What is the formula for return on Assets? Follow up question. Why is average used for the assets?
You can solve for return on assets using the formula Operating income divided by the average assets. Average assets is used for the formula because return on assets is computing for the return on each peso of assets used. Asset in nature is a real account, meaning it is a balance accumulated in years. An operating income pertains to a nominal account, a balance that is arrived per year. To match the timing of the accounts, assets is averaged to see how much is the actual increase of asset for a period and not in time. It agrees with the matching principle on timing.
Solve for x and y using the comparison method: 1st equation: 4x + y = 6 2nd equation: 3x + 5y= 10
To solve for x, we have to rewrite the first equation to y = -4x + 6. Then, substitute (-4x + 6) to the y in the second equation. After substitution, the equation will look like: 3x + 5 (-4x+6) = 10 Thereafter, what we have to do is to simplify the equation by performing multiplication and addition. After multiplying, the equation will now be: 3x -20x +30 = 10 Then, add numbers of similar nature so that the simplified equation will show: 3x - 20x = 10 - 30 After this, simplified equation will show like this: -17x = -20 With that, we can now solve for x by simply dividing -20 by -17 and the final answer is x= 1.17647059 or 1.18 when rounded off. Now that we have the value of x, we can easily solve for the value of y. Choose any one of the equation above, say the first equation (4x + y = 6). The equation showing the value of x will look like this: 4(1.18) + y = 6 After doing the math, the equation will look like this: 4.72 + y = 6 Simplified equation will look like this: Y = 6 - 4.72 Then the value of y will be 1.28 Now, Let's check our answers in the other original equation, 4x + y = 6. 4 (1.18) + 1.28 = 6 4.72 + 1.28 = 6
What's the difference between liability and provision in accounting? How are these recorded in accounting?
A liability is an account that resulted from a past event that requires the entity or individual to give up his/her resources in order to satisfy the liability. It can be measured reliably and it is more likely than not that resources will be given up for this account. A provision meets all the criteria of a liability but the timing and amount of the liability is not certain. Both accounts are recorded in the financial statements if they are probable. Probable accounts are those that has 51% or more to happen. If the account is not probable or considered contingent to happen, this shall be disclosed in the notes to the financial statements but not recorded as a line item in the balance sheet. This means only liabilities and provision are seen on the Statement of financial position but not those of contingent liabilities The entry to record liabilities would be: Debit ASSET/EQUITY/EXPENSE account (e.g Equipment) Credit LIABILITY (e.g. Accounts Payable). For provision: Debit ASSET/EQUITY/EXPENSE account (e.g Loss on litigation) Credit LIABILITY (e.g. Provision for loss on litigation) *Mostly, litigation that are probable to losses are recorded since they are expected to be paid in the near future but are only uncertain as to how much.