ASC 842 requires private companies to record nearly every lease longer than 12 months as a right-of-use asset and lease liability. This guide covers the lease definition tests, operating versus finance classification, discount rate options including the risk-free rate election, the seven most common implementation pitfalls, and how the changes ripple through covenants, EBITDA, and audit work.
ASC 842 requires private companies to capitalize nearly every lease longer than 12 months as a right-of-use asset and a lease liability. This guide walks through the five-criteria classification test, the six-step calculation, the risk-free rate and short-term lease expedients, and the audit findings that most often trigger restatements.
Liabilities are every dollar your business owes—from next month's supplier invoice to a 20-year mortgage. Learn the types of liabilities, how they appear on your balance sheet, key ratios to monitor, and practical strategies to manage them.
Owner's equity is the most honest measure of your business's financial health—and most small business owners don't check it enough. Learn what it is, how to calculate it, what changes it, and how to use it to build long-term wealth.
Learn what equity means in accounting, how to calculate it using the accounting equation, understand the difference between owner's equity and shareholders' equity, what negative equity signals, and practical strategies to grow your business equity over time.
Learn what liabilities are in accounting, the difference between current, non-current, and contingent liabilities, key financial ratios for analyzing debt, and practical strategies to manage your business obligations effectively.
Learn what assets, liabilities, and equity are, how the accounting equation (Assets = Liabilities + Equity) works with real examples, types of each category, key financial ratios, and common mistakes to avoid.
Learn what retained earnings are, how to calculate them using the simple formula, real-world examples, what negative retained earnings mean, common mistakes to avoid, and how to use retained earnings strategically for business growth.
