Accounting 101 Formulas

Bonus

(Bonus % X Net Income Before Bonus)/ ( 1 + Bonus %)

Weighted average number of common shares outstanding

(beginning balance + ending balance) / 2

Revised Depreciation

(book value- revised residual value)/ revised useful life remaining)

Cash Ratio

(cash + cash equivalents)/ total current liabilities

Acid Test Ratio

(cash including cash equity + short-term investments + net current receivables)/ total current liabilities

Cost of New Equipment

(cost - accumulated depreciation) + cash exchanged

Depletion per unit

(cost - residual value) / units useful

Depreciation Method: double declining balance

(cost- accumulated depreciation) X 2 X (1/ useful life)

Depreciation Method: Straight-Line

(cost- residual value)/ useful life

Straight-line depreciation

(cost- residual value)/ useful life

Depreciation Value: Units of Production

(cost- residual value)/ useful life in units

Times Interest Earned Ratio

(net income + income tax expense + interest expense) % interest experience

Earnings per share

(net income - preferred dividend) % weighted average number of common shares outstanding

Return on equity

(net income - preferred dividend)/ average common stock equity

Days Sales in Receivables

365/ accounts receivable turnover ratio

Interest Expense

Carrying amount X Market Interest X Time

Resent Value

PV of principal + PV of stated interest

Amount of interest

Principal X Interest Rate X Time

Net sales revenue

Sales Revenue - discounts

Bad Debt: Percentage of Receivables

Target Balance +/- unadjusted balance of allowance for bad debts

Straight- Line (when not in full years)

[( cost - residual value)/ useful life] X ( number of months/ 12)

Double Declining Balance for First Year

[(cost - 0) X 2 (x/X)]

Double Declining Balance after First Year

[(cost -accumulated) X 2 (1/ number of years)] X ( number of months/ 12)

Average Common Stock Equity

[(total stockholder equity at time - preferred equity at time) + (total stockholder equity one year later - preferred equity one year later)]/ 2

Net realizable Value

accounts receivable - allowance for bad debts

Present Value

amount of each cash in flow X annuity PV factor for i= and n=

Equity Equation

assets - liabilities

Full accounting equation

assets = liabilities + (Revenue - (expenses + dividends))

Stockholders equity equation

beginning equity + common stock issued + net income (or - net loss) - dividends = end equity

Amount Paid on Notes Payable (notes payable with finance)

beginning notes payable balance + finance amount - ending notes payable

Ending Retained Earnings

beginning retained earnings + net income (or - net loss) - dividends

Solving for missing expense

beginning retained earnings + revenues - dividends - end retaining earnings = expense

Premium

cash - expense

Book value

cost - accumulated depreciation

Cash paid for merchandise inventory

cost of goods sold - beginning merchandise inventory + ending merchandise inventory + beginning accounts payable - ending accounts payable

Current Ratio Equation

current assets/current liabilities

Unit of production

depreciation/ depreciation units X current year usage

Target Balance

end balance of accounts receivable X %

Retained earnings balance at end of period equation

ending equity - common stock = ending retained earnings

Discount

expense - cash

Cash

face value X State Interest X Time

Operating Income

gross profit- operating expenses

Gross Profit %

gross profit/ net sales revenue

Solving for used items

items before adjustments - items used = items on hand

% of total value

land (or building) market value/ total market value

Total Market Value

land market value + building market value

Price/ Earnings Ratio

market price per share of common stock/ earnings per share

Inventory Shrinkage (adjusting entry)

merchandise inventory balance before adjustment - actual merchandise on hand

Free cash flow

net cash provided by operating activities - cash payments planned for investments in long-term assets - cash dividends

Net increase (decrease) in cash

net cash provided by operating activities - net cash used for investing activities = net cash provided by financing activities

Bad Debt: Percent of Sales Method

net credit sales X %

Accounts Receivable Turnover Ratio

net credit sales/ average net accounts receivable

Gross Profit

net sales - cost of goods sold

Cash receipts from customers

net sales revenue + beginning accounts receivables - ending accounts receivables

Asset Turnover Ratio

net sales revenue/ average total assets

Exchanging Asset

old asset book value + cash paid - cash received

Cash paid for other operating expenses

other expenses + beginning accrued liabilities - ending accrued liabilities

Preferred Dividend

outstand X par value X preferred dividend rate

Carrying Amount

previous carrying amount + discounts

Carrying Amount

previous carrying amount - premium

Net cost of inventory purchased (or net cost of merchandise inventory)

purchase cost of inventory - purchase returns and allowances - purchase discounts + freight in

Net Purchases

purchases - purchases returns and allowances - purchase discount

Net income equation

revenues - expenses

Bad Debt: Aging

target Balance +/- unadjusted balance of allowance for bad debts

Debt Ratio

total liabilities/ total assets

Debt to Equity Ratio

total liabilities/ total equity

Accounting Equation

Assets = liabilities + equity

Present Value

Future value X PV factor for i= and n=