See inventory conformity rule.
See inventory conformity rule.
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
A technique for estimating the number of years or the interest rate necessary to double your money. Divide 72 by the interest rate and you will have the approximate number of years needed to double your money. If your...
What is the rule of 72? The rule of 72 is a simple formula that tells you the approximate amount of time or interest rate needed for an amount to double. The formula is Years X Rate per year = 72. Here’s how it works....
It is common for a small quantity to account for most of the value. Examples: 20% of the people may have 80% of the wealth; 20% of the members do 80% of the work; 20% of the items in inventory account for 80% of the...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
, conservatism means recording the transaction or situation in a manner that results in less profit, less asset amount, and/or a greater liability amount. Example of Conservatism in Accounting One example of...
and less asset amount (or more liability amount). If there is uncertainty as to whether there was a gain, the rule says don’t record it. Because of the uncertainty and because you did not record the potential gain,...
and the investment earns a consistent 10% per year compounded annually. The following table illustrates how the single deposit of $100,000 will grow as a result of the compounding at 10% per year. (The amounts are...
R & D costs. These are costs incurred to develop new products or processes that may or may not result in commercially viable items. The general rule is that research and development costs are to be expensed...
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
should normally be reported at its net realizable value. (U.S. income tax rules require conformity between tax and financial reporting. As a result, there are complexities involved.) Join PRO to Track Progress Mark the...
account, you will need to record the check in your general ledger. The entry will be a credit to the general ledger cash account and a debit (or debits) to the appropriate account. It might be helpful to recall the...
to Circular E.) Part 1 of the guide is entitled Who Are Employees? and it provides this general rule: “…an individual is an independent contractor if you, the person for whom the services are performed, have the...
Can you help me understand the golden rules of accounting? The golden rules of accounting are not presented in any of the U.S. accounting books that I have reviewed. I assume the reason for omitting the golden rules of...
How do I learn of new accounting rules? The U.S. accounting rules issued by the Financial Accounting Standards Board (FASB) can be found on its free website www.fasb.org/st/. There you will find: FASB Statements...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
for 20% of the inventory value. Under this system, the “A” items will receive the most attention since they account for 70% of the value. This ABC is sometimes referred to as Pareto analysis or Pareto’s rule and...
reporting at cost is the general rule, inventories must be reported at less than cost in certain situations. For example, some inventories will have to be reported at their net realizable value when it is less than...
of the U.S. Department of Labor, is the employer required to pay the employee an additional amount for working six overtime hours? Select... Yes No View Coaching One of the criteria in the federal rule for overtime is a...
Financial Statements Video Training Part 1 Introduction to the main financial statements and accounting rules, balance sheet heading and sections, reporting of cash Must-Watch Video Learn How to Advance Your Accounting...
on the amount. Mark as wrong Mark as right lower of cost or net realizable value This inventory valuation rule is usually associated with the accounting concept of conservatism. It is relevant when the value of...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Vendor statements are often received from suppliers when a customer has not fully paid the amounts previously billed by the supplier or vendor. A general rule is: Never pay a vendor from a vendor’s statement. A...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
account. A general rule is that the older the unpaid invoice, the more likely that the amount will not be collected in full. Example 2. A corporation’s Accounts Receivable has a debit balance of $130,000. The...
Our Explanation of Bank Reconciliation will show you the needed adjustments to the balance on the bank statement and also the adjustments needed to the balance in the related general ledger account. A comprehensive...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
. The actual senior executive compensation amount (regardless of amount) will be the same amount whether the company stays in three states or expands to the fourth state. What matters are the ADDITIONAL expenses and the...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
at the top of the page. 1. A current asset is a company’s resource that is expected to be converted to cash within one year or within the operating cycle, whichever is ____________. Select... longer shorter View...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Featured Review
"I am a CPA with a (heavy, technical) tax and accounting (bookkeeping) practice. After training and teaching accounting and taxes, this is THE ONLY place where I can send interns, staff, associates, and most importantly, clients! There needs to be a place where any person can get simple, concise, and complete explanations of accounting, processes and some theory (what/why/how). Most folks do not find that, and therefore stop doing accounting, or stop trying to get it right. Thank you for the most appropriate, thorough, and sensible source for accounting explanations, and for the understanding and value it brings to folks at any level. The paths to success you offer are numerous and well considered, to avoid the normal ‘I don't get it’ failures that drive some to just give up and quit. BEST overall accounting resource out there, and I continue to use it even after over 50 years of experience. GREAT JOB, please continue!" - Anthony S.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: