Allowing a person or company to purchase goods or services without paying cash at the time of purchase.
Allowing a person or company to purchase goods or services without paying cash at the time of purchase.
What is cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
A weighted-average of the cost of a company’s debt, common stock, and preferred stock.
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account). The contra asset account is related to another asset account. For example, the contra asset...
What is an unpresented cheque or check and does it require an adjustment to the balance sheet? Definition of Unpresented Cheque or Check An unpresented cheque is a check that a company has written, but the check has not...
In standard costing, how is the purchase price variance reclassified to arrive at actual cost? Definition of Purchase Price Variance In standard costing, the purchase price variance is the difference between the actual...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
What is a checking account? Definition of Checking Account A checking account is a bank account in which a company deposits money and can subsequently withdraw the money by writing a check, using a debit card, arranging...
What is a current asset? Definition of Current Asset A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the...
What is a contingent asset? Definition of Contingent Asset A contingent asset is a potential asset that is associated with a potential gain. The asset and gain are contingent because they are dependent upon some future...
Why are loan costs amortized? Definition of Loan Costs Loan costs may include legal and accounting fees, registration fees, appraisal fees, processing fees, etc. that were necessary costs in order to obtain a loan. If...
What is a contra account? Definition of Contra Account A contra account is a general ledger account with a balance that is opposite of the normal balance for that account classification. The use of a contra account...
Why are sales a credit? Definition of Sales In accounting, sales are revenues earned when a company transfers ownership of its goods to its customers. Under the accrual basis or method of accounting, the sale occurs when...
What is an accounting clerk? Definition of Accounting Clerk An accounting clerk is typically a person with an aptitude for numbers who can process a large volume of details accurately and quickly with a minimal amount of...
What is a capital account? Definition of Capital Account In accounting and bookkeeping, a capital account is a general ledger account that is part of the balance sheet classification: Owner’s equity (in a sole...
What are debits and credits? Definition of Debits and Credits Debits and credits are terms used in accounting and bookkeeping systems for the past five centuries. They are part of the double entry system which results in...
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
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...
Do corporations issue both common stock and preferred stock? Some corporations issue both common stock and preferred stock. However, most corporations issue only common stock. In other words, it is necessary that a...
What is the difference between normal costing and standard costing? Definition of Normal Costing Normal costing for manufactured products consists of following: Actual cost of materials Actual cost of direct labor...
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
What is the difference between the current ratio and working capital? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
Can I take the CPA Exam with a bachelor's degree? To be eligible for taking the CPA Exam you must meet the requirements of the board of accountancy in the U.S. state (or jurisdiction) in which you plan to take the CPA...
Should capital budgeting decisions be based on cash flows or revenues and expenses? Definition of Capital Budgeting Decisions Capital budgeting assists in the investment decisions regarding assets that will have an...
Which date is used to record a credit card transaction? When a business uses its credit card, the transaction date is the date the credit card is used, not the date that the credit card statement is paid. For example, if...
What is the difference between product costs and period costs? A manufacturer’s product costs are the direct materials, direct labor, and manufacturing overhead used in making its products. (Manufacturing overhead is...
What causes a corporation's market value to be greater than its book value? One cause of a corporation’s market value being greater than its book value is the accountant’s cost principle. In order for an item to be...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
Why are bonds payable less costly than common stock? Bonds payable are less costly than common stock because the bonds issued by a corporation contain a formal contract to pay the investor a fixed amount of interest...
Can I take the CPA exam without having a bachelor degree? You will need to inquire with your state or jurisdiction about its requirements to take or sit for the CPA Exam. Generally, you will need to have a minimum of 150...
If a customer pays for the same invoice twice, should the customer be informed? I say yes. If you become aware of the double payment when posting the customer’s second remittance, I would double check your records...
Is the rental cost of a building considered overhead? Definition of Rent as Overhead The rental cost of a building used in manufacturing is part of manufacturing overhead. Manufacturing overhead is assigned or allocated...
Why would the cost behavior change outside of the relevant range of activity? Cost behavior often changes outside of the relevant range of activity due to a change in the fixed costs. When volume increases to a certain...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods sold...
How can a business increase its cash flow from operations? A business can increase its cash flow from operations (or operating activities) by looking closely at each of its current assets and current liabilities. For...
How do you calculate the cost of goods sold for a retailer? Formula for Calculating a Retailer’s Cost of Goods Sold A retailer’s cost of goods sold is: The cost of the retailer’s beginning inventory Plus the cost...
How can a manufacturer determine the precise cost of its products? A manufacturer may never be able to determine the precise cost of its individual products. The reason is that most of the manufacturing costs (other than...
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