How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
preferred stock with the __________ feature, it will have dividends in arrears. 15. If common stock is issued for assets other than cash, the transaction should be recorded at the fair __________ value of 1) the stock...
Goodwill is a long-term (or noncurrent) asset categorized as an intangible asset. Goodwill arises when a company acquires another entire business. The amount of goodwill is the cost to purchase the business minus the...
. This estimated amount is used to calculate the asset’s depreciation expense and it is often assumed to be zero. The term residual value may have other uses as well. For example, it is used when discussing leased...
, the basic accounting equation Assets = Liabilities + Owner’s Equity can be restated to be Assets = Equities. Equity can mean an owner’s interest in a personal asset. For example, the owner of a $200,000 house that...
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
of volume is more than a reasonable change. If volume did triple, it is likely that the company would have to add more space and more salaried employees. This would mean more fixed expenses. In Total Within A Reasonable...
. In essence, the cost of goods sold is being matched with the revenues from the goods sold, thereby achieving the matching principle of accounting. When the cost of goods sold is subtracted from net sales, the result is...
In regression analysis this is a statistic designated as r and ranging from -1 to +1. It indicates the percentage of correlation between the dependent variable and the independent variable(s). When this statistic is...
A driver of a change in the amount of a dependent variable. The independent variable is usually represented by “x”, the dependent variable by “y”, the rate of change by “b”, and the...
What is the coefficient of determination? The coefficient of determination is a statistic which indicates the percentage change in the amount of the dependent variable that is “explained by” the changes in the...
to make meaningful comparisons between years. Consistency does allow a company to make a change to a more preferred accounting method. However, the change and its effects must be clearly disclosed for the benefit of the...
What is a dependent variable? In accounting, a dependent variable is likely to be the total of a mixed cost that will change as the result of several factors. A factor that causes the change in the total cost is referred...
assets. Gain Right! Because the sale of equipment is outside of the main business activity and the amount received was greater than the amount at which the asset was carried in the company books, it is reported as a...
. If the range of these MHs (6,000 to 10,000) are not outside the range of normal activity, we know by definition that the fixed manufacturing costs will not change in this range as the MHs change. That means that any...
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
tells you that 64% of the change in the total of the dependent variable is associated with the change in the independent variable.) An r of +0.20 or -0.20 will result in an r-squared of only 4% (0.20 x 0.20), which...
What is cost behavior? Definition of Cost Behavior Cost behavior is an indicator of how a cost will change in total when there is a change in some activity. In cost accounting and managerial accounting, three types of...
___________ are equal to total costs. REVENUES UERVNESE Unscramble REVENUES RVEUEENS Unscramble 2. Revenues minus variable costs equals the _________________ margin. CONTRIBUTION BNIUTRCNTIOO Unscramble CONTRIBUTION...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
Our Explanation of Financial Accounting introduces some of the basic accounting concepts and how they affect the income statement, balance sheet, and other financial statements.
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
What is stockholders' equity? Definition of Stockholders’ Equity Stockholders’ equity (also known as shareholders’ equity) is reported on a corporation’s balance sheet and its amount is the difference...
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
What is a dividend? Definition of Dividend Generally, the term dividend refers to a cash dividend, which is distribution of a portion of a corporation’s earnings to its stockholders in the form of cash. The cash...
What is the difference between depreciation expense and accumulated depreciation? Definition of Depreciation Expense Depreciation expense is the amount of depreciation that is reported on the income statement. In other...
If cash and a note are exchanged for a plant asset, is the amount of the note used in the depreciation calculation? A plant asset’s cost is depreciated, unless the asset is land. Cost is defined as the cash or cash...
(such as years). Instead, the depreciation is expressed and calculated based on the asset’s usage. Under the units-of-activity method of depreciation, the asset’s cost (less any salvage value) is allocated to the...
How do I compute the units of production method of depreciation? Definition of Units of Production Depreciation The units of production method of depreciation (which is also referred to as the units of activity method)...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
computes the variable cost rate by dividing the change in the total costs by the change in the number of units of manufactured. In other words, the $4,800 change in total costs is divided by the change in units of...
, the following adjusting entry will be needed: Debit Inventory for $5,000, and Credit Inventory Change for $5,000 Let’s also assume that the Purchases account showed a debit balance of $200,000 for the year. The...
Current assets minus current liabilities.
An estimate of an asset’s market value
of land. Depreciation attempts to match an asset’s cost (minus any expected salvage value) with the revenues that the asset will be generating over an estimated number of accounting periods. Example of Depreciation...
Featured Review
"I am currently a returning adult student studying business and accounting. My Intro to Accounting professor recommended AccountingCoach, and it has been invaluable. I opted to become a PRO user because I knew it would serve me well, not only throughout my schooling but in my career as well. The certificates, flashcards, and practice quizzes are a great way to master and maintain accounting concepts. The site is very user friendly and has all the information I could ever need. A fantastic resource!" - Renee S.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: