A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
. To make the best decisions, management needs the future amounts. Obviously, the future has not yet occurred, therefore getting the approximate future amounts will be a challenge. Past Amounts Are Not Relevant The...
What is meant by the term relevance in accounting? Definition of Relevance In accounting, the term relevance could mean one of the following: An amount, disclosure, etc. that will make a difference to the decision maker...
subsidiary companies. A benefit of decentralization is having the decision makers closer to the markets to make better and faster decisions. Another benefit of decentralization is having more individuals share the work...
A qualitative characteristic in accounting. Relevance is associated with information that is timely, useful, has predictive value, and is going to make a difference to a decision maker.
The recognition that a dollar in the present is more valuable than a dollar in the future. Present-value calculators and present-value tables assist in converting future dollars to the present value in order to make a...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
In accounting, what is meant by relevant costs? Definition of Relevant Costs Relevant costs are future costs that will differ between two or more alternative actions. Expressed another way, relevant costs are the costs...
Why would someone buy a bond at a premium? Definition of Bond Premium Bond premium or premium on bonds occurs when the bond’s actual interest payments are greater than the interest payments expected by the market. The...
of opportunity cost is relevant in making decisions. For example, in deciding whether to make or to buy a component, the opportunity cost is an important consideration: If your plant has idle capacity, you might opt to...
Should a company focus on cash flows or accounting profits when making a capital expenditure decision? Using the incremental cash flows and discounting them to reflect the time value of money is the preferred method. The...
Do I buy a new machine or use an old one? One technique for deciding whether to buy a new machine or to use an old machine is to look at the future cash flows if you buy a new machine and the future cash flows if you use...
What are some tips to make learning debits and credits easy? Here are five tips to make learning debits and credits easier: The accounts for expenses are nearly always debited. For example, when a company pays its...
A discount that often varies by customer. For example, a company may sell its products to a variety of resellers. Some of the resellers might buy $1 million of products each year, other resellers might purchase $100,000,...
, capital budgeting for expanding operations, standard costing and the reporting of variances, transfer pricing, etc. Special analyses includes cost behavior, cost-volume-profit relationships, make or buy decisions,...
another way, since we cannot undo the past, every decision will affect only today and/or the future. As a result, the relevant costs and benefits for making a decision are the current and future costs....
to as common or __________ costs. 3. A frequent decision at the point where two or more products emerge from a common process is whether to 1) sell the products at that point, or 2) to __________ them further. 4. The...
A right to buy a specific number of shares of stock at a specific price by a specific date.
The price at which the holder of a bond must sell the bond to the issuer. For example, a corporation may have the right to redeem/buy back its bonds by paying the bondholder 110% of the bond’s face amount.
The quantity on hand that will trigger an order to buy more items. A company’s reorder point for Product X might be 80 units. When the quantity on hand gets down to 80, a purchase order is prepared to obtain more...
What is the difference between information and data? I was taught that information is useful data. The point is there are lots of data (plural of datum) everywhere, and most of the data will not be useful to a decision...
that will be the same amount under two alternative proposals are not relevant when selecting one of the proposals. In other words, the expenses that are the same could be omitted from both alternatives without affecting...
In business decision-making, payback means the number of years before the cash invested in a project is returned. It involves the cash flows from the project but generally the cash flows are not discounted to reflect the...
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is the...
An accounting guideline that requires information pertinent to an investing or lending decision to be included in the notes to financial statements or in other financial reports.
Pushing authority and decision making down to the managers and employees who are closer to the work.
A stakeholder is anyone that has an interest or is affected by a decision. For example, some of the stakeholders of a state university include the students, students’ families, alumni, professors, custodians,...
Also referred to as a sunk cost. A past cost is not relevant to a decision.
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
A current or future cost that will differ among alternatives. For example, if a company is deciding whether to expand its sales territory, the real estate tax and depreciation on the company’s headquarters building...
or misclassified. If sophisticated investors would be misled or would have made a different decision, the amount is considered to be material. If sophisticated investors would not be misled or would not have made a...
paid to your friend will be recorded as the cost of the website. (The 3 weeks of missed profits are not recorded and will not be widely discussed.) This is also a reminder that the general ledger accounts are filled...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
smaller (fewer products, fewer customers, fewer managers). Now the company’s more sophisticated operations require more detailed reporting that is segmented by processes and/or by each manager’s area of...
that are needed for the external financial statements which must comply with US GAAP. Other topics involve analyses and reports that are not distributed outside of the company but are used by management in its decision...
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