, these nonmanufacturing costs are immediately expensed in the accounting period in which they are incurred. That is why accountants refer to nonmanufacturing costs as period costs or period expenses. Examples of...
, these nonmanufacturing costs are immediately expensed in the accounting period in which they are incurred. That is why accountants refer to nonmanufacturing costs as period costs or period expenses. Examples of...
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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...
What is the entry when a contract is signed? Accounting Entry When Signing a Contract Merely signing a contract does not by itself require a journal entry. In other words, signing a contract for a future transaction does...
What is a balance sheet and why is it prepared? Definition of Balance Sheet The balance sheet is prepared in order to report an organization’s financial position at the end of an accounting period, such as midnight on...
date the account(s) and amount(s) that will be debited the account(s) and amount(s) that will be credited a short description/memo/reference The journal entries appear in a journal in order by date and are...
; L. Webb, Draws; or L. Webb, Withdrawals. The other part of the entry will reduce the specific business asset. Example of Drawings If the owner (L. Webb) draws $5,000 of cash from her business, the accounting entry will...
get back to Company X’s checking account, Company X’s bank will have two options when Company X’s checking account does not have sufficient funds to cover the checks: 1. The bank could pay the checks and allow...
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Are the goods purchased by a retailer an expense or an asset? Definition of Goods Purchased by a Retailer The goods purchased by a retailer are the products or merchandise that it buys and plans to resell. The goods that...
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See production service department.
be on hand based on the accounting information. Examples of Determining the Cost of Missing Inventory If a company’s accounting records or its inventory system uses the perpetual inventory system (and it is maintained...
A liability account that reports the amount a company owes as of the date of the balance sheet for the company’s pension plan. Information on pensions can be found in an Intermediate Accounting textbook.
Sales made on account. Sales where the customer is allowed to pay at a later date. Noncash sales.
A symbol that indicates the total amount of fixed costs during a specified period of time. In the equation of the straight line, y = a + bx, the total amount of fixed costs during the period is represented by...
Classifying expenses according to the type of work such as selling, administration, general, and financing.
What are the various types of adjusting entries? Types of Adjusting Entries Adjusting entries, which are required in order to have a company’s financial statements comply with the accrual method of accounting, are...
A term used with standard costs to report a difference between actual costs and standard costs. To learn more, see Explanation of Standard Costing.
Also known as the acid test ratio. This ratio compares the amount of cash + marketable securities + accounts receivable to the amount of current liabilities. To learn more, see Explanation of Financial Ratios.
Long term assets of a company such as minerals, oil reserves, timberland, stone quarries, etc. The term depletion is associated with natural resources.
The person paying rent for using but not owning the asset.
%). It also indicates that a company without sufficient cash to pay within the early payment discount period will experience a huge opportunity cost. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
See budgetary slack.
See job order costing.
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The income statement account which contains a portion of the cost of plant and equipment that is being matched to the time interval shown in the heading of the income statement. (There is no depreciation expense for...
To learn more, see Explanation of Depreciation.
Assigning manufacturing overhead costs to products being manufactured by using a manufacturing overhead rate.
Scrap or waste that should have been avoided. In other words, abnormal spoilage is the amount that is over and above the normal amount that is expected in a production process.
In accounting this means to defer or to delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred to a balance sheet liability account until they...
Is standard costing GAAP? Definition of Standard Costing Standard costing is a cost accounting system used by some manufacturers to assist in planning and controlling its manufacturing operations. When standard costing...
See just-in-time (JIT).
A lien on real estate to protect a lender. The loan made with such security is referred to as a mortgage loan.
Merchandise that has been shipped by a supplier but the merchandise has not yet reached the customer’s location. Goods in transit that were shipped FOB Shipping Point should be included in the customer’s...
A projection or estimate of the future quantities and selling prices of products and/or services.
An asset account in a bank’s general ledger that indicates the amounts owed by borrowers to the bank as of a given date.
Federal Unemployment Tax Act. See federal unemployment tax.
must be recorded for the company’s financial statements to reflect the accrual basis of accounting. Example of Calculating the Payroll Accrual Assume that a company prepares monthly financial statements as of the last...
Another word for purchasing.
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