When calculating inventory turnover, do you use sales or the cost of goods sold? I calculate the inventory turnover by using the cost of goods sold. I use the cost of goods sold because inventory is in the general ledger...
When calculating inventory turnover, do you use sales or the cost of goods sold? I calculate the inventory turnover by using the cost of goods sold. I use the cost of goods sold because inventory is in the general ledger...
Is the cost of land, buildings, and machinery a fixed cost? Land, Buildings and Machinery are Fixed Assets It is common for people to refer to land, buildings, and machinery as fixed assets. They are also referred to as...
Are repairs to office equipment and factory equipment period costs? Repairs to office equipment are period costs. That is, the cost of the repairs to office equipment will be reported as a selling, general and...
Is the depreciation of delivery trucks a period cost or is it manufacturing overhead? The depreciation on the trucks used to deliver products to customers is a period cost. The depreciation on delivery trucks will be...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
Why is the Cash Flow Statement identified as one of the financial statements? The Cash Flow Statement or Statement of Cash Flows is required as part of a full set of financial statements because of the Financial...
Is a favorable variance always an indicator of efficiency in operation? In a standard costing system, some favorable variances are not indicators of efficiency in operations. For example, the materials price variance,...
How should the cost of a yearly subscription for a newspaper be recorded? Definition of Recording a Yearly Subscription Typically, yearly subscriptions are paid in advance or at the start of the subscription period. If...
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
What is the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
What are some of the accounting courses in a college accounting degree? The accounting courses often included in a 120- or 150-credit college accounting degree are: fundamentals of financial accounting fundamentals of...
What is the double declining balance method of depreciation? Definition of Double Declining Balance Method of Depreciation The double declining balance method of depreciation, also known as the 200% declining balance...
Where are short-term bank loans reported on the statement of cash flows? Definition of Short-Term Bank Loans Short-term bank loans are generally loans that must be repaid within one year of the date of the balance sheet....
Where does the purchase of equipment show up on a profit and loss statement? Reporting the Purchase of Equipment Assuming that the purchase of equipment is a long-term or noncurrent asset that will be used in a business,...
Why would a business change its chart of accounts? There can be several reasons for a business to change its chart of accounts. One reason for changing the chart of accounts is to better match how the business is...
What is the meaning of a favorable budget variance? Definition of a Favorable Budget Variance A favorable budget variance means that the actual amount that occurred was better for the company (or organization) than the...
Which financial statement tells the value of a business? None of the financial statements will report the value of a business. The main financial statements (balance sheet, income statement, statement of cash flows,...
What is meant by the full cost of a product? Many (perhaps most) accountants use the term full cost to mean the full manufacturing or production cost of a product. To these accountants this means a product’s cost of...
What are some examples of financing activities on the cash flow statement? Definition of Financing Activities Financing activities reported on the statement of cash flows (SCF) involve changes to the long-term...
What is the face value of a bond payable? Definition of Face Value of a Bond Payable The face value of a bond payable is the amount printed on the bond. The face value is also referred to as the following: Face amount...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
How do I calculate the cost of goods sold for a manufacturing company? Calculation of the Cost of Goods Sold for a Manufacturer The calculation of the cost of goods sold for a manufacturing company is: Beginning...
A non-operating item that results from the sale of a long-term asset for more (gain) or less (loss) than its carrying amount or book value.
Can you help me understand the golden rules of accounting? The golden rules of accounting are not presented in any of the U.S. accounting books that I have reviewed. I assume the reason for omitting the golden rules of...
What are the advantages of departmentalizing manufacturing overhead costs? The departmentalizing of manufacturing overhead costs allows for better planning and control if the head of each department is held responsible...
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
Why is an increase in inventory shown as a negative amount in the statement of cash flows? Meaning of a Negative Amount on Statement of Cash Flows A negative amount on the statement of cash flows (SCF) indicates that the...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
Does the income statement explain the change in the equity section of a balance sheet? The income statement could explain the change in the equity section of a balance sheet. However, there are likely to be some other...
Why is Interest Expense Included in the Operating Activities Section of the Cash Flow Statement? Definition of Interest Expense Interest expense is the cost of borrowing money. Under the accrual method of accounting,...
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
Why is the P&L profit entered on the credit side of the balance sheet? Profit’s Effect on the Balance Sheet The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
Bookkeeping Video Training Part 2 Accounting equation, why revenue accounts have credit balances, accrual method of accounting Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
Is it okay to have negative amounts in the equity section of the balance sheet? Definition of Equity Section of the Balance Sheet The equity section of the balance sheet is known as: Owner’s equity if it is a sole...
Bookkeeping Video Training Part 8 Adjusting entries: accrued expenses, reversing the accrual of expenses after the accounting period is over Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
What is the advantage of using historical cost on the balance sheet for property, plant and equipment? Definition of Historical Cost Historical cost is the original cost of an asset including all the necessary costs to...
Bookkeeping Video Training Part 11 Introduction to internal control for safeguarding assets: 3-way match, segregation of duties Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better...
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