), it will result in a present value of approximately $522,000. The $522,000 of present value coming in minus the $500,000 of present value going out results is a positive net present value of $22,000. In other words,...
), it will result in a present value of approximately $522,000. The $522,000 of present value coming in minus the $500,000 of present value going out results is a positive net present value of $22,000. In other words,...
What is work-in-process inventory (WIP)? Definition of Work-in-process Inventory Work-in-process (WIP) inventory pertains to the goods for which the manufacturing has begun, but not yet completed. In other words, WIP is...
independently. The synergy might come from shared research, ability to meet the needs of each other’s customers, ability to attract new customers that want a single global supplier, elimination of duplicate...
, and the production volume variance are generally not related to the efficiency of the operations. On the other hand, the materials usage variance, the labor efficiency variance, and the variable manufacturing...
assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
and is surprised at the amount. She concludes that the tax experts billed her based on the amount of money they had saved her. In other words, the tax experts had utilized the concept of value billing. Join PRO to Track...
card means that the bank (or other financial institution) is making a loan or providing credit to the cardholder. Usually the cardholder will receive a monthly statement showing the credit card transactions and must...
to the product, such as the aluminum in beverage cans Direct labor , which are the wages and fringe benefits earned by the individuals who are physically involved in converting raw materials into a finished product...
and finished goods. The notes to the financial statements will also described how the manufacturer’s inventory is valued. For example, the notes will disclose whether FIFO lower of cost or net realizable value, LIFO,...
, it debits Cash. Every transaction will require a debit to at least one account and a credit to at least one other account. Here are two examples to illustrate our five tips. A bakery records its cash sales at a local...
, there are occasions when the general ledger expense accounts will be credited. Examples of Expenses being Credited Below are some examples of when general ledger expense accounts are credited: When recording closing...
. 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...
What is going concern? Definition of Going Concern The going concern assumption is a basic underlying assumption of accounting. For a company to be a going concern, it must be able to continue operating long enough to...
instead of 30 days) Purchases Returns and Allowances (credit memos received for returning goods to vendors or for other conditions) These accounts are used by a company that purchases goods for resale and uses the...
a number is assigned for reference and control. Receipts or other documentation justifying the disbursement should be attached to the petty cash voucher. When the petty cash fund is replenished, the completed petty cash...
is headed Debit and the other column is headed Credit Each account’s balance is listed in the appropriate column After all of the account balances are entered, each column is summed The total of the debit column...
there are damages). As the example showed, a security deposit is an asset for one party and the same security deposit is a liability for the other party. Join PRO to Track Progress Mark the Question as Read Must-Watch...
accruals and deferrals and other adjusting entries must be recorded prior to issuing monthly financial statements in order to comply with the accrual basis of accounting. Join PRO to Track Progress Mark the Question as...
the classified balance sheet shows the total amount of the company’s current assets and the total amount of its current liabilities. A classified balance sheet is likely used by companies and is organized as follows:...
One component of the payroll tax referred to as FICA. (The other component of the FICA tax is the Medicare tax.) The Social Security tax is levied by the U.S. government on both the employee and the employer. In 2024 the...
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
in which the office furniture is recorded, such as Furniture and Fixtures or Office Furniture. In other words, the discount is a reduction of the asset’s cost. [If the discount is received by a retailer who is in the...
, to bid on a job, or some other unique requirement. Although most small businesses are not required to have a CPA involved, a small business may engage a CPA to review its internal controls, evaluate accounting...
by one of the 50 U.S. states (or one of the five other jurisdictions). The CPA’s license is renewed if the state’s continuing professional education requirements are met. Examples of a Certified Public Accountant...
produced. In other words, the utility bill will be clinging to the units produced. Some of the utility cost will be clinging to the units in inventory and therefore will be part of the cost of the asset inventory. Some...
What is the difference between financial accounting and management accounting? Definition of Financial Accounting Financial accounting has its focus on the financial statements which are distributed to stockholders,...
What are accounting principles? Definition of Accounting Principles Accounting principles are the common rules that must be followed when preparing financial statements that are distributed to people outside of the...
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 trading on equity? Definition of Trading on Equity Trading on equity, which is also referred to as financial leverage, occurs when a corporation uses bonds, other debt, and preferred stock to increase its...
statements) at the time that an order is received: The company has not yet earned the revenue The company does not yet have a right to a receivable or other asset The revenues and a receivable will not be earned until...
Are retained earnings an asset? Definition of Retained Earnings Usually, retained earnings consists of a corporation’s earnings since the corporation was formed minus the amount that was distributed to the stockholders...
track the total amounts of refunds that you make during a year. On the other hand, if it is rare for your organization to refund registration fees, you could simply 1) debit the amount you are refunding to the normal...
$0, the project is earning exactly the interest rate used to discount the future cash amounts. In other words, if a project has an internal rate of return of 15%, and you discount the project’s future cash amounts by...
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....
asset (or noncurrent asset) under the balance sheet classification “Other assets”. The landlord that receives and holds the security deposit should report the amount as a liability. Example of a Security Deposit A...
In accounting, are debit balances good? It is best if you accept the meaning that the word debit has had for 500 years: a debit is an amount entered on the left-side of an account. Don’t add “good” or “bad” or...
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...
investments with a maturity date that was 3 months or less at the time of purchase. In other words, there is very little risk of collecting the full amount being reported. Examples of Cash Equivalents Examples of cash...
What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
What is a restrictive endorsement? Definition of Restrictive Endorsement A restrictive endorsement or restricted endorsement places a limitation on the use of a check or other negotiable financial instrument. Using a...
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