30, and will not include the goods in transit as its December 31 inventory. On December 31, the customer (buyer) is the owner of the goods in transit and will need to report a purchase, a payable, and must include the...
30, and will not include the goods in transit as its December 31 inventory. On December 31, the customer (buyer) is the owner of the goods in transit and will need to report a purchase, a payable, and must include 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...
What is a capital expenditure versus a revenue expenditure? Definition of Capital Expenditure A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
(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...
What is the difference between revenues and earnings? Definition of Revenues and Earnings Revenues are the amounts earned from providing goods or services to customers during the period shown in the heading of the income...
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....
What entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
What is accumulated depreciation? Definition of Accumulated Depreciation Accumulated depreciation is the total amount of a plant asset’s cost that has been allocated to depreciation expense (or to manufacturing...
What is the difference between gross profit margin and gross margin? Definition of Gross Profit Gross profit is an amount that is computed as follows: A company’s net Sales minus its cost of goods sold A product’s...
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...
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...
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...
See cost-volume-profit (CVP).
A cost and/or volume of activity that is outside of an expected range.
The acronym for cost of goods sold.
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
service department is responsible for its costs. Hence, the service departments are separate cost centers. The costs incurred by the service departments are considered to be indirect manufacturing costs that ultimately...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
What is leverage? Definition of Leverage In accounting and finance, leverage is the use of a significant amount of debt to purchase an asset, operate a company, acquire another company, etc. Since the cost of debt is...
Why isn't a key employee reported as an asset on the balance sheet? While an employee could be an organization’s most valuable asset, accountants record past transactions that can be measured. Since an employee...
for the company’s: Financial statements General ledger Cost accounting Payroll Accounts payable Accounts receivable Budgeting Special analyses as well as other duties At larger companies the controller may be assisted...
balance could begin by comparing the balance with an aging of the accounts receivable. Another example is reconciling the balance in the general ledger account Utilities Payable. This might be accomplished by computing...
How do you calculate an asset's salvage value? Definition of Asset Salvage Value In accounting, an asset’s salvage value is the estimated amount that a company will receive at the end of a plant asset’s useful...
realizable value (NRV) that is less than the cost of the inventory, it may choose to keep the original costs in its Inventory account and to reduce the reported amount of inventory through a contra inventory account...
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...
of Sundry Debtors I suspect that the term sundry was more common when bookkeeping was done manually. For instance, prior to the low cost of computers and accounting software, the bookkeeper had to add a page to the...
the insured company will be paid the cost of the inventory lost minus the amount of the insurance policy deductible. Example of Recording Insurance Claim for Inventory Loss Assume that a company received $105,000 from...
What is the difference between an invoice and a statement? Definition of an Invoice An invoice received from a supplier shows the items purchased, the cost per unit, the total cost or extension of each item, the total of...
What is gross profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Gross profit is sometimes referred to as gross margin. (However, gross margin can also mean the gross...
. For example, a small retailer can compare her cost of goods sold (perhaps 78%) to a much larger retailer’s cost of goods sold (perhaps 80%). Similarly, one company’s inventory might be 33% (of total assets) while a...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
! The amounts needed (total current assets and total current liabilities) are reported on the balance sheet. Cash Flow Statement Wrong. Income Statement Wrong. More Than One Will Be Needed Wrong. 3. The operating cycle...
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 Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
truck at the vendor’s dock). Since the goods in transit are now owned by AVCO, the cost of $5,000 must be reported on AVCO’s December 31 balance sheet as the current asset inventory and the current liability...
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...
__________ net income. 6. Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________ assets. 7. Assets are usually reported on the...
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