What are the reasons for high inventory days? Definition of Inventory Days I assume that inventory days is referring to the days’ sales in inventory. If so, then inventory days is also related to the inventory turnover...
What are the reasons for high inventory days? Definition of Inventory Days I assume that inventory days is referring to the days’ sales in inventory. If so, then inventory days is also related to the inventory turnover...
What is the accounts receivable collection period? Definition of Accounts Receivable Collection Period The accounts receivable collection period is similar to the days sales outstanding or the days sales in accounts...
the net amount owed within 10 days (20 days sooner than the 30 days), the customer may subtract 2% from the net amount owed. This discount of 2% is known as an early payment discount or as a sales discount. Example of...
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of...
the cost of the goods that were sold with the sales of the goods. It also requires the matching of sales commission expense with the related sales. If these cause and effect relationships are not present, an expense is...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
income statement accounts used in a business include Sales, Sales Returns and Allowances, Service Revenues, Cost of Goods Sold, Salaries Expense, Wages Expense, Fringe Benefits Expense, Rent Expense, Utilities Expense,...
What is the fixed asset turnover ratio? Definition of Fixed Asset Turnover Ratio The fixed asset turnover ratio shows the relationship between a company’s annual net sales and the net amount of its fixed assets. The...
Assume that for the most recent year a corporation had net sales of $410,000; cost of goods sold $230,000; SG&A $120,000; interest expense $10,000; income tax expense $9,000. For the recent year the corporation’s...
at its cost of $15,000 Report the inventory at its net realizable value (NRV) of $12,000. (NRV is equal to the estimated sales value of $14,000 minus $2,000 of expenses necessary to get the goods sold for $14,000.) 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...
Should a manufacturer's selling prices be based on costs? A manufacturer’s selling prices should not be based on costs alone. One reason is that the actual cost of each product is not known with precision. At...
. The most common responsibility centers are the numerous departments within a company. Examples of Responsibility Centers Responsibility centers are often categorized by the degree of authority and responsibility given...
... dividend yield payout price earnings 26. Earnings per share is calculated by using the weighted average number of __________ shares of common stock. Select... authorized issued outstanding 27. During the past year a...
Are direct costs fixed and indirect costs variable? Direct Costs vs. Indirect Costs The terms direct costs and indirect costs could be referring to a product, a department, a machine, geographic market, etc. (which are...
for packaging, sales commissions, and shipping. Therefore, the net realizable value of the inventory is $12,000 (selling price of $14,000 minus $2,000 of costs to dispose of the goods). In that situation the inventory...
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
The amount before deductions. For example, gross pay is the amount before withholding deductions. Gross sales is the amount before sales returns and allowances and sales discounts.
A revenues account with a debit balance instead of the usual credit balance. Examples include sales returns, sales allowances, and sales discounts.
What is the average collection period? Definition of Average Collection Period The average collection period is the average number of days between 1) the dates that credit sales were made, and 2) the dates that the money...
How do you reduce a company's break-even point? Definition of Break-even Point The break-even point is the level of sales where a company’s income statement will report exactly zero net income. The level of sales...
in a later accounting period. This means that the financial statements for two accounting periods will be reporting incorrect amounts. Example of an Accrual Adjusting Entry for Expenses To illustrate, let’s assume...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
for $900,000. As a result, its Sales account was credited for $900,000 and Accounts Receivable was debited for $900,000. Several customers were disappointed in the goods they received and the company gave them a sales...
sales, while the operating expenses will include the cost of goods sold, selling, general and administrative expenses (SG&A), and perhaps impairment charges. Some of the SG&A expenses may appear as separate...
What does M and MM stand for? Definition of M The Roman numeral M is often used to indicate one thousand. Example of M An expense of $60,000 could be written as $60M. Internet advertisers are familiar with CPM which is...
Costs that are matched with revenues on the income statement. For example, Cost of Goods Sold is an expense caused by Sales. Insurance Expense, Wages Expense, Advertising Expense, Interest Expense are expenses matched...
costs must be reported as Advertising Expense at the time the ads are run. A prepayment of the cost of ads that will air in the future should be recorded in a current asset account such as Prepaid Advertising. When the...
What is the difference between a bookkeeper and an accounting clerk? I envision a bookkeeper as a person employed by a smaller company and being responsible for recording nearly all of its transactions. Hence, the...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
's inventory balance averaged $100,000; its sales were $500,000; and its cost of goods sold was $400,000. The company’s inventory turnover ratio for that year was __________ 4 Inventory turnover ratio = cost of...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
How does inflation affect the cost of goods sold? Inflation and the Cost of Goods Sold Generally speaking, a company selling goods during periods of inflation will see an increase in its cost of goods sold. When and by...
, such as Sales Discounts or Discounts for xxx. Let me give you an example from the meat industry. We had 40,000 pounds of beef without a local customer, so we sold it to a company 1,000 miles away for the local price of...
statement account Sales Returns and Allowances is a contra revenue account that is associated with the revenue account Sales. If the balance in this contra account is a debit of $3,000 and the Sales account has the...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
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