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...
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...
the depreciation expense of an asset, the expected amount of the salvage value is not included. Example of Salvage Value Assume that a plant asset has a cost of $325,000 and is expected to have a salvage value of...
What is the difference between depreciation expense and accumulated depreciation? Definition of Depreciation Expense Depreciation expense is the amount of depreciation that is reported on the income statement. In other...
is less than the asset’s book value, the difference is recorded as a loss. Example of a Gain on the Sale of an Asset On March 31, a company sells its old delivery van for $4,000. The van’s original cost was $45,000...
What is insurance expense? Definition of Insurance Expense Under the accrual basis of accounting, insurance expense is the cost of insurance that has been incurred, has expired, or has been used up during the current...
(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...
. If the vehicle is sold, both the vehicle’s cost and its accumulated depreciation at the date of the sale will be removed from the accounts. If the amount received is greater than the book value, a gain will be...
A cost and/or volume of activity that is outside of an expected range.
The acronym for cost of goods sold.
See cost-volume-profit (CVP).
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...
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...
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...
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 are the accounting principles, assumptions, and concepts? Definition of Accounting Principles, Assumptions, and Concepts The basic underlying accounting principles, assumptions, and concepts include the following:...
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...
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...
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...
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...
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...
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...
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...
necessary to get the merchandise in place and ready for sale. For example, freight-in is part of the inventory cost.) 12. On December 1 a company paid its property insurance bill of $3,000 for the 6-month period of...
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...
(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
. Predicting all of the future cash flows can be difficult especially if the new machine will offer more features that could result in more sales, etc. Obviously, the further into the future you look, the more uncertain...
will include preparing the following projections for the next accounting year: Amounts for sales Amounts for producing goods Amounts for each department’s expenses Summarizing the above budgets into a master budget or...
is the sum of the following: the days’ sales in inventory (365 days/inventory turnover ratio), plus the average collection period (365 days/accounts receivable turnover ratio) The operating cycle has...
much of the data entry tasks. This includes entering the bills from vendors, paying bills, processing payroll data, preparing sales invoices, mailing statements to customers, etc. The accountant is likely to have a...
What is an unsecured creditor? Definition of Unsecured Creditor An unsecured creditor is often a vendor or supplier that: Shipped goods to a customer as part of a sale on credit Has not been paid Does not have a lien on...
Does collecting a customer's accounts receivable affect net income? Definition of Accounts Receivable Accounts receivable is a current asset that results when a company reports revenues from sales of products or the...
of merchandise on May 15, but allows the customer to pay on June 15. On May 15, the company will credit its income statement account Sales and will debit its current asset account Accounts Receivable. (When the customer...
a contribution margin of $4 per unit (selling price of $10 per unit minus variable expenses of $6 per unit), the company’s break-even point in sales for the year is 75,000 units. Break-even Point in Billable Service...
What are accrued revenues and when are they recorded? Definition of Accrued Revenues Accrued revenues include service revenues, interest income, sales of goods, etc. which have been earned by a business, but the...
will be recorded with a debit of $4,000 to Accounts Receivable and a credit of $4,000 to Sales Revenues. Definition of Receipts A company’s receipts refers to the cash that the company received. Examples of Receipts...
that the company’s balance sheet will include the amount as a current liability. (The adjusting entry typically debits Wages Expense and credits Wages Payable.) Example of Wages Payable To illustrate wages payable we...
and gain accounts such as Sales Revenues, Service Revenues, Interest Revenues, Gain on Disposal of Equipment, Gain from Lawsuit, and many others Contra-asset accounts including Allowance for Doubtful Accounts and...
Journal A general journal is used to record unique journal entries that cannot be processed in a more efficient manner. For example, checks written, sales invoices issued, purchase invoices received, and others can be...
will prepare its own sales invoice to bill the condo developer. 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...
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