a regular corporation and invest cash in exchange for shares of the new corporation’s common stock, Cash will be debited and the account Common Stock will be credited. (If the common stock has a par value, Paid-in...
a regular corporation and invest cash in exchange for shares of the new corporation’s common stock, Cash will be debited and the account Common Stock will be credited. (If the common stock has a par value, Paid-in...
What is preferred stock? Definition of Preferred Stock Preferred stock is a type of capital stock issued by some corporations in addition to its common stock. Preferred stock is also known as preference stock. The word...
costs, burden, indirect manufacturing costs, and indirect product costs. Since manufacturing overhead is an indirect product cost, it needs to be allocated or assigned to the products manufactured and will cling to 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 do overabsorbed and underabsorbed mean? Definition of Overabsorbed and Underabsorbed In cost accounting, overabsorbed and underabsorbed pertain to a manufacturer’s manufacturing overhead costs. The manufacturing...
for further processing are referred to as __________–__________ units by Department A. 5. Department A’s costs for the units it sent to Department B are referred to as __________–__________ costs by Department B....
, the allocated manufacturing cost will be included as part of the following costs: Cost of goods that are in inventory (a current asset on the balance sheet) Cost of goods that were sold (as the expense cost of goods...
with significant amounts of inventory and plant assets. For example, when inventory is measured by using the first-in, first-out cost flow assumption under US GAAP, the actual historical cost of inventory that is...
. With standard costing, the general ledger accounts for inventories and the cost of goods sold contain the standard costs of the inputs that should have been used to make the actual good output. Differences between the...
What is the difference between actual overhead and applied overhead? Definition of Actual Overhead In the context of actual and applied overhead, actual overhead refers to a manufacturer’s indirect manufacturing costs....
run smoothly with the same amount of monthly fixed costs, which on average are approximately $200,000 per month for the cost of supervisors, rent, depreciation, and other fixed costs. However, if the manufacturer’s...
How can a manufacturer determine the precise cost of its products? A manufacturer may never be able to determine the precise cost of its individual products. The reason is that most of the manufacturing costs (other than...
The reduction in inventory quantities resulting in the removal of older layers of costs. With continuously higher costs, the older layers are likely to be low costs under LIFO. Removing these old, low costs will cause an...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
What is the death spiral? Definition of Death Spiral In cost accounting and managerial accounting, the term death spiral refers to the repeated elimination of a manufacturer’s products which will result in spreading...
Stockholders' Equity (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. If you have difficulty answering the following questions, learn more about this topic...
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...
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
rate The three product costs are used for calculating the cost of goods sold and the cost of the various inventories. If there is a difference between the total amount of overhead costs applied to the products and the...
the inventory Cost of deterioration and obsolescence of the inventory items Some of the costs listed are a function of the cost or value of the inventory, while some are based on the physical size of the items being...
of the balance sheet. Examples of Capital Stock Capital stock is the combination of a corporation’s common stock and preferred stock. Common stock is issued by every U.S. corporation. A small percentage of...
An entry without debit or credit amounts. For example, assume that a corporation has 100,000 shares of $0.50 par value common stock before a 2-for-1 stock split. At the time of the split a memo entry would be entered in...
What is the dividend payout ratio? The dividend payout ratio, or simply the payout ratio, is the percentage of a corporation’s earnings that is paid out in the form of cash dividends. The calculation of the dividend...
Why would a company use LIFO instead of FIFO? Definitions of FIFO and LIFO FIFO and LIFO are two of the cost flow assumptions used by U.S. companies with inventory items. FIFO moves the first/oldest costs from...
What is an incremental cost? Definition of Incremental Cost An incremental cost is the difference in total costs as the result of a change in some activity. Incremental costs are also referred to as the differential...
incurred, the products have overabsorbed the overhead costs. At the end of the accounting year, the amount of the overapplied, overassigned, or overabsorbed overhead is often credited to the cost of goods sold. The...
Should inventories be reported at their cost or at their selling prices? Definition of Inventory Cost Inventories are reported at cost, not at selling prices. A retailer’s inventory cost is the cost to purchase the...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
and the deferral of some costs to a future accounting period. Select... conservatism cost economic entity full disclosure going concern industry practices matching materiality monetary unit time period 16. Assumption...
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...
Usually used in describing fixed costs. We often state that fixed costs will not change as volume changes. However, if volume were to triple, there would likely be more fixed costs as the company will need more space and...
(including semivariable expenses) into fixed costs/expenses and variable costs/expenses. For simple businesses with similar products or services, the total amount of fixed costs/expenses is divided by the...
. The break-even point could be determined by using an electronic spreadsheet or by using a formula. The key is to determine how each of the company’s costs and expenses behave in order to compute the total amount of...
in the variable costs. Here’s the formula: Variable Cost Rate = Change in total costs divided by the change in the MHs. In our example, Variable Cost Rate = $40,000 ($140,000 minus $100,000) divided by 4,000 MHs...
What is LIFO? Definition of LIFO LIFO is the acronym for last-in, first-out, which is a cost flow assumption often used by U.S. corporations in moving costs from inventory to the cost of goods sold. Under LIFO, the most...
What is a standard cost? Definition of Standard Cost A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the “should be”...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
Our Explanation of Manufacturing Overhead gives you examples of what is included in manufacturing overhead. You will learn that these are indirect product costs and therefore are allocated to the products in order to...
is credited to this account and then amortized with a credit to interest expense over the life of the bonds. Mark as wrong Mark as right straight-line amortization This is a common method for systematically moving bond...
Featured Review
"Hands down, without a trace of doubt, your website is the absolute number one aid for an accounting student such as myself. Trust me, I have been to all the websites, nothing like AccountingCoach even comes close. It is extremely professional and expertly web-formatted, not to mention, user-friendly." - T.M.
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: