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.
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.
View Coaching LIFO is the acronym for last-in, first-out. It is a cost flow assumption used in determining the amounts reported as inventory and the cost of goods sold. LIFO means that the most recent costs of goods...
.) A retailer’s or a manufacturer’s cost of goods sold is another example of an expense that is matched with sales through a cause and effect relationship. Not all costs and expenses have a cause and effect...
the first costs are assumed to have been the first costs out of inventory to become part of the cost of goods sold. Under the LIFO cost flow assumption, the inventory will be valued at the older costs, since the more...
of $5,000 and cost of goods sold of $3,000. The difference of $2,000 is part of the retailer’s gross profit, operating income, and net income. The word “gain” is not appropriate since the activities involved the...
than the current cost of the productive capacity being used up each year. Similarly, if a retailer’s cost of items in inventory is increasing at an annual rate of 10%, the cost of goods sold reported on the income...
increases when the volume decreases. Examples of Fixed Costs Assume the rent for a production facility is a fixed cost of $120,000 per year and there are normally 30,000 machine hours of good output during a year. At...
important because of its effect on the following: Cost of goods sold for more than one accounting period The amount of a company’s current assets The company’s working capital The company’s current ratio Join PRO...
the production department (which also includes the warehouse for materials, the warehouse for finished goods, the shipping department, and quality control department) are indirect costs of the production department,...
. PERIOD PRDEOI Unscramble PERIOD EOIRPD Unscramble 6. The amounts earned from a company's main activities. REVENUES VNEERSEU Unscramble REVENUES UNEVRESE Unscramble 7. The costs that are matched with revenues....
the actual cost per unit (pounds, gallons, etc.) and the standard cost per unit Materials Usage or Quantity Variance which reports the difference between the actual quantity of the materials used and the standard...
from disposing of an old asset, etc. The net cash flows also include the cash outflows such as paying for new equipment, paying for goods and services from the last accounting period, repaying bank loans, making a...
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
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...
for packaging, sales commissions, and shipping. Therefore, the net realizable value of the inventory is $12,000 (selling price of $14,000 minus $2,000 of costs to dispose of the goods). In that situation the inventory...
a lower amount of cost of goods sold. Smoothing income by abusing the leeway in accounting principles is unethical and does a disservice to the users of the financial statements. Accountants should follow the...
the heading __________ current assets. 19. A supplier of goods or services is known as a __________. Debtor Wrong. Vendor Right! 20. The separation of duties is part of the internal __________ controls for safeguarding...
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...
's inventory balance averaged $100,000; its sales were $500,000; and its cost of goods sold was $400,000. The company’s inventory turnover ratio for that year was __________ 4 Inventory turnover ratio = cost of...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
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...
that under the accrual basis of accounting: Revenues are reported in the accounting period in which they are earned (as opposed to when cash is collected) Expenses are reported in the accounting period when they best...
? Cash Is Received Wrong. Service Or Goods Have Been Delivered Right! 4. Under the accrual basis of accounting, expenses are reported in the accounting period when which of the following occurs? Cash Is Paid Wrong. An...
What are departmental overhead rates? Definition of Departmental Overhead Rates Departmental overhead rates are used by many manufacturers to allocate (assign, apply) manufacturing overhead to the goods it produces...
Unscramble 7. Amounts owed for goods and services received on account are accounts __________. PAYABLE APBLAYE Unscramble PAYABLE LAEPBYA Unscramble 8. A corporation's owner's equity is referred to as...
How do you estimate the amount of uncollectible accounts receivable? Definition of Estimating Uncollectible Accounts Receivable When a company sells goods and/or provides services on account (on credit) using the...
the accrual method, when a company purchases goods from a supplier on credit the company will credit Accounts _____________. PAYABLE AAPBELY Unscramble PAYABLE APLYAEB Unscramble 19. This is an allocation process (not a...
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...
: For the past year, a company had net credit sales of $770,000 plus cash sales of $210,000. Its average balance in Accounts Receivable was $70,000. The company's cost of the goods sold averaged 70% of selling...
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...
the cost of the goods that were sold with the sales of the goods. It also requires the matching of sales commission expense with the related sales. If these cause and effect relationships are not present, an expense is...
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.
? Select... Cost of goods sold Total credit sales Total sales 11. Which of the following should be used to compute the receivables turnover ratio? Select... Gross sales Net credit sales Net sales 12. A company’s net...
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...
format? Single-step Wrong. There is no subtotal in the single-step income statement. Multiple-step Right! It will appear as the result of subtracting the cost of goods sold from net sales. 8. Which income statement...
. The merchandise held by a retailer is usually in the Inventory account at which amount? Select... Cost Sales value 22. Which inventory system will reduce the general ledger account Inventory and increase the general...
is available at www.FASB.org. assets liabilities equity revenues expenses gains losses comprehensive income 21. Net assets. Select... assets liabilities equity revenues expenses gains losses comprehensive income 22....
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