Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
What is the difference between assessed value and appraised value? Definition of Assessed Value Assessed value will likely be the amount that a local or state government has designated for individual properties. This...
What is a product cost? Definition of a Retailer’s Product Cost In accounting, a retailer’s product cost is the cost paid to a supplier plus any other costs that are necessary to get the product in place and ready...
What does drop ship mean? One example of drop ship is a manufacturer shipping goods directly to one of its customers’ customer (instead of delivering the goods to the customer that placed the order with the...
Are transportation-in costs part of the cost of goods sold? Definition of Transportation-in Costs Transportation-in costs, which are also known as freight-in costs, are part of the cost of goods purchased. The reason is...
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...
Inventory and Cost of Goods Sold (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (39) Marked Wrong (0) Marked Right (0) inventory This current asset reports a retailer’s or manufacturer’s...
What are operating expenses? Definition of Operating Expenses Operating expenses are the costs that have been used up (expired) as part of a company’s main operating activities during the period shown in the heading of...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of...
One of the financial statements issued by a nonprofit organization which reports expenses according to both function and nature. Learn more about Nonprofit Accounting.
What are sundry expenses? Definition of Sundry Expenses In accounting and bookkeeping, sundry expenses are expenses that are small in amount and rare in occurrence. For these rare and insignificant expenses, a company...
A subgroup of a nonprofit’s supporting activities expenses. This functional expense classification is used for the fundraising activities including fundraising campaigns, mailings for funds from supporters, and...
What are prepaid expenses? Definition of Prepaid Expenses Prepaid expenses are future expenses that have been paid in advance. In other words, prepaid expenses are costs that have been paid but are not yet used up or...
Classifying expenses according to the type of work such as selling, administration, general, and financing.
Why are expenses debited? Why Expenses Are Debited Expenses cause owner’s equity to decrease. Since owner’s equity’s normal balance is a credit balance, an expense must be recorded as a debit. At the end of the...
Expenses which do not change in response to reasonable changes in sales or other activity.
When are expenses credited? Definition of Expenses Credited Normally, the general ledger accounts for expenses are debited and are expected to have debit balances. The reason they are debited is they cause the normal...
A classification on a single-step income statement for both operating and nonoperating expenses and losses that pertain to the time interval shown in the heading of the income statement.
Used in conjunction with cost or expense behavior. Mixed expenses consist of a constant or fixed portion and a variable portion. For example, sales salaries would be a mixed expense if each sales person’s...
See mixed expenses.
Expenses that vary with some activity. For example, sales commissions expense and cost of goods sold will be greater when sales are greater; electricity expense will decrease when machine hours are reduced.
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
A liability account that reflects the estimated amount a company owes for expenses that occurred, but have not yet been paid nor recorded through a routine transaction. To learn more, see Explanation of Adjusting...
The expenses directly incurred by a nonprofit organization in providing one of its programs.
A subgroup of the supporting activities of a nonprofit organization. This functional expense classification is used to report the overall management of the nonprofit organization other than the direct expenses of...
One of two broad functional categories for sorting and reporting a nonprofit organization’s expenses. (The other is program expenses.) Supporting services expenses consists of 1) management and general expenses,...
A phrase used in depreciation and amortization to indicate that the expense is being allocated on a logical basis (because a cause and effect relationship does not exist).
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Financial Statements For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
Why is there a difference in the amounts for Bad Debts Expense and Allowance for Doubtful Accounts? Amount Reported as Bad Debts Expense The amount reported in the income statement account Bad Debts Expense pertains to...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
Accounts Receivable & Bad Debts Expense(Quick Test #3 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Why is Rent Expense a debit and Service Revenues a credit? Why Rent Expense is a Debit Rent expense (and any other expense) will reduce a company’s owner’s equity (or stockholders’ equity). Owner’s equity which...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Should an owner's compensation be recorded as an expense or in the Drawing account? If the enterprise is a sole proprietorship, the owner’s compensation should be debited to the Drawing account. If the enterprise is a...
Featured Review
"After being an accounts receivable supervisor for 9 years at a large building supply company, I was offered a role in the accounting department. However, this was not what I had studied in college. I work for two individuals who both have master’s degrees in the subject, so I quickly found myself at a loss trying to follow their conversations. I did some research and found your program online, along with some of your free tips and glossaries. I found the materials immensely helpful, so I decided to sign up. Your program has helped me in SO many situations, such as when I was stuck on how something rolled to the balance sheet, how stocks and investments were handled in the general ledger, etc. The information is so clear and easy to understand. You saved me—I could not be more grateful! One of the features that appeals to me most, is the ability to go on and look for the specific topic that I am needing help on. AccountingCoach always helps me to understand the full picture of the process, and I feel much more confident in accomplishing the tasks handed to me by my superiors. I have been in my current role for over 6 years now, and with the company for over 18 years... I cannot recommend this program enough! Thank you for offering such a great program!" - Melissa F.
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: