Ratios Investors can use ratios to analyze a company's solvency. The interest coverage ratio divides operating income by interest expense to show a company...

The primary bookkeeping record in single-entry bookkeeping is the cash book, which is similar to a checking account (UK: cheque account, current account) register, but allocates the income and expenses to various income and expense accounts. Separate account records are maintained for petty cash, accounts payable and receivable , and other relevant transactions such as inventory and travel expenses. These days, single-entry bookkeeping can be done with DIY bookkeeping software to speed up manual calculations. Double-entry system A double-entry bookkeeping system is a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different nominal ledger accounts. Daybooks[edit] A daybook is a descriptive and chronological (diary-like) record of day-to-day financial transactions also called a book of original entry. The daybook's details must be entered formally into journals to enable pos...

Revenue recognition The revenue recognition principle is a cornerstone of accrual accounting together with the matching principle. They both determine the accounting period , in which revenues and expenses are recognized. According to the principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received. In cash accounting – in contrast – revenues are recognized when cash is received no matter when goods or services are sold. Cash can be received in an earlier or later period than obligations are met (when goods or services are delivered) and related revenues are recognized that results in the following two types of accounts: Accrued revenue : Revenue is recognized before cash is received. Deferred revenue: Revenue is recognized after cash is received. Revenue realized during an accounting period is included in the income .. International Financial Rep...

What is a 'Redemption' A redemption is the return of an investor's principal in a fixed-income security , such as a preferred stock or bond, or the sale of units in a mutual fund. Fixed-income securities are redeemed at par value on the maturity date, and called bonds are redeemed at a premium price above par. On the other hand, mutual fund investors redeem mutual funds shares , and the some mutual funds have minimum holding periods and back-end sales charges. BREAKING DOWN 'Redemption' The redemption of an investment may generate a capital gainor loss , and the taxation of capital gains is reduced by capital losses recognized in the same year. Capital gains and losses are recognized on both fixed-income investments and mutual fund shares. Examples of Capital Gains and Losses To compute the capital gain or loss on redemption, the investor needs to know the cost basis. Bonds can be purchased at a price other than the par amount (face amount) of t...

Property , in the abstract, is what belongs to or with something, whether as an attribute or as a component of said thing. In the context of this article, it is one or more components (rather than attributes), whether physical or incorporeal, of a person's estate ; or so belonging to, as in being owned by, a person or jointly a group of people or a legal entity like a corporation or even a society. (With that meaning, the word property is uncountable and so is not used with an indefinite article or as a plural.) Depending on the nature of the property , an owner of property has the right toconsume , alter, share, redefine, rent, mortgage , pawn, sell, exchange , transfer, give away or destroy it, or to exclude others from doing these things,[1][2][3] as well as to perhaps abandon it; whereas regardless of the nature of the property, the owner thereof has the right to properly use it (as a durable, mean or factor, or whatever), or at the very least exclusively keep it. In econo...

An income statement or profit and loss account [1] (also referred to as a profit and loss statement (P&L), statement of profit or loss, revenue statement , statement of financial performance, earnings statement, operating statement, or statement of operations )[2] is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period.[1] It indicates how the revenues (money received from the sale of products and services before expenses are taken out, also known as the “top line”) are transformed into the net income (the result after all revenues and expenses have been accounted for, also known as “net profit” or the “bottom line”). The purpose of the income statement is to show managers andinvestors whether the company made or lost money during the period being reported. One important thing to remember about an income statement is that it represents a period of time like the cash flow statement. This contrasts with the ...

Preferred stock is a special kind of equity ownership , while bonds are a common form of debt issue. Many consider preferred stock an investment that lands in between common shares and bonds. Despite many similarities, preferred stock is generally riskier than a bond and tends to have higher yields to compensate for that. In the event of corporate bankruptcy proceedings and liquidation, bonds take preference over preferred stock when receiving payments. Preferred Stock Preferred stockholders have a claim to ownership of a corporation just like common stockholders . The structure and rights granted by preferred stock varies from company to company. Unlike common shares, preferredshares do not come with voting rights. Preferred stock carries characteristics of fixed,dividend-paying securities such as bonds and offers appreciation and possible capital gains such as regular stock. In terms of the distribution of profits, preferred stock dividends are paid before common stock ...

Double entry is the fundamental concept underlying present-day bookkeeping and accounting. Double-entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts. I t is used to satisfy the equation Assets = Liabilities + Equity, in which each entry is recorded to maintain the relationship. BREAKING DOWN 'Double Entry' In the double-entry system, transactions are recorded in terms of debits and credits . Since a debit in one account will be offset by a credit in another account, the sum of all debits must therefore be exactly equal to the sum of all credits. The double-entry system of bookkeeping or accounting makes it easier to prepare accurate financial statements directly from the books of account and detect errors. Types of Accounts Bookkeeping and accounting are a way of recording business transactions in monetary terms. A business transaction is an exchange of financial inter...

  Double entry is the fundamental concept underlying present-day bookkeeping and accounting. Double-entry accounting is based on the fact that every financial transaction has equal and opposite effects in at least two different accounts . It is used to satisfy the equation Assets = Liabilities + Equity, in which each entry is recorded to maintain the relationship. BREAKING DOWN 'Double Entry ' In the double-entry system , transactions are recorded in terms of debits and credits . Since a debit in one account will be offset by a credit in another account, the sum of all debits must therefore be exactly equal to the sum of all credits . The double-entry system of bookkeeping oraccounting makes it easier to prepare accurate financial statements directly from the books of account and detect errors. Types of Accounts Bookkeeping and accounting are a way of recording business transactions in monetary terms. A business transaction is an exchange of financial interests b...

In double entry bookkeeping, debits and credits (abbreviated Dr and Cr, respectively) are entries made in account ledgers to record changes in value resulting from business transactions . Generally speaking, the sources for spending money in transaction account is credit (that is, an entry is made on the right side of the account's ledger) and what the money obtained with thecredits is destined as debit in transaction accounts (that is, an entry is made on the left side). The credits here could also be share capital, revenues , etc. and The debits here could be assets, dividends , etc. From a technical point of view the sides refer to the balance sheet placement of accounts. [1] Totaldebits must equal total credits for each transaction ; individual transactions may require multiple debit and credit entries to record.[2][3] The difference between the total debits and total credits in a single account is the account's balance. If debits exceed credits, the account h...

The differences and similarities between common stocks and preferred stocks are numerous. Both represent a piece of ownership in a company, and both are tools investors can use to try to profit from the future successes of thebusiness. The main difference between the two types of stock is that holders of common stock typically have voting privileges , whereas holders of preferredstock do not. However, preferred stockholders receive a fixed dividend from the company, while common shareholders may or may not receive one, depending on the decisions of the board of directors. When valuing common and preferred stocks, an investor must consider the different properties of each type. Common stock may not offer the possibility of dividends, but generally investors will hold this type of stock because they are expecting to capture profit through a capital gain, or an increase in the stock price. Preferred stockholders, on the other hand, are generally interested in receiving a ...

Retirement planning is the process of determining retirementincome goals and the actions and decisions necessary to achieve those goals . Retirement planning includes identifying sources of income , estimatingexpenses , implementing a savings program and managing assets . Future cash flows are estimated to determine if the retirement income goal will be achieved. BREAKING DOWN ' Retirement Planning' In the simplest sense, retirement planning is the planning one does to be prepared for life after paid work ends, not just financially but in all aspects of life. The non-financial aspects include lifestyle choices such as how to spend time in retirement, where to live, when to completely quit working, etc. A holistic approach to retirement planning considers all these areas. The emphasis one puts on retirement planning changes throughout different life stages. Early in a person's working life, retirementplanning is about setting aside enough money for retirement . Du...

A deferral , in accrual accounting , is any account where the asset or liability is not realized until a future date (accounting period), e.g. annuities, charges, taxes , income , etc. The deferred item may be carried, dependent on type of deferral, as either an asset or liability. See also accrual. Deferrals are the consequence of the revenue recognition principle which dictates that revenues be recognized in the period in which they occur, and the matching principle which dictates expenses to be recognized in the period in which they are incurred. Deferrals are the result of cash flows occurring before they are allowed to be recognized under accrual accounting. As a result, adjusting entries are required to reconcile a flow of cash (or rarely other non-cash items) with events that have not occurred yet as either liabilities or assets. Because of the similarity between deferrals and their corresponding accruals, they are commonly conflated. Deferred expense: cash has left th...

Bookkeeping is the recording of f inancial transaction s, and is part of the process of accounting in business.[1] Transaction s include purchases , sales, receipts, and payments by an individual person or an organization/corporation. There are several standard methods of bookkeeping, such as the single-entry bookkeeping system and the double-entry bookkeepingsystem , but, while they may be thought of as "real" bookkeeping, any process that involves the recording of financial transactions is a bookkeeping process. Bookkeeping is usually performed by a bookkeeper. A bookkeeper (or book-keeper) is a person who records the day-to-day financial transactions of a business . He or she is usually responsible for writing the daybooks, which contain records of purchases, sales, receipts, and payments. The bookkeeper is responsible for ensuring that all transactions whether it is cash transaction or credit transaction are recorded in the correct daybook, supplier's ledger,...

Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business , and it also refers to the process of summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities. Accounting is one of the key functions for almost any business; it may be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at large companies. BREAKING DOWN 'Accounting' The reports generated by various streams of accounting, such as cost accounting and management accounting , are invaluable in helping management make informed business decisions . While basic accounting functions can be handled by a bookkeeper, advanced accounting is typically handled by qualified accountants who possess designations such as Certified Public Accountant (CPA) in the United States, or Chartered Accountant (CA), Certified General Accountant (CGA) or Certified Management A...

Accounts receivable is a legally enforceable claim forpayment held by a business for goods supplied and/or services rendered that customers/clients have ordered but not paid for . These are generally in the form of invoices raised by a business and delivered to the customer for payment within an agreed time frame. Accounts receivable is shown in a balance sheet asan asset. It is one of a series of accounting transactions dealing with the billing of a customer for goods and services that the customer has ordered. These may be distinguished from notes receivable , which are debts created through formal legal instruments called promissory notes. Overview[edit] Accounts receivable represents money owed by entities to thefirm on the sale of products or services on credit. In most business entities, accounts receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an estab...

Ratio analysis is one of the oldest methods of financial statementsanalysis . It was developed by banks and other lenders to help them chose amongst competing companies asking for their credit. Two sets of financialstatements can be difficult to compare. The effect of time , of being in different industries and having different styles of conducting business can make it almost impossible to come up with a conclusion as to which company is a better investment . Ratio analysis helps creditors solve these issues. Here is how: What are Financial Ratios ? Shortcut: Financial ratios provide a sort of heuristic or thumb rule that investors can apply to understand the true financial position of a company. There are recommended values that specific ratios must fall within. Whereas in other cases, the values for comparison are derived from other companies or the same companies own previous records. However, instead of undertaking a complete tedious analysis, financial ratios helps inv...

The accounting for payroll involves all aspects of paying compensation andbenefits to employees. The outcome of this process is precise records regarding the expenses associated with all types of compensation, as well as timely payments to employees. Though some systems that incorporate more or less automation may not include all of these steps, the general process flow will apply to most payroll systems : Set up new employees . Have new employees fill out payroll-specificinformation as part of the hiring process, such as the W-4 form and medical insurance forms that may require payroll deductions. Set aside copies of this information in order to include it in the next payroll. Collect timecard information. Salaried employees require no change in wages paid for each payroll, but you must collect and summarize information about the hours worked by non-exempt employees. This may involve having employees scan a badge through a computerized time clock. Verify timecard inf...