will report on its income statement the insurance expense incurred for its selling, general and administrative functions. However, the insurance costs associated with the manufacturing function are included in the cost...
will report on its income statement the insurance expense incurred for its selling, general and administrative functions. However, the insurance costs associated with the manufacturing function are included in the cost...
of vendor invoices, receiving reports, etc. Accounting for goods in transit, goods on consignment, etc. The cost of each item in inventory is based on the actual costs of the items purchased or produced by the company...
What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of a...
What is the difference between a cost and an expense? Definitions of Cost and Expense Some people use cost interchangeably with expense. However, we use the term cost to mean the amount spent to purchase an item, a...
main operating activities involve the buying and selling of merchandise or goods. Therefore, the retailer’s income statement will report the following operating expenses: Cost of goods sold. These costs are reported...
Inventory is dormant and contains only the cost of the prior year’s ending inventory. With the periodic inventory system, the costs of additional purchases of goods are debited to the temporary account Purchases....
will receive their dividends before the common stockholders are to receive any dividend. Preferred stock is relatively rare since corporations will use debt in addition to its common stock. Example of Preferred Stock...
What is the times interest earned ratio? Definition of Times Interest Earned Ratio The times interest earned ratio is an indicator of a corporation’s ability to meet the interest payments on its debt. The times...
What is the difference between interest expense and interest payable? Definition of Interest Expense Assuming the accrual method of accounting, interest expense is the amount of interest that was incurred on debt during...
of the balance sheet date. Current portion of long-term debt which includes the principal payments of a mortgage loan or other long-term loans that must be paid within one year of the date of the balance sheet. There is...
), and 2) financing activities (borrowing and repaying short-term and long-term debt, issuing and buying back shares of stock, paying dividends). Examples of Reporting the Cash from Operating Activities In the U.S., the...
and distribute to its stockholders, the following corporation information should be considered: Present cash balance Cash needed to finance the business operations (growth, inflation, etc.) Cash needed to finance future...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
Our Explanation of Evaluating Business Investments compares four of the techniques for reviewing potential capital expenditures. You will be introduced to accounting rate of return, payback, net present value, and...
to be renewed. Long-term (or noncurrent) liabilities are the obligations that are not due within one year of the balance sheet date and will not require a cash payment. Typically, companies issue classified balance...
to operate its respective business and each will issue its own financial statements. However, the investors and potential investors in NEP will find it helpful to see the results of operations and the financial position...
What is the FISH inventory method? FISH is the acronym for first-in, still-here. FISH is an attempt to bring humor to the fact that some items have been sitting in inventory for years. Unlike FIFO and LIFO, which are...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
Isn't all overhead fixed? Not all overhead is fixed. Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable. A common example of a variable overhead cost is the...
-in-Progress. Construction Work-in-Progress is often reported as the last line within the balance sheet classification Property, Plant and Equipment. There is no depreciation of the accumulated costs until the project is...
cost of $5, the total cost for Item Q should be $75. To foot the invoice means to add up the extended costs and verify the total with the amount appearing as the total on the invoice. For example, if the invoice has...
to replace the asset. True Right! The original cost is a sunk, past cost. False Wrong. The original cost is a sunk, past cost. Such costs are not relevant to any decision, since decisions involve the present and the...
Is depreciation a direct or indirect cost? Definition of Depreciation Depreciation is defined as the systematic expensing of the cost of an asset such as equipment, building, vehicle, etc. over the useful life of the...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
fitting line between costs and volume or activities is __________ analysis. 5. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost. 6. When there is an increase in volume...
This is a record on an individual job (product, batch) within the job costing system. For items in process this is a subsidiary record to the general ledger account inventory: work-in-process (WIP).
See first in, first out (FIFO).
in inventory). Cost Flow Assumption Is Needed When costs change during the accounting period, a cost flow will have to be assumed. Some common cost flow assumptions include FIFO, LIFO, and average. Join PRO to Track...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
will have a __________ balance when the variance is unfavorable. Select... credit debit 3. The invoice amount for direct materials purchased will be credited to Accounts Payable for the __________ cost. Select... actual...
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
The method used for removing costs from the inventory of goods. The cost flow can be different from the physical flow of goods. For example, in the U.S. the LIFO cost flow can be used even if the oldest goods are shipped...
What is the cost of goods manufactured? Definition of Cost of Goods Manufactured The cost of goods manufactured is a calculation of the production costs of the goods that were completed during an accounting period. In...
What is job order costing? Definition of Job Order Costing Job order costing or job costing is a system for assigning and accumulating manufacturing costs of an individual unit of output. The job order costing system is...
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