What is the entry when merchandise has been received but not the vendor's invoice? Definition of Merchandise Received but Not Vendor’s Invoice If a retailer receives merchandise from one of its vendors, but has...
What is the entry when merchandise has been received but not the vendor's invoice? Definition of Merchandise Received but Not Vendor’s Invoice If a retailer receives merchandise from one of its vendors, but has...
and utilities, and interest on loans are examples of expenses that are not assigned to the products. Instead, these costs are described as period costs since they are expensed immediately in the accounting period in...
What is the days' sales in accounts receivable ratio? Definition of Days’ Sales in Accounts Receivable The days’ sales in accounts receivable ratio (also known as the average collection period) tells you the...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
What is the difference between cost and price? Definition of Cost and Price In accounting, the term cost can mean the cash or cash equivalent amount a company paid to acquire an asset or the amount of an expense it...
will be closed at the end of each year. However, the account’s debit balance is closed directly to the owner’s capital account. (The owner’s draws are not reported as an expense on the company’s income...
Why not use Sales in the Inventory Turnover Ratio? The short answer is: Because Inventory is at cost. Inventory is not on the company’s books at selling prices. The Inventory Turnover Ratio is Cost of Goods Sold...
. Let’s begin by assuming that a company’s product has a cost of $75 and the company desires a 25% gross margin (or 25% of the selling price). Let’s use “SP” to indicate the product’s required selling price...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
of $20,000 per year ($500,000 divided by 25 years). Another example of a deferred expense is a $12,000 insurance premium paid by a company on December 27 for insurance protection during the upcoming January 1 through...
to provide electricity on peak demand days) A variable amount based on the number of kilowatt hours of electricity actually used by the company The manufacturer’s electricity cost is also semivariable in relation to...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
What is the difference between the current ratio and the quick ratio? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
Depreciation However, U.S. companies continue to use the term reserve in regards to the accounting for inventories using the LIFO cost flow method. For example, the company will use a contra inventory account entitled...
What is the proper accounting for supplies? Definition of Supplies Office supplies are items used to carry out tasks in a company’s departments outside of manufacturing or shipping. Office supplies are likely to...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
will be reported by the bank as a current liability, and will be reported as a short-term investment by the depositor (provided the amount is not restricted by the depositor). Example of a Certificate of Deposit James...
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...
, etc. The manufacturer has 40,000 production machine hours. Using the traditional method of cost accounting, the company will allocate or assign $50 of overhead of each machine used to produce the output. Applying $50...
Why are the amounts on the financial statements rounded to thousands or millions? Definition of Rounding Amounts on Financial Statements Rounding the amounts on a company’s financial statements means dropping the less...
, a company borrows $100,000 with an annual interest rate of 12%. The interest for each month is to be paid on the last day of the month. No principal payment is required until the loan comes due in two years. On July 1...
What is a journal entry? Definition of a Journal Entry In manual accounting or bookkeeping systems, business transactions are first recorded in a journal…hence the term journal entry. Journal entries that are recorded...
What is a multiple-step income statement? Multiple-Step Income Statement Definition A multiple-step income statement presents two important subtotals before arriving at a company’s net income. For a company that sells...
What are accruals? Definition of Accruals The accounting and bookkeeping term accruals refers to adjustments that must be made before a company’s financial statements are issued. Accruals involve the following types of...
of fixed manufacturing overhead costs The amount of the fixed manufacturing overhead costs that were assigned to (or absorbed by) the company’s good output Example of Production Volume Variance Assume that a...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
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...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
on this in the Internal Revenue Service Publication 946. Examples of Mid-Month Convention Under the mid-month convention, if a company put a warehouse into service on October 6, it is assumed that the warehouse was put...
the employee's _______ wages. GROSS SROSG Unscramble GROSS GOSRS Unscramble 6. A person who performs a service for a company but is not the company's employee is referred to as an _________________ contractor....
another way, since we cannot undo the past, every decision will affect only today and/or the future. As a result, the relevant costs and benefits for making a decision are the current and future costs....
What is accrued payroll? Definition of Accrued Payroll Accrued payroll includes wages, salaries, commissions, bonuses, and other payroll related expenses that have been earned by a company’s employees, but have not yet...
Bookkeeping Video Training Part 10 Adjusting entries: recap of accruals, deferrals, one balance sheet account and one income statement account will be affected Must-Watch Video Learn How to Advance Your Accounting and...
Bookkeeping Video Training Part 3 Accounts for expenses are debited, the income statement and balance sheet are connected, accrual method of accounting Must-Watch Video Learn How to Advance Your Accounting and...
14. The current ratio and the quick ratio are indicators of a company's ___________. LIQUIDITY QULYIITID Unscramble LIQUIDITY TYLIIDQIU Unscramble 15. The profit margin ratio and the return on assets are indicators...
of Adjusting the Inventory Account When using the periodic method, balance in the inventory account can be changed to the ending inventory’s cost by recording an adjusting entry. To illustrate, let’s assume that the...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. A company owes its suppliers $38,000 and it owes its bank $50,000. The suppliers and the bank are...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
Bookkeeping Video Training Part 9 Adjusting entries: depreciation expense and accumulated depreciation reported on financial statements, useful life of the asset Must-Watch Video Learn How to Advance Your Accounting and...
and variable costing Neither absorption nor variable costing Use the following information for answering Questions 21 - 25: During the past year a company budgeted, manufactured, and sold 100,000 units of its only...
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