How do you calculate the payback period? Definition of Payback Period The payback period is the expected number of years it will take for a company to recoup the cash it invested in a project. Examples of Payback Periods...
How do you calculate the payback period? Definition of Payback Period The payback period is the expected number of years it will take for a company to recoup the cash it invested in a project. Examples of Payback Periods...
in accordance with generally accepted accounting principles often referred to as GAAP or US GAAP. Examples of Management Accounting Another part of accounting focuses on providing a company’s management with the...
period in order to report the amount of its ending inventory for its balance sheet and the cost of goods sold for its income statement. Computing the Inventory Amount Under the Periodic Inventory Method At the end of an...
with an accrual adjusting entry prior to issuing the financial statements. Example of Accrued Income One example of accrued income is the interest a company earns on a bond investment. To illustrate, let’s assume that...
market value of this bond is: Interest of $30,000 paid at the end of each of 4 semiannual periods discounted by 4% per semiannual period = $108,897 Maturity value of $1,000,000 discounted by 4% for 4 semiannual periods...
and completed 10,000 units. In addition, it started 1,000 units but they were only 30% complete at the end of June. The production cost report for this department will indicate that it manufactured 10,300 (10,000 + 300)...
is not adjusted for inflation or for changes in the current value or replacement value of the asset. For buildings, equipment, fixtures, vehicles, and other long-lived tangible assets other than land, the asset’s...
the amount that should be the correct ending balance for the balance sheet account. The difference between the current balance and the needed ending balance is the amount for the adjusting entry. As a young accountant I...
and providers offering a cash discount will refer to it as a sales discount, while the buyer will refer to the same discount as a purchase discount. Examples of a Cash Discount Let’s assume that a company offers a...
and will be reported on the balance sheet as part of a company’s noncurrent or long-term asset section entitled Property, plant and equipment. The costs of constructing the asset are accumulated in the account...
What is a purchase discount? Definition of Purchase Discount A purchase discount is a deduction that a company may receive if the supplier offers it and the company pays the supplier’s invoice within a specified period...
one year later. The $11,000 represents: An amount for today’s services Interest compensation for the company waiting 365 days to be paid Under the accrual basis of accounting and with a time value of money of 10%, the...
Why not use Sales in the Inventory Turnover Ratio? The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover Ratio is Cost of Goods Sold...
How do I compute the product cost per unit? Definition of Product Cost per Unit In accounting, a product’s cost is defined as the direct material, direct labor, and manufacturing overhead. Other costs such as...
could clear (be paid from) the bank account prior to that date. Post-dating a check makes sense only if you are certain that the payee will not cash or deposit the check before the date appearing on the check. Example...
How does inflation affect the cost of goods sold? Inflation and the Cost of Goods Sold Generally speaking, a company selling goods during periods of inflation will see an increase in its cost of goods sold. When and by...
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...
a __________ to the company’s general ledger Cash account. Select... debit credit 7. A bank service charge needs to be listed on the bank reconciliation as an adjustment to the balance per __________. Select... bank...
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...
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...
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...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
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...
of goods sold on the income statement. Inventory is important for a company’s profitability and survival. For instance, if a retailer or manufacturer does not have sufficient inventory of requested items, the result...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
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...
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
Is a manufacturer's product warranty part of its manufacturing overhead or is it part of its SG&A expense? The costs associated with a manufacturer’s product warranty are part of its selling expenses and...
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...
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
What is the accounting entry when an order is received? There is no accounting entry recorded in a company’s general ledger accounts when an order is received. The reason is that a sale or sales revenues has not yet...
A term associated with petty cash. Replenish means to return the amount of actual cash in the petty cash box back to the amount appearing in the general ledger account Petty Cash. This is done whenever the amount of...
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
A word that means to add column totals across to see if the sum will equal the grand total. In the table below each of the columns A through Total was “footed” (added or summed) in order to get each...
Beginning in 2018, this is one of two classifications of net assets reported on the financial statements of a not-for-profit organization’s financial statements. This classification is to be used instead of the...
Liabilities Equity or net assets Investments by owners Distributions to owners Comprehensive income Revenues Expenses Gains Losses The above list is based on the FASB’s Statement of Financial Accounting Concepts No....
What is Big 4 Accounting? In accounting, the Big 4 refers to the four largest public accounting and auditing firms: Deloitte PricewaterhouseCoopers (PwC Ernst & Young (EY) KPMG These certified public accounting (CPA)...
The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
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