Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
Variable costs and expenses divided by net sales. To learn more, see Explanation of Break-even Point.
Rather than the previous year’s budget being the starting point for the next budget, a zero-based budget assumes no activities: everything in the budget must be justified.
See the Explanation of Break-even Point.
A common cost. Often refers to the costs prior to the point where several products emerge from a common process.
A statement that shows the changes in retained earnings from one point to another.
What is a purchase allowance? Definition of Purchase Allowance A purchase allowance is a reduction in the buyer’s cost of merchandise that had been purchased. The purchase allowance is granted by the supplier because...
Electricity Cost if you are analyzing the individual components of overhead). Label the horizontal or x-axis of the graph as total machine hours (or some other indicator of volume). Then put a point on the graph for...
One of the main financial statements. The balance sheet reports the assets, liabilities, and owner’s (stockholders’) equity at a specific point in time, such as December 31. The balance sheet is also referred...
of the factors used in calculating the reorder point of items carried in inventory. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
The one-year period ending at an organization’s typical low point of activity. For example, a school’s natural business year is July 1 through June 30. It is practical to have the accounting and financial...
A balance sheet with at least two columns of amounts. The column of amounts that is closest to the words will be the most recent amounts. The column furthest from the words will contain the oldest amounts. The older...
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...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
What is a natural business year? Definition of Natural Business Year A natural business year is the period of 12 consecutive months (or 52-53 consecutive weeks) ending at a low point of the organization’s activities...
of these two balance sheet amounts in the denominator. Using the average of only two days can also be misleading if the company’s year ends at the low point of business activity. For example, when a company’s peak...
that: SP = Cost + MU$ SP = $75 + MU$ Since MU$ must be 25% of SP, we can state: SP = $75 + 0.25SP Restating the previous point, we have: SP – 0.25SP = $75 Restating the previous point, we have: 0.75SP = $75 After...
hours. For each monthly electricity bill, a point is entered on the graph at the intersection of 1) the amount of the electricity bill, and 2) the number of equipment hours that occurred between the meter reading dates...
Usually financial statements refer to the balance sheet, income statement, statement of cash flows, statement of retained earnings, and statement of stockholders’ equity. The balance sheet reports information as of...
A rolling budget adds a future accounting period’s budget to replace a budget for an accounting period that has past. For example, a company’s 2024 annual budget will become a rolling budget if in February...
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...
for packaging, sales commissions, and shipping. Therefore, the net realizable value of the inventory is $12,000 (selling price of $14,000 minus $2,000 of costs to dispose of the goods). In that situation the inventory...
reports amounts at a _________ in time. POINT NPOIT Unscramble POINT INTPO Unscramble 4. The amount of working __________ can be calculated quickly from a classified balance sheet. CAPITAL LACITAP Unscramble CAPITAL...
. In other words, you made a $150,000 investment and recorded it as the asset Mortgage Loan Receivable. The house is the collateral for the loan receivable. Within one year, the local housing market drops by 30% and the...
certificate for merchandise or services. Accounting for the Sale of Gift Certificates The sale of a gift certificate should be recorded with a debit to Cash and a credit to a liability account such as Gift Certificates...
on the income statement over the asset’s useful life. Accountants point out that depreciation is an allocation process which does not result in reporting the asset’s market value. Example of Recording Depreciation...
to arrive at their present value. The annuity payments can also be used to determine the effective interest rate that is embedded in an agreement. Depending on the starting point of the first payment, an annuity will be...
cost or fixed expense. Fixed expenses such as depreciation expense and property insurance expense are reported on a company’s income statement. Understanding which costs are fixed and which are variable is important...
, the entire cost of the asset used in the business will be charged to depreciation expense during the years of the asset’s expected useful life. A salvage value of zero is reasonable since it is assumed that the asset...
. During December the retailer will have incurred the cost of the electricity it used during December. Under the accrual basis of accounting the retailer must report a current liability on December 31 for the amount owed...
a new sole proprietorship business. At this point, the owner’s equity is a positive $100,000. During the first year of operations, the business’s expenses exceeded revenues by $108,000 and there were no draws or...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
are as of a _________ in time. POINT ONTIP Unscramble POINT INOTP Unscramble 2. Resources. ASSETS SEASTS Unscramble ASSETS ASETSS Unscramble 3. Obligations. LIABILITIES IIABLIILTES Unscramble LIABILITIES LAIISBIIELT...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
for the workweek of June 22-28 might be calculated by the time the adjusting entry is prepared in early July and only the amounts for June 29 and 30 will need to be estimated.) The important point with the accrual...
have increased in value, the depreciation and cost of goods sold reported on the income statement will be less than the value of the economic capacity being used up. As a result, the reported net income will be greater...
What is present value? Definition of Present Value In accounting, present value refers to the amount after discounting future cash amounts to the present. The present is depicted on a timeline as the point 0, which is...
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