A variance arising in a standard costing system that indicates the difference between 1) the standard cost of the direct labor that should have been used (the standard hours times the standard rate) for the good output,...
A variance arising in a standard costing system that indicates the difference between 1) the standard cost of the direct labor that should have been used (the standard hours times the standard rate) for the good output,...
This is the bottom line of the income statement. It is the mathematical result of revenues and gains minus the cost of goods sold and all expenses and losses (including income tax expense if the company is a regular...
The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. The book value of a company is the amount of owner’s or stockholders’ equity....
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
Often a U-shaped arrangement of the various machines involved in manufacturing a product. This layout eliminates the need to move the item being manufactured from one area or department of the factory to another. In...
An accounting guideline which allows the readers of financial statements to assume that the company will continue on long enough to carry out its objectives and commitments. In other words, the accountants believe that...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
The statement of the Financial Accounting Standards Board with the title Accounting for Contributions Received and Contributions Made. This statement was originally issued in June 1993 and applies to both nonprofit...
The average amount of inventory during a period of time. Since the amount reported in the Inventory account is the ending balance on one specific day, it is necessary to compute an average balance when relating this...
A reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
Operating expenses are the costs of a company’s main operations that have been used up during the period indicated on the income statement. For example, a retailer’s operating expenses consist of its cost of...
The amount of a long-term asset’s cost that has been allocated to Depreciation Expense since the time that the asset was acquired. Accumulated Depreciation is a long-term contra asset account (an asset account with...
The remainder or difference. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset’s useful life. In the accounting equation, owner’s equity is considered to be...
The field of study within accounting that is devoted to information needed by the management of the company (as opposed to financial accounting to external parties). Topics covered in managerial accounting include cost...
, Statement of Cash Flows. You can read Statement No. 95 at no cost at www.FASB.org/st. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
In adjusting entries, how do I know which T-accounts to use? We illustrate the common adjusting entries with the use of T-accounts in the Explanation of the Topic Adjusting Entries available for your reading at no...
A long term asset account containing the cost of delivery equipment acquired by a company and used in its business. The account will appear on the balance sheet under the heading of Property, Plant and Equipment. There...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
A long-term asset which indicates the cost of the constructed improvements to land, such as driveways, walkways, lighting, and parking lots. Land Improvements will be depreciated over their useful life by debiting the...
A current asset which indicates the cost of the insurance contract (premiums) that have been paid in advance. It represents the amount that has been paid but has not yet expired as of the balance sheet date. A related...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
of completing a sale or service. They are reported as a liability until they become earned. Mark as wrong Mark as right depreciation This is the systematic allocation of a plant asset’s cost to expense over the...
No. 33 required large companies to report supplementary information on the effects of changing prices on its inventory and its property, plant and equipment. (In the late 1970’s the U.S. was experiencing double-digit...
a vendor’s invoice within the vendor’s early payment discount period. Purchase Discounts Lost is considered to be an interest expense or a financing charge resulting from the buyer not being able to pay the cash...
a debit balance equal to the cost of the repurchased shares being held by the corporation. The corporation’s cost of treasury stock reduces the corporation’s cash and the total amount of stockholders’ equity. The...
What is the journal entry to record a one-year subscription for a magazine? Ways to Record One-Year Subscriptions Let’s assume that the cost of the one-year subscription for a monthly trade publication is $120. Let’s...
analysis may include the following: There is an $8,000 unfavorable variance which needs to be analyzed The $8,000 variance can be separated into a price variance and a quantity variance The price variance identifies...
What is the entry to remove equipment that is sold before it is fully depreciated? Entries To Record a Sale of Equipment When equipment that is used in a business is disposed of (sold) for cash before it is fully...
Accounting Principles The basic underlying accounting principles consist of the following: Economic entity assumption Going concern assumption Time period assumption Monetary unit assumption Cost principle or...
, the businesses are referred to as profit centers. If the operating businesses make their own investment decisions, the businesses are referred to as investment centers. The production and administrative departments...
of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating...
employees’ wages to pay part of the cost of the insurance, the company will credit its contra expense account 4211 Employee Withholdings for Health Ins. The benefit of using the contra expense account is that the...
is interest income to be reported during the 365 days that the company waits for the $11,000. Importance of the Time Value of Money in Accounting The time value of money is important in accounting because of the...
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