What is an Adjusted Trial Balance and Adjusting Journal Entry

December 18th, 2015 Comments off
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We understand what is a trial balance. But what then is an Adjusted Trial Balance?

An adjusted trial balance is a trial balance taken from the general ledger accounts after ADJUSTING JOURNAL ENTRIES but before CLOSING ENTRIES have been posted.

Adjusting journal entry  is the record made of an accounting transaction giving effect to the correction of an error, an accrual, a write off, a provision for bad debts or depreciation,etc

It is important to understand what is an adjusted trial balance because this is a frequently asked bookkeeping topics whereby examiners will always give the candidates the initial trial balance and them items on adjusting journal entry to prepare the adjusted trial balance

What are the advantages and disadvantages of using Common Stock Financing from the viewpoint of the Corporation

May 25th, 2013 Comments off
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The advantages of using stock financing are:

  • Common stock does not obligate the firm to make fixed payments to stockholders
  • Carries no fixed maturity date
  • Increases the creditworthiness of the firm thus increasing the future availability of debt at a lower cost
  • Can often be sold more easily than debt if the firm’s prospects look potentially good but risky and
  • Financing with common stock serves as a reserve of borrowing capacity

The disadvantages of common stock financing to the corporation:

  • Issuing common stock extends voting rights and perhaps even control, to new stockholders
  • Gives new stockholders the right to a percentage of profits rather than to a fixed payment in the case of creditors
  • The cost of underwriting and distributing common stock is high
  • If common stock is sold to the point where the equity ratio exceeds that in the optimal capital structure, a firm’s average cost of capital will increase and its stock price will not be maximized and
  • Dividends paid to stockholders are not tax deductible as is interest paid to creditors.

Financial Accounting


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