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=
