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Also known as freight-out or as delivery expense. This is an operating expense further classified as a selling expense. It results when merchandise is sold with terms of FOB destination.

Delivery expense to be paid by the seller when its merchandise is sold with terms of FOB destination. This is an operating expense and is not included in the cost of merchandise.

What are out-of-pocket costs? Author: Harold Averkamp, CPA, MBA Out-of-pocket costs are those costs or expenses that require a cash payment in the current period or during a project. For example, the wages of the person...

A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means the latest (recent) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods Sold.

A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...

What is carriage outwards? Author: Harold Averkamp, CPA, MBA Definition of Carriage Outwards Carriage outwards refers to the transportation costs that a seller must pay when it sells merchandise with the terms FOB...

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...

This account shows the amount of delivery expense incurred (occurring) during the accounting period shown in the heading of the income statement. The title of this account could also be Freight Out or Transportation...

What is carriage inwards? Author: Harold Averkamp, CPA, MBA Definition of Carriage Inwards Carriage inwards refers to the transportation costs required to be paid by the purchaser when it receives merchandise it ordered...

What is the proper accounting for supplies? Author: Harold Averkamp, CPA, MBA Definition of Supplies Office supplies are items used to carry out tasks in a company’s departments outside of manufacturing or shipping....

A person who is considered to be both the employer and the employee. For example, the sole owner of a sole proprietorship is self-employed.

Where do preferred stocks go on the P&L? Author: Harold Averkamp, CPA, MBA The amount received from issuing preferred stock is reported on the balance sheet within the stockholders’ equity section. Only the annual...

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...

In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...

A temporary account used in the periodic inventory system to record the purchases of merchandise for resale. (Purchases of equipment or supplies are not recorded in the purchases account.) This account reports the gross...

In bookkeeping, why are revenues credits? Author: Harold Averkamp, CPA, MBA In bookkeeping, revenues are credits because revenues cause owner’s equity or stockholders’ equity to increase. Recall that the accounting...

The financial ratio which indicates the speed at which a company collects its accounts receivable. If a company’s turnover is 10, this means the company’s accounts receivable are turning over 10 times per...

Why are revenues credited? Author: Harold Averkamp, CPA, MBA Why Revenues are Credited Revenues cause owner’s equity to increase. Since the normal balance for owner’s equity is a credit balance, revenues must be...

Nonmanufacturing Overhead Quiz and Test | AccountingCoach Nonmanufacturing Overhead(Practice Quiz) Download PDF Author: Harold Averkamp, CPA, MBA For multiple-choice and true/false questions, simply press or click on...

What is inventory? Author: Harold Averkamp, CPA, MBA Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a...

What is the times interest earned ratio? Author: Harold Averkamp, CPA, MBA Definition of Times Interest Earned Ratio The times interest earned ratio is an indicator of a corporation’s ability to meet the interest...

What does double entry mean? Author: Harold Averkamp, CPA, MBA Definition of Double Entry In accounting, double entry means that every transaction will involve at least two accounts. Double entry also requires that one...

How do you balance a checkbook? Author: Harold Averkamp, CPA, MBA Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the...

What is net realizable value? Author: Harold Averkamp, CPA, MBA Definition of Net Realizable Value Net realizable value (NRV) is the cash amount that a company expects to receive. Hence, net realizable value is sometimes...

Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.

Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...

Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...

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