of money. The concept is that receiving $1,000 in the future is less valuable than receiving $1,000 today. If we assume that the time value of money is 10% per year, a net receipt of $1,000 one year from today will have...
of money. The concept is that receiving $1,000 in the future is less valuable than receiving $1,000 today. If we assume that the time value of money is 10% per year, a net receipt of $1,000 one year from today will have...
What is the debt to total assets ratio? Definition of Debt to Total Assets Ratio The debt to total assets ratio is an indicator of a company’s financial leverage. It tells you the percentage of a company’s total...
in previous years and to other companies in the same industry. Even with a favorable inventory turnover ratio, a company may have some excess and obsolete inventory items. Therefore, it is wise to compare the...
How do you balance a checkbook? Definition of Balance a Checkbook To balance a company checkbook means comparing the amounts on the bank statement (or other bank account detail) to the amount in the company’s...
the best price, the transaction is viewed as an arms length transaction. The resulting price should be close to the fair market price. On the other hand, if the daughter of the company’s owner wants the company to...
Bulletins FASB Emerging Issues Task Force (EITF) Abstracts FASB Concepts (Statements of Financial Accounting Concepts) Each of the “FASB Statements” has three options: Text, Summary, and Status. The Status option...
space and other costs of holding/carrying inventory While inventory is critical to meet demand for the goods, but having too much of the wrong inventory items can result in cash flow problems that may jeopardize...
How many days after a month ends should the bank reconciliation be done? Definition Bank Reconciliation The bank reconciliation (if prepared or reviewed by someone other than the person with access to the checking...
What is the break-even point? Definition of Break-even Point In accounting, the break-even point refers to the revenues necessary to cover a company’s total amount of fixed and variable expenses during a specified...
when the amount is insignificant in relationship to the company’s size. Since no investor or lender would be misled if the entire $120 appeared as an expense in one month and $0 appeared in the other 11 months, the...
position and the for-profit corporation’s balance sheet is the equity section: The for-profit corporation’s equity section has the heading Stockholders’ Equity. Within this section are the paid-in capital amounts...
account entitled Petty Cash must be opened. (This will be an additional cash account that can be listed separately on the company’s balance sheet or its balance could be included with the balances in the other cash...
for $8. The credit memo will result in the following entry in SellerCorp’s accounting records: 1) a debit of $8 to Sales Returns and Allowances, and 2) a credit of $8 to Accounts Receivable. In other words, the credit...
of the accounts will receive a debit entry and at least one other account will receive a credit entry. Further, the amounts entered as debits must be equal to the amounts entered as credits. You should think of a debit...
in a year, each semimonthly pay period will have on average 2.16667 weeks per semimonthly payday. Example of Biweekly Payroll Let’s assume that a company pays its employees biweekly on every other Friday. If a new...
For most industries, a company’s current assets are defined as cash and other assets that will turn to cash or will be used up or consumed within one year of the balance sheet date. If a company is in an industry...
What are goods in transit? Definition of Goods in Transit Goods in transit refers to inventory items and other products that have been shipped by a seller, but have not yet reached the purchaser. When goods are in...
that are discounted for the time value of money. The time value of money recognizes that a dollar today is more valuable than a dollar received in the future. Other capital budgeting models use cash flows without...
and general management, are expenses of the accounting period and are not applied or assigned to products.) Actual overhead are the manufacturing costs other than direct materials and direct labor. Since the overhead...
What is a blank check? Definition of Blank Check A blank check often refers to a check that has been signed by an authorized check signer without completing the other information (date, payee, amount). A blank check...
margin ratios vary between industries. Therefore, you should compare a company’s gross margin ratio to other companies in the same industry and to its own past ratios or its planned ratios. Join PRO to Track Progress...
variance indicates that the variance (or difference between the budgeted and actual amounts) was not good for the company’s profits. In other words, this unfavorable variance is one reason for the company’s actual...
examples to show the usefulness of Herb’s tip. When a company receives the bank statement for its checking account, the bank statement already shows the deduction for the bank’s service charge. Therefore, the bank...
can be compared to the ratios of other companies in the same industry. An accounting ratio can also be compared to the company’s same ratio in recent periods to see whether the company is improving or declining....
is the result of discounting all of the cash inflows and outflows and then combining all of their present values. This means that the original outflow (often the investment made at the present time) is a deduction from...
value. For example, the “A” items might be 20% of the items in inventory which account for 70% of the inventory value. At the other extreme the “C” items might be 60% of the items in inventory but they account...
31, 2023), you are ignoring the balances on the other 364 days of 2023. That’s a problem if the majority of the company’s activity occurs in the months of March through October. If that’s the case, using only the...
on credit and offers an early payment discount expressed as 1/10, net 30. This means that a customer is allowed to deduct 1% of the invoice amount, if payment is made within 10 days (instead of paying the full...
average time for all four websites will be 64 hours (80% of 80 hours). After the eighth website the cumulative average for all 8 websites will be 51.2 hours (80% of 64 hours). In other words, the total time to have...
that the variance or difference between the budgeted and actual amounts was good or favorable for the company’s profits. In other words, this variance will be one reason why the amount of the company’s actual...
How do I write off old outstanding checks? Definition of an Old Outstanding Check We will assume that an outstanding check has appeared on the outstanding check list that is part of the company’s bank reconciliation...
20% of the grades awarded are A’s. In short, the GPA needed to be hired by a CPA firm will depend on the philosophy, size, and clients of the CPA firm. The required GPA will also depend on the student’s ability to...
, the company lists the cash inflows and cash outflows from: Borrowing and repaying short-term loans Borrowing and repaying long-term loans and other long-term liabilities Issuing or reacquiring its own shares of common...
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
generally have a 120 or 150 credit college degree including at least 30 credits of accounting courses plus 30 credits of other business courses. A bookkeeper is likely to be employed at a smaller company or organization...
principle, the cost flow assumption, consistency, and other accounting concepts and principles. When a company elects the LIFO cost flow assumption, it chooses to put its most recent costs in the cost of goods sold, and...
What is a customer deposit? Definition of Customer Deposit A customer deposit could be money that a company receives from a customer prior to the company earning it (by providing the customer with goods or services). In...
to +1 (“0” indicates no correlation and “1” indicates perfect correlation). Measuring the correlation between variables can be helpful, but a high degree of correlation does not guarantee that a change in one...
What is job order costing? Definition of Job Order Costing Job order costing or job costing is a system for assigning and accumulating manufacturing costs of an individual unit of output. The job order costing system is...
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