What is a natural business year? Definition of Natural Business Year A natural business year is the period of 12 consecutive months (or 52-53 consecutive weeks) ending at a low point of the organization’s activities...
What is a natural business year? Definition of Natural Business Year A natural business year is the period of 12 consecutive months (or 52-53 consecutive weeks) ending at a low point of the organization’s activities...
What is sales mix? Definition of Sales Mix Sales mix is the relative proportion or ratio of a business’s products that are sold. Sales mix is important because a company’s products usually have different degrees of...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods sold...
What is the purpose of the Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts or Allowance for Uncollectible Accounts is a general ledger contra account...
What is the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is an important financial ratio that indicates a company’s past ability to sell its goods. Converting inventory...
A corporation has a large balance in retained earnings. Does that mean that its dividends to stockholders will be increasing? Definition of Retained Earnings Retained earnings is one part of a corporation’s...
What is the stated interest rate of a bond payable? Definition of Stated Interest Rate of a Bond The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond and stated...
What is the conservatism principle? Definition of Conservatism Principle In accounting, the conservatism principle (or accounting constraint) directs an accountant, who is faced with doubt between two possible...
What is the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
What are the typical items reported as current liabilities? Definition of Current Liabilities Current liabilities (also known as short-term liabilities) for most companies are the obligations that must be paid within one...
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...
What is transfer pricing? Definition of Transfer Pricing Transfer pricing involves setting a price that will be used when one responsibility center of a company sells goods or services to another responsibility center of...
Should a manufacturer's selling prices be based on costs? A manufacturer’s selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At best,...
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...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Cost Behavior & Estimation(Quick Test) Download PDF After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
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...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
What is a bookkeeper? Definition of Bookkeeper A bookkeeper is usually employed by a small to mid-size company (or other organization) to process and record the large volume of transactions involving sales, purchases,...
What is revenue? Definition of Revenue Revenue is the amount a company receives from selling goods and/or providing services to its customers and clients. A company’s revenue, which is reported on the first line of its...
Debits and Credits(Quick Test #2) Download PDF After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
How is the material usage variance account reported on the financial statements? Definition of Materials Usage Variance The materials usage variance (in a standard costing system) results from using more or less than the...
What is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
What is income smoothing? Definition of Income Smoothing Income smoothing involves reducing the fluctuations in a corporation’s earnings. The reductions in fluctuations can result from some legitimate business methods...
How do you calculate opportunity costs? Definition of Opportunity Costs Opportunity costs are the profits a company (or person) missed, or the contribution margin that was missed. Opportunity cost might be thought of as...
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
Chart of Accounts For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Are income taxes affected by accelerated depreciation? Definition of Accelerated Depreciation Accelerated depreciation means the cost of an asset used in a business will be charged to Depreciation Expense at a faster...
What are the limitations of the balance sheet? Definition of Balance Sheet The balance sheet is one of the main required financial statements. It is also known as the statement of financial position. The balance sheet...
Our income statement shows wide fluctuations in utilities expense from month to month. I suspect our accounting is not proper. Any suggestions? Under accrual accounting, your income statement should report the amount for...
Depreciation For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Variable vs Absorption Costing(Quick Test) Download PDF After you have answered all 25 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note:...
What is the accrual basis of accounting? Definition of Accrual Basis of Accounting Under the accrual basis of accounting (or accrual method of accounting), revenues are reported on the income statement when they are...
Depreciation(Quick Test #2) Download PDF After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
What are LIFO layers? Definition of LIFO Layer LIFO is the acronym for Last-In, First-Out. In the context of inventory, it means that the cost of the most recently purchased units will be the first costs to be matched...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
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