A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
What does a debit signify in bookkeeping? In bookkeeping, a debit can signify an increase in an asset, an expense, and the owner’s draws. A debit can also signify a decrease in a liability, revenues, and owner’s...
Why is an increase in inventory shown as a negative amount in the statement of cash flows? Meaning of a Negative Amount on Statement of Cash Flows A negative amount on the statement of cash flows (SCF) indicates that the...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee is not...
Why is the accuracy of inventory valuation so important? Definition of Inventory Accuracy Inventory accuracy means the following: Accurate counts of the items in inventory Proper cost of each item in inventory (based on...
, if gross sales are 990 and sales returns are 10, sales allowances are 5, and sales discounts 20, the net sales are 955 (990 minus 35). Here are some additional examples of net: net realizable value. The amount to be...
What is Form 10-K? Definition of Form 10-K Form 10-K is a required annual report filed with the U.S. Securities and Exchange Commission (SEC) by U.S. corporations whose common stock is publicly traded. It is common for a...
depreciation expense, assume that a company had paid $480,000 for its office building (excluding land) and the building has an estimated useful life of 40 years (480 months) with no salvage value. Using the...
When should a product warranty liability be recorded? Definition of Product Warranty Liability A product warranty means the manufacturer or seller has a potential liability and expense if its product or service fails to...
What is the entry for an employee's personal phone calls included in the company's bill? Let’s assume that an employee has made personal phone calls of $20 which are included in the company’s phone bill of $100....
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
Why do bonds rarely sell for their maturity value? The reasons why bonds rarely sell for their maturity value are: The interest paid is usually fixed at the interest rate that is stated on the face of the bond. As a...
Is the sales tax paid on merchandise that you will resell an expense? I believe that most states have sales tax exemptions for merchandise purchased for resale. Check with your state’s sales tax department to see if...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
How do you treat voided checks on the bank reconciliation? Definition of Voided Check on Bank Reconciliation If a check was voided in the current month but was written in the previous month and appeared on the previous...
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...
What is a nonprofit organization? A nonprofit organization is an organization without commercial owners and which addresses the needs of society. Nonprofit organizations are also known as not-for-profits, NFP’s or...
What is the gross profit method of inventory? Definition of Gross Profit Method The gross profit method is a technique for estimating the amount of ending inventory. The gross profit method might be used to estimate each...
What journal entries are prepared in a bank reconciliation? Definition of Journal Entries in a Bank Reconciliation Journal entries are required in a bank reconciliation when there are adjustments to the balance per...
What should be the entry when goods are purchased at a discount? Definition of Goods Purchased at a Discount There are two common types of discounts for companies buying goods to resell: Trade discount Early payment...
refers to: organizations that are not government owned, and the goods and services provided by organizations outside of the government Example of Private Sector Companies owned by individuals are part of the private...
realizable value (NRV) that is less than the cost of the inventory, it may choose to keep the original costs in its Inventory account and to reduce the reported amount of inventory through a contra inventory account...
What is the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a balance sheet contra asset account that reduces the reported amount of accounts...
or maturity amount at a specified date some years in the future. The agreement containing the details of the bonds payable is known as the bond indenture. U. S. corporations issue bonds instead of common stock for...
in the fire is in the company’s general ledger accounts at a cost of $106,000. The insurance policy deductible was $1,000 per occurrence. The journal entry for this transaction is: Debit Cash for $105,000 Credit...
What is the procedure for preparing a trial balance? Definition of a Trial Balance A trial balance consists of the following information: The title of each general ledger account that has a balance To the right of the...
What is SG&A? Definition of SG&A SG&A is the acronym for selling, general and administrative. SG&A are the operating expenses incurred to 1) promote, sell, and deliver a company’s products and services, and 2) manage...
How many years is the appropriate time for depreciating leasehold improvements? Leasehold improvements should be depreciated or amortized according to the lessee’s normal depreciation policy except that the time period...
What is the difference between cash flow and free cash flow? Definition of Cash Flow Cash flow refers to the amounts of cash that a company, investment or project generates. The cash that a company generates is different...
What are quick assets? Definition of Quick Assets Quick assets are a company’s current assets which can quickly be converted into cash. Quick assets provide the liquidity necessary to pay the company’s obligations...
What is GAAP? Definition of GAAP GAAP is the acronym for generally accepted accounting principles. GAAP consists of the following: Basic underlying accounting principles, assumptions, and concepts such as the cost...
What is a recurring journal entry? Definition of Recurring Journal Entry A recurring journal entry is a journal entry that is recorded in every accounting period. Some recurring journal entries will involve the same...
, 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...
units and the partially completed units are expressed in terms of fully completed units. Equivalent units are used in the production cost reports for the producing departments of manufacturers using a process costing...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
in the property’s cost of $1,600,000. A real estate appraisal indicates that the land has a current value of $400,000 and the warehouse building has a current value of $1,200,000. The transaction will be recorded with...
What is a special journal? Definition of a Special Journal A special journal (also known as a specialized journal) is useful in a manual accounting or bookkeeping system to reduce the tedious task of recording both the...
What is other comprehensive income? Definition of Other Comprehensive Income Other comprehensive income, or OCI, consists of items that have an effect on the balance sheet amounts, but the effect is not reported on the...
What is the difference between a nominal account and a real account? Definition of Nominal Account The balance in a nominal account is closed at the end of the accounting year. As a result, a nominal account begins each...
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