, and that your company prepares monthly financial statements. One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $120 and to credit Cash for $120. At the end of each month an...
, and that your company prepares monthly financial statements. One way to enter the transaction is to debit the current asset Prepaid Subscriptions for $120 and to credit Cash for $120. At the end of each month an...
What are nonmanufacturing overhead costs? Definition of Nonmanufacturing Overhead Costs Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other...
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...
bookkeeping or accounting system, another general ledger account will also be misstated by the same amount. Example of Understated Assume that a company reports its accounts payable as $210,000. Also assume that the...
to $80,000+. The reasons for the wide pay range include the company’s size and industry, supply and demand for accountants in the company’s geographic area, the responsibilities of the accountant, the accountant’s...
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
Inventory and will be the first costs to be included in the cost of goods sold on the income statement. Therefore, under the FIFO cost flow assumption the most recent costs will remain in Inventory to be reported on the...
What is the periodic inventory system? Definition of Periodic Inventory System The periodic inventory system does not update the general ledger account Inventory when a company purchases goods to be resold. Rather than...
Are utility bills an expense or a liability? Definition of Utility Bills Utility bills are invoices received by a company for the natural gas, electricity, water, and sewer charges that the company used during a previous...
: $10,000 of assets = $0 of liabilities + $10,000 of owner’s equity. Next, let’s assume the company purchases equipment at a cost of $3,000 and signs a promise to pay the $3,000 within six months. Now the company’s...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
: The company has a sufficient, long-term investment that is restricted for the purpose of paying the bondholders the maturity amount of the bonds when they come due. Typically, this investment is known as a bond sinking...
and interest receivable. Example of a Promissory Note A promissory note is created when a company borrows money from its bank. However, a promissory note could also be used when a company is unable to pay one of its...
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...
a fixed budget, let’s assume that a company pays a 5% sales commission on all of its sales. If the company prepares a fixed budget and it is projecting sales of $1 million, the budget for sales commissions will be...
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 does it mean to replenish the petty cash fund? Definition of Replenishing Petty Cash Replenishing the petty cash fund means the petty cash custodian requests and receives cash from the company’s regular checking...
of each and every item may allow the company to reduce the inventory quantities thereby freeing up cash that would have been sitting in inventory. Accounts receivable needs to be monitored to be certain that every...
What is an outstanding check? Definition of Outstanding Check An outstanding check is a check that a company has issued and recorded in its general ledger accounts, but the check has not yet cleared the bank account on...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Assets are reported on the financial statement known as the __________ __________. 2. The...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
. If the __________ __________ __________ of a company’s inventory is less than its cost, this lower amount will be reported on the company’s balance sheet. 3. If an error results in the amount of ending inventory...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
What does the direct labor efficiency variance tell us? This variance tells us how efficient the direct labor was in making the actual output that was produced by the direct labor. The direct labor efficiency variance...
What are the advantages of departmentalizing manufacturing overhead costs? The departmentalizing of manufacturing overhead costs allows for better planning and control if the head of each department is held responsible...
What are indirect manufacturing costs? Definition of Indirect Manufacturing Costs Indirect manufacturing costs are a manufacturer’s production costs other than direct materials and direct labor. Indirect manufacturing...
What is a service department? Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department does not produce any of the...
What is the difference between prime costs and conversion costs? Cost Categories of a Manufactured Product Prime costs and conversion costs pertain to the three cost categories of a manufactured product: Direct materials...
. 8. At the beginning of the year, the asset Supplies had a balance of $1,000. At the end of the year, it had a balance of $1,300. During the year the company purchased $3,000 of supplies, which were recorded in 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...
__________ for the customer. 18. A value __________ shows the business activities or functions starting with research and development and ending with customer service. 19. A __________ chain shows the path from the...
displays for its store at a cost of $120,000. The displays have a useful life of 10 years and will have no salvage value. The straight-line method of depreciation will result in depreciation of $1,000 per month...
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...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
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...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
The proportion of products sold. For example, if a car company sells 100,000 low-profit cars and 400,000 medium-profit cars and 500,000 high-profit trucks, it has a sales mix of 10% + 40% + 50%. If the total number of...
A discount that often varies by customer. For example, a company may sell its products to a variety of resellers. Some of the resellers might buy $1 million of products each year, other resellers might purchase $100,000,...
Under the accrual method of accounting, this account reports the employer’s portion of the Social Security and Medicare tax that pertains to the period indicated in the heading of the income statement, whether or...
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