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...
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...
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...
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...
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...
(or) receiving ticket This document or computer entry indicates the description and quantity of goods received by a company. It is one of the documents in the three-way match. Mark as wrong Mark as right vendor invoice...
amount due for the sales invoice and might even show a negative amount due from the customer. If your company mails statements to its customers, the customer should be able to see its double payment when reviewing the...
What is a budget? A budget is a financial plan for future activities. The budgets used in business often include a sales or revenues budget detailed by products or services, production budgets, budgets for each...
Are estimates allowed in bookkeeping? While bookkeeping involves mostly precise amounts from sales and purchase invoices, cash receipts and checks written, etc. there are situations when estimates need to be entered....
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...
is good or bad, sufficient or insufficient, etc. depends on many factors including the composition of the company’s current assets, the speed at which the company’s sales turn into cash, the credit terms of its...
At what point are revenues considered to be earned? Revenues, which are derived from an entity’s main activities such as the sale of merchandise or the performance of service, are considered to be earned when the...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
(probable and the amount can be estimated). Product warranties will be recorded at the time of the products’ sales by debiting Warranty Expense and crediting to Warranty Liability for the estimated amount. Join PRO to...
benefits (more sales, lower health insurance expense) are related to the amounts being spent. Here, too, the ROI calculations do not consider the time value of money. Join PRO to Track Progress Mark the Question as Read...
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...
sheet. Here are some of the changes: Owner’s equity or stockholders’ equity will increase by the positive amount of net income Accounts receivable will change by the amount of sales/services provided with...
, if the manufacturer’s production and sales have declined and it fails to cut fixed costs, the manufacturer could be worse off by increasing selling prices. It could even lead to a death spiral. Examples of Elastic...
assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
of the monetary unit assumption, accountants at a U.S. corporation do not hesitate to add the cost of a parcel of land purchased in 2024 to the cost of another parcel of land that had been purchased in 2004. (See...
as the asset Propane Inventory. As the propane is sold, the dealer will reduce Propane Inventory for the cost of the propane sold and will increase the expense Cost of Goods Sold. Example 3. A manufacturer uses propane...
and the depreciation expense begins. This expense will reduce the company’s profits (net income, earnings). There may also be some additional revenues and costs, and perhaps cost savings, that will also affect the...
is $400,000 and is expected to process 50,000 identical units of product. Some companies will develop standard costs for controlling its operations. For example, the standard cost of processing all identical units in...
How do you report a write-down in inventory? Definition of Write-down in Inventory Under FIFO and average cost methods, when the net realizable value of inventory is less than the cost of the inventory, there needs to be...
in a general ledger intangible asset account. If a company designs and registers its trademark, the amount recorded is limited to its cost. Costs incurred to defend a trademark are also recorded in the trademark...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
between the asset amounts reported on the balance sheet minus the liability amounts. Next, the accountant’s cost principle requires that only the cost of items purchased can be reported as an asset. This means that...
What is a fully depreciated asset? Definition of Fully Depreciated Asset A fully depreciated asset is a plant asset or fixed asset where the asset’s book value is equal to its estimated salvage value. In other words,...
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...
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...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. When an asset has the same amount of depreciation expense each full year, it is being depreciated under...
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...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
the balance sheet report the current value of an asset. True Wrong. The purpose of depreciation is to match the cost of the asset to revenues derived from using the asset or to the periods benefiting from the asset. The...
to prepare its external financial statements. Example of Materials Usage Variance Even though a company uses a standard cost system in its accounting, the company’s external financial statements must comply with the...
the standard quantity of materials. The materials usage variance is favorable when the actual quantity of materials used was less than the standard quantity. In the U.S. the materials usage cost variance is expressed in...
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
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