A general ledger, or GL, is essentially the backbone of a company’s financial record-keeping system. It functions as a centralized repository that tracks all of a company’s transactions over time, organized by specific accounts. These accounts are categorized as assets, liabilities, equity, revenue, and expenses. The GL supports the double-entry accounting system, where each transaction…
What is
A Simple Explanation of Section 1231 Property & Its Taxation
Editor’s Note: This article focuses on the big-picture 1231 issues. It excludes details and exceptions that rarely make a difference and only serve to overly complicate things. It is intended for small business owners trying to understand how the tax is calculated on their asset sales, so if you’re a tax pro researching the nuances…
What Is a Blanket Mortgage? A Beginner’s Guide
A blanket mortgage (or blanket loan) allows a borrower to finance multiple properties under one financial agreement. It streamlines the lending process and saves time and money by cutting down on paperwork and various fees associated with applying for several individual mortgages. Seasoned real estate investors use it to manage both commercial and residential properties…
The Accounting Equation: What It Is & The Effects of Common Transactions
The accounting equation is the fundamental formula in accounting—showing that assets are equal to liabilities plus owner’s equity. It’s the reason why modern-day accounting uses double-entry bookkeeping as transactions usually affect both sides of the equation. The accounting equation is an accounting fundamental that bookkeepers need to master to be proficient. We express the accounting…
What SBA Economic Injury Disaster Loans Are & How They Work
SBA economic injury disaster loans (EIDLs) are designed to provide funding to businesses that have suffered substantial economic injury as a result of a natural disaster. Funds can be used to cover ordinary and reasonable expenses to help the business survive until normal operations can be resumed. EIDLs are, however, only available to businesses that…
Current Ratio: What It Is & How It Works [+ Calculator]
The current ratio, also commonly referred to as the working capital ratio, evaluates whether a company can cover its current liabilities with its current assets. The current ratio formula divides a company’s current assets by its current liabilities. It’s a useful calculation that can be used to determine if a company can pay its short-term…
Fixed Charge Coverage Ratio: What It Is & How to Calculate
Fixed charge coverage ratio (FCCR) measures a company’s ability to cover its fixed expenses from its earnings. Lenders may evaluate this as one of several factors in determining whether you qualify for a loan, as well as what interest rate and loan terms you qualify for. A fixed charge coverage ratio above 1.2 is required…
Borrowing Base: What It Is & How to Calculate [+ Calculator]
Borrowing base is a figure that refers to the largest loan amount you can get from a lender. It applies to secured loans and is calculated by taking the lender’s advance rate (sometimes also referred to as its loan-to-value limit) and multiplying it by the value of the collateral. As an example, if you have…