An accounting guideline where the U.S. dollar is assumed to be constant (no change in purchasing power) over time. This allows an accountant to add one dollar from a transaction in 2010 to one dollar in 2024 and to show...
An accounting guideline where the U.S. dollar is assumed to be constant (no change in purchasing power) over time. This allows an accountant to add one dollar from a transaction in 2010 to one dollar in 2024 and to show...
What is the monetary unit assumption? Definition of Monetary Unit Assumption The monetary unit assumption as it applies to a U.S. corporation is that the U.S.dollar (USD) is stable in the long run. That is, the USD does...
A dollar adjusted for inflation. If an asset such as land was purchased for $10,000 many years ago when the consumer price index (CPI) was 100 and today the CPI is 400, today’s constant-dollar amount would be...
principle Economic entity assumption monetary unit assumption Time period assumption Going concern assumption Constraints such as materiality and conservatism Qualities such as reliability, relevance, consistency,...
are: Economic Entity Assumption Going Concern Assumption Time Period Assumption Monetary Unit Assumption Cost Principle (or Measurement Principle) Matching Principle (or Expense Recognition Principle) Revenue...
Accounting Principles The basic underlying accounting principles consist of the following: Economic entity assumption Going concern assumption Time period assumption Monetary unit assumption Cost principle or...
to report 1) revenue and expense amounts for a distinct time period such as a month, quarter, etc., and 2) asset and liability amounts as of the final moment of the accounting period. Monetary Unit Assumption The...
! The owner's assets are not shown on the balance sheet of the business. This is true even if the business is a sole proprietorship. Monetary Unit Wrong. The monetary unit involves the expression of amounts in...
. accounting principles This term refers to the basic underlying accounting guidelines, standards and rules for financial statements distributed outside of a company. Mark as wrong Mark as right monetary unit assumption...
as right monetary unit assumption This accounting assumption means that a U.S. corporation’s financial statements are not adjusted for changes in the purchasing power of the U.S. dollar. monetary unit assumption This...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
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...
and the deferral of some costs to a future accounting period. Select... conservatism cost economic entity full disclosure going concern industry practices matching materiality monetary unit time period 16. Assumption...
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
. (If specific identification is used, there is no need to make an assumption.) FIFO, LIFO, average are assumptions because the flow of costs out of inventory does not have to match the way the items were physically...
will have: A break-even point in sales dollars of $800,000 [$480,000 divided by 60%] A break-even point in units of product of 40,000 [$480,000 divided by $12 per unit] The break-even calculations are based on the...
An assumption that determines the order in which costs should flow out of a balance sheet account (e.g. Inventory, Investments, Treasury Stock) when the item is sold. For an illustration of the cost flow assumption, see...
Also known as the periodicity assumption. The accounting guideline that allows the accountant to divide up the complex, ongoing activities of a business into periods of a year, quarter, month, week, etc. The precise time...
An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that...
An accounting principle/guideline that allows the accountant to keep the sole proprietor’s business transactions separate from the owner’s personal transactions even though a sole proprietorship is not...
unit. You must also realize that the cost flow assumption is independent of the physical flow of the products. This means you can rotate your company’s inventory (by selling its oldest units first) and yet flow the...
assumption is needed. inventory This current asset reports a retailer’s or manufacturer’s goods on hand at its cost (or lower). Because the unit costs change, a cost flow assumption is needed. Mark as wrong Mark as...
. The actual unit costs must be consistent with the cost flow assumption (FIFO, weighted-average, etc.) that was elected by the company. Special attention is required for items that are on consignment or are in transit....
What is an equivalent unit of production? Definition of Equivalent Unit of Production An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially...
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
ending inventory and COGS will differ depending on a company’s cost flow assumption. Three examples of cost flow assumptions are: FIFO which assigns the recent unit costs of the purchases to inventory and the oldest...
See first in, first out (FIFO).
The method used for removing costs from the inventory of goods. The cost flow can be different from the physical flow of goods. For example, in the U.S. the LIFO cost flow can be used even if the oldest goods are shipped...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
of $2,500. Since the unit cost of items purchased or produced may be increasing with inflation, the costs used for inventory reporting will be based on a cost flow assumption. For example, the FIFO cost flow assumption...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
for the year when it sold 10 units. Which inventory cost flow assumption will cause the $15 cost per unit to be expensed as part of the year 2023's cost of goods sold? LIFO Periodic Right! Under LIFO periodic the...
A predetermined dollar amount that one unit of a finished product should cost during an accounting period.
A predetermined dollar amount that a pound of material or an hour of labor should cost during an accounting period.
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are 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...
__________–__________, __________–__________. 7. LIFO means __________ – __________, __________ – __________. 8. The cost flow assumption where the most recent costs are matched first with current period sales...
A term used in cost accounting to arrive at the cost per unit. The term is associated with the units that are not completed at the end of an accounting period. For example, if 500 units are completed as far as materials,...
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