to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
of a decentralized corporation such as related subsidiary corporations, separate divisions of a corporation, or some other subunits. Depending on the production capacity and the demand for each subunit’s goods or...
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
in a general ledger intangible asset account. If a company designs and registers its trademark, the amount recorded is limited to its cost. Costs incurred to defend a trademark are also recorded in the trademark...
expense account to record the amounts that employees paid toward the company’s health insurance costs. For instance, the company might debit its expense account 4210 Employee Health Insurance Expense when recording...
) are not reported on the balance sheet. The same holds for a great management team and an amazing reputation. The cost principle also means that many long-term assets are reported at cost (and not at their current...
of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating...
, the businesses are referred to as profit centers. If the operating businesses make their own investment decisions, the businesses are referred to as investment centers. The production and administrative departments...
statements Being eligible for a U.S. income tax benefit Having less inventory holding costs Being confronted with the total cost of holding items in inventory Join PRO to Track Progress Mark the Question as Read...
What is the difference between expenses and payments? Definition of Expenses and Payments Under the accrual method of accounting, expenses are costs that have been used up or have been incurred in the process of earning...
selling price). Therefore, the $2 markup divided by the product’s cost of $8 results in a markup that is 25% of cost. Thus, if a retailer wants its income statement to show a gross profit that is 20% of sales, the...
sold. Accountants can find the level of correlation between variables by using statistical software. For example, simple linear regression analysis (and multiple regression analysis) software can be used to determine...
these are recorded in accounts such as Purchases, Purchases Returns and Allowances, Purchases Discounts, etc. Must be adjusted at the end of the accounting year in order to report the costs actually in inventory...
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
asset. The deferred expenses that will not become expenses within one year of the date of the balance sheet will be reported in the long-term asset section of the balance sheet under the classification of other assets....
What is workers' compensation insurance? Workers’ compensation insurance is likely to be an insurance policy obtained by a company to cover the medical costs and lost wages for its employees’ work-related...
. The equipment’s cost was $100,000 and its accumulated depreciation as of its recent balance sheet date was $40,000. This means that up to the balance sheet date $40,000 of the asset’s cost had been reported as...
was $103,000 during the month, it’s June direct labor cost per equivalent unit will be $10 ($103,000 divided by 10,300 equivalent units). This means that $100,000 (10,000 X $10) of labor costs will be assigned to the...
by reading our Nonmanufacturing Overhead (Explanation). 1. Selling expenses should be allocated to the cost of goods sold for external financial reporting. True Wrong. False Right! 2. According to U.S. accounting...
Expense. The combination of the unamortized debit balance in Discount on Bonds Payable, the unamortized debit balance in Bond Issue Costs, and the $10,000,000 credit balance in Bonds Payable is referred to as the book...
purchases = cost of goods available – costs computed for the ending inventory = cost of goods sold. An alternative format is: net purchases plus the decrease in inventory or minus the increase in inventory = cost of...
, the cost is recorded as an expense in the year of the expenditure.) Examples of Capitalized Costs When a company constructs a new building, the interest incurred to finance its construction is capitalized. This means...
for the manufacturer’s cash to be used to: pay for the raw materials needed in its products pay for the labor and overhead costs needed to convert the raw materials into products hold the finished products in...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
similar amounts. The following are common account titles: Cash, Accounts Receivable, Accounts Payable, Loans Payable, Sales, Advertising Expense, Rent Expense, Interest Expense, and perhaps hundreds more. When we use...
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.
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.
. Costs that are used up or expire in the current accounting period are reported on the income statement as __________. 6. The Allowance for Doubtful Accounts reduces the amount reported on the balance sheet for the...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
. Another name for the balance sheet is the statement of financial __________. 5. The unexpired portion of prepaid insurance is __________. Select... a current asset a current liability an expense 6. A retailer’s...
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...
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