The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
The principle that requires a company to match expenses with related revenues in order to report a company’s profitability during a specified time interval. Ideally, the matching is based on a cause and effect...
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
receivable turnover ratio. days' sales in accounts receivable (or) average collection period This is the result of dividing 365 or 360 days by the accounts receivable turnover ratio. Mark as wrong Mark as right...
receiving ticket/record Some companies use an internal form known as the accounts payable voucher to which the above documents are attached. 3. On January 3, AVCO received a shipment of goods from a...
. If you matched the $100 cost with the sale, the company’s inventory will have the higher costs. If you matched the $110 cost with the sale, the company’s inventory will have lower costs. The weighted-average cost...
__________. Select... cost of goods sold selling expenses 12. The Allowance for Doubtful Accounts is one of the accounts under the __________ section of the chart of accounts. 13. The end-of-year balances in the asset...
removed from inventory and charged to the cost of goods sold will be the last cost of 4 units, which is $11 each. This means the cost of its December 31 inventory using periodic LIFO will be $31 (1 unit at $11 plus 2...
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 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...
per unit appearing as the cost of goods sold on the recent income statement. Had the replacement cost of the product been used, the cost of goods sold might have been $145. Assuming the product was sold for $165, the...
be significant if the items become obsolete due to breakthroughs in technology. If the company cuts back on the quantity of goods it orders or the quantity of goods it produces in order to reduce its holding costs, the...
of a Contra Account Assume that a company’s Equipment has a debit balance of $450,000. The related account Accumulated Depreciation of Equipment has a credit balance of $190,000. Therefore, the carrying amount or book...
What is the major weakness of the traditional method of allocating factory overhead? Definition of Traditional Method Allocating Factory Overhead The traditional method of allocating factory overhead (manufacturing...
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.
Ratio The inventory turnover ratio indicates how many times a company’s inventory turns over in a year. The calculation is: cost of goods sold for a year divided by the average inventory during the same year. Since a...
and variable manufacturing __________ costs. 3. A manufacturer’s inventory classifications are raw materials,__________ __________ __________, and finished goods. 4. A manufacturer will have cost of goods __________...
are sold, the costs of the products (raw materials, direct labor, and factory overhead) will be expensed as the cost of goods sold. Until the products are sold, the products’ costs will be reported as the current...
include: Billing for goods sold or services provided to clients Recording receipts from customers Verifying and recording invoices received from suppliers Paying suppliers Processing employees’ pay and the related...
refers to consistency as one of the characteristics or qualities that makes accounting information useful. Example of Consistency Let’s assume that a U.S. corporation uses the FIFO cost flow assumption for valuing its...
What is setup cost? Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded as a batch-level cost in activity...
in Manufacturing At a manufacturing company, the salaries and wages of employees in the manufacturing operations are assigned to the products manufactured. When the products are sold, the costs assigned to those...
. Examples of Petty Cash Payments Some examples of small payments made from petty cash include: Paying the mail carrier 30 cents for the postage due on a letter Reimbursing an employee $9 for supplies purchased...
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...
and finished goods. The notes to the financial statements will also described how the manufacturer’s inventory is valued. For example, the notes will disclose whether FIFO lower of cost or net realizable value, LIFO,...
What is absorption costing? Definition of Absorption Costing Absorption costing (also known as full absorption costing) indicates that all of the manufacturing costs have been assigned to (absorbed by) the units of goods...
statement as the cost of goods sold. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your...
current assets and the calculation of its cost of goods sold. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
of machine hours. A product’s manufacturing cost, consisting of direct materials, direct labor and manufacturing overhead, is used to report the cost of goods sold and also the cost of units in inventory. Therefore,...
with U.S. GAAP. The resulting unit costs are used for inventory valuation and for the calculation of the cost of goods sold. Example of Manufacturing Costs Manufacturing costs are typically divided into three...
What is COS? Definition of COS In accounting, the acronym COS could indicate either cost of sales or cost of services. The income statement of a manufacturer or a retailer might use the term cost of sales or it might use...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
pays for its purchases 90 days after it receives the goods. The corporation does not have sufficient money to purchase the raw materials, pay for the labor, and then wait 90 days to collect the receivable. The...
revenues are considered earned when the goods have been shipped or delivered to the customers and the merchandiser has a right to a collectible accounts receivable. (Under accrual accounting it is not necessary to have...
, the seller will debit Accounts Receivable and will credit Sales. When the seller receives payment from the customer, the seller will debit Cash and will credit Accounts Receivable. Example of a Credit Sale Assume that...
What is the difference between an invoice and a voucher? Definition of an Invoice An invoice received from a vendor is a billing for goods or services that it had provided. The vendor’s invoice will include the...
How does an expense affect the balance sheet? Definition of Expense An expense is a cost that has been used up, expired, or is directly related to the earning of revenues. Most of a company’s expenses fall into the...
a company’s costs, assisting in financial decisions, profit planning, calculating break-even points, capital budgeting, and calculating the costs of existing products in order to value the company’s inventory and to...
sales, while the operating expenses will include the cost of goods sold, selling, general and administrative expenses (SG&A), and perhaps impairment charges. Some of the SG&A expenses may appear as separate...
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