To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
This is a valuation account for the asset Inventory. A credit balance should be reported in this account for the amount that the net realizable value of inventory is less than the cost reported in the Inventory account....
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
A variance arising in a standard costing system that indicates the difference between the actual cost of direct materials and the standard cost of direct materials. Recognizing this variance at the time the direct...
A variance arising in a standard costing system that indicates the difference between the standard cost of direct labor for the good output (standard hours times standard rate) and the standard cost of the actual hours...
An intangible asset reported on the balance sheet at the company’s cost (or lower). Often, successful trade names were developed by companies over many years. As a result the cost of the trade name is minimal, but...
This account is a non-operating or “other” expense for the cost of borrowed money or other credit. The amount of interest expense appearing on the income statement is the cost of the money that was used...
A term used in cost accounting to arrive at the cost per unit. The term is associated with the units that are not completed at the end of an accounting period. For example, if 500 units are completed as far as materials,...
How do you record the sales tax on the purchase of an asset? Accountants define the cost of an asset as all of the costs that are necessary to obtain the asset and to get it ready for use. If your state does not allow an...
expenses are best described as expenses that change __________. In Total As Volume Changes Right! Variable expenses change in total as volume changes. They are fixed on a per unit basis. For example, the cost of the...
Why isn't land depreciated? Definition of Land The land that is used in a business (as opposed to land that is an investment, or land that will be sold by a real estate developer) is a tangible asset that is assumed...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
be combined, such as raw materials and supplies, or raw materials and work-in-process. In addition, a manufacturer (and others with inventory) should disclose the method for valuing the inventory. This includes whether...
of Depreciate The term depreciate refers to systematically moving part of the cost of a plant asset from the balance sheet to depreciation expense on the income statement. Example of Capitalize and Depreciate Assume a...
for the cost principle. If a company is a going concern (and therefore liquidation is not relevant), reporting its long term assets at cost is sufficient and there is no need to report the long term assets at their...
in which the office furniture is recorded, such as Furniture and Fixtures or Office Furniture. In other words, the discount is a reduction of the asset’s cost. [If the discount is received by a retailer who is in the...
Should a cash discount be recorded as a reduction to an expense? Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of...
refers to consistency as one of the characteristics or qualities that makes accounting information useful. Example of Consistency Let’s assume that a U.S. corporation uses the FIFO cost flow assumption for valuing its...
What is an independent variable? In accounting, an independent variable is ideally a factor that causes a change in the total amount of the dependent variable. In other words, an independent variable should be something...
in which the expenses occur. Hence, SG&A expenses are said to be period costs as opposed to being part of a product’s cost. Since SG&A expenses are not a product cost, they are not assigned to the cost of...
What is carriage outwards? Definition of Carriage Outwards Carriage outwards refers to the transportation costs that a seller must pay when it sells merchandise with the terms FOB Destination. Carriage outwards is also...
accumulated depreciation is subtracted from the asset’s cost to indicate the asset’s book value. The book value indicates the maximum amount of future depreciation remaining. Since depreciation is defined as the...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
multiple step This income statement format when used by a retailer will report amounts in the following order: sales, cost of goods sold, gross profit, operating expenses, operating income, nonoperating revenues and...
How do you account for bond issue costs? Definition of Bond Issue Costs The costs associated with issuing bonds are debited to a contra liability account such as Bond Issue Costs. Over the life of the bonds, the issue...
Are repairs to office equipment and factory equipment period costs? Repairs to office equipment are period costs. That is, the cost of the repairs to office equipment will be reported as a selling, general and...
. The contract to pay these cash amounts to the investors makes bonds a less risky investment than common stock. Less risk for the investor means the investor will earn a smaller return—and the corporation will have a...
with the current assets accounts receivable and inventory. While these two assets are initially recorded at cost, there are occasions when the company will collect less than the cost. When that occurs, the company must...
the depreciable asset is sold, scrapped, or retired, its accumulated depreciation and its cost are removed from the respective accounts. (Any difference between the book value and the amount received is recorded as a...
of a company’s fixed expenses assists in understanding how the retailer’s net income will change as volume changes. The total amount of fixed expenses can also be used to quickly estimate a company’s break-even...
bills tell you the cost of the gas and electricity used between the meter reading dates appearing on the utility bill. For example, if the meters are read on the last day of the month then the utility bills received in...
How much do you depreciate an asset and when? Definition of How and When to Depreciate an Asset Depreciation begins when you place an asset in service and it ends when you take an asset out of service or when you have...
) as of the final moment of an accounting period in accordance with generally accepted accounting principles (GAAP, US GAAP). GAAP’s historical cost principle means that some noncurrent assets are reported at amounts...
of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
Accumulated Depreciation (instead of crediting the asset account which has the asset’s original cost), it allows for the balance sheet to report or disclose the following: The original cost of the asset being...
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