additional goods or services on credit (as opposed to paying with cash), the company will need to credit Accounts Payable so that the credit balance will increase accordingly. Definition of an Accounts Payable Debit If...
additional goods or services on credit (as opposed to paying with cash), the company will need to credit Accounts Payable so that the credit balance will increase accordingly. Definition of an Accounts Payable Debit If...
is helpful if the bank’s customer is traveling in countries where the customer is not known. The letter of credit will allow the customer to purchase goods on credit because the seller is assured of payment. In other...
What are the methods for separating mixed costs into fixed and variable? Definition of Mixed Costs Mixed costs are partially a fixed cost and partially a variable cost. Mixed costs are also known as semivariable costs....
A difference between an actual cost and a budgeted or standard cost, and the actual cost is the lesser amount. In the case of revenues, a favorable variance occurs when the actual revenues are greater than the budgeted...
Isn't all overhead fixed? Not all overhead is fixed. Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable. A common example of a variable overhead cost is the...
to as the optimum lot size. The formula to calculate the economic order quantity (EOQ) is the square root of [(2 times the annual demand in units times the incremental cost to process an order) divided by (the...
when a noncurrent asset is sold. It is reported as a positive amount in the second section of the statement of cash flows. cash proceeds from the sale of a plant asset This is the amount of cash received when a...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
Point A company’s break-even point will be reduced by the following: Decreasing the amount of fixed costs/expenses Reducing the variable costs/expenses per unit Improving the sales mix Increasing selling...
amount (or the book value) of the asset sold. An example would be a retailer’s disposal of a delivery truck for a cash amount that is greater than the truck’s carrying amount. Another example is a gain from a...
What are fixed assets? Definition of Fixed Assets Fixed assets are a company’s tangible, noncurrent assets that are used in its business operations. The word fixed indicates that these assets will not be used up,...
Waste, scrap, evaporation, etc. in the manufacturing of products. Normal spoilage is considered unavoidable and is part of the cost of producing the good output. Abnormal spoilage is considered avoidable and is not part...
A variance arising in a standard costing system that indicates the difference between the standard cost of direct materials that should have been used (standard quantity times standard cost) for the good output and the...
A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...
depreciation, assume that a service business purchases equipment at a cost of $160,000. This asset is expected to have a useful life of 5 years at which time it will be sold for $10,000. This means that the total amount...
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...
How do you calculate ending inventory? Physically Counting the Items in Inventory One method for calculating the cost of a company’s ending inventory is to 1) physically count the quantity of each of the items in...
If cash and a note are exchanged for a plant asset, is the amount of the note used in the depreciation calculation? A plant asset’s cost is depreciated, unless the asset is land. Cost is defined as the cash or cash...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
) are not reported at their higher liquidation value because of several accounting principles. Below are four accounting principles that come to mind. The cost principle requires that plant assets be reported at amounts...
Depreciation Depreciation In accounting, depreciation is the spreading (allocation) of an asset’s cost over the many accounting periods in which it is used. The assets that are depreciated include buildings, equipment,...
that best matches the descriptions listed as items 6 - 16: Each principle or term can be used several times. conservatism cost economic entity full disclosure going concern industry practices matching materiality...
The acronym for cost of sales or for the cost of services.
payment of $450,000 in order to acquire a building, the land on which the building sits, and also some equipment. The lump sum payment means that the total cost of $450,000 has to be allocated among three general ledger...
How are fully depreciated assets reported on the balance sheet? Definition of Fully Depreciated Asset A fully depreciated asset is a depreciable asset for which no additional depreciation expense will be recorded. In...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
Can a fully depreciated asset be revalued? A fully depreciated asset cannot be revalued because of accounting’s cost principle. Definition of a Fully Depreciated Asset A fully depreciated asset is one that has...
consider a project, its internal rate of return must equal or exceed the hurdle rate. The hurdle rate is also used to discount a project’s future cash flows to its net present value. Example of Hurdle Rate The...
for Doubtful Accounts is a contra account to __________ __________. 4. Inventory is often reported at the lower of __________ or net __________ value. 5. The cost of insurance premiums that have been paid but have not...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
A gain from holding an asset and the gain has not yet been reported in the financial statements. As an example, assume that a company purchased land many years ago and continues to hold the land. The land was purchased...
What is an outlier? In cost accounting, an outlier could be a cost or its related level of activity that is out of line with other observations. An outlier can be detected by plotting each observation’s cost and...
This could be the difference between cost and the selling price. For example, a retailer may markup its cost by 50% to arrive at a selling price. In the retail method of costing inventory, markup is used to mean the...
What does it mean to check the extensions and to foot an invoice? To check the extensions on a purchase invoice means to verify that the number of units of each item multiplied by its unit cost agrees with the total...
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
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