What do overabsorbed and underabsorbed mean? Definition of Overabsorbed and Underabsorbed In cost accounting, overabsorbed and underabsorbed pertain to a manufacturer’s manufacturing overhead costs. The manufacturing...
What do overabsorbed and underabsorbed mean? Definition of Overabsorbed and Underabsorbed In cost accounting, overabsorbed and underabsorbed pertain to a manufacturer’s manufacturing overhead costs. The manufacturing...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
What are the two methods for recording prepaid expenses? Definition of Prepaid Expenses Prepaid expenses refers to payments made in advance and part of the amount will become an expense in a future accounting period. A...
What is accrued rent? Definition of Accrued Rent Accrued rent is the amount of rent that has not yet been paid by the tenant or received by the landlord for a past period of time. [If the tenant always pays the monthly...
Adjusting Entries(Quick Test #2) Download PDF After you have answered all 30 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
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.
Where is treasury stock reported on the balance sheet? Under the cost method of recording treasury stock, the cost of treasury stock is reported at the end of the Stockholders’ Equity section of the balance sheet....
Inventory and Cost of Goods Sold Inventory Inventory is usually the most significant current asset of a retailer or manufacturer. Generally, inventory is reported on the balance sheet at its cost (or lower). When the...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
What is the difference between residual value, salvage value, and scrap value? The terms residual value, salvage value, and scrap value are often used when referring to the estimated value that is expected at the end of...
Are repairs to office equipment an expense? Repairing and maintaining office equipment is an immediate expense. This is true even if the repair cost is a very large amount. If a large expenditure is made to improve...
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
Why are sales a credit? Definition of Sales In accounting, sales are revenues earned when a company transfers ownership of its goods to its customers. Under the accrual basis or method of accounting, the sale occurs when...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Financial Statements (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (30) Marked Wrong (0) Marked Right (0) financial statements These are part of the accounting cycle and part of a...
Why does an increase in accounts payable appear as an addition on the statement of cash flows? Adjustments from Accrual to Cash on Statement of Cash Flows When the statement of cash flows (SCF, cash flow statement) is...
What is a long-term asset? Definition of Long-term Asset A long-term asset is an asset that is not expected to be converted to cash or be consumed within one year of the date shown in the heading of the balance sheet....
What is the difference between a bookkeeper and an accountant? Before I provide a distinction, you should be aware that some people use the words interchangeably. Even though I was the accountant, treasurer, and CFO of a...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
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,...
What are capital expenditures? Definition of Capital Expenditures Capital expenditures are the amounts spent for tangible assets that will be used for more than one year in the operations of a business. Capital...
What is the difference between assessed value and appraised value? Definition of Assessed Value Assessed value will likely be the amount that a local or state government has designated for individual properties. This...
Job Costing(Quick Test) Download PDF After you have answered all 30 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the following...
If a mortgage payment is due by December 31, but the payment is not made until the following month, should the loan payment be accrued at December 31? The interest portion of the mortgage payment should be accrued as of...
Financial Accounting Financial Accounting Financial accounting is a type or branch of accounting that begins with the recording, sorting and storing of a business’s transactions in accounts contained in its general...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
What are accounting ratios? Definition of Accounting Ratios Accounting ratios, which are also known as financial ratios, are one part of financial statement analysis. Accounting ratios will often relate one financial...
Why is an increase in inventory shown as a negative amount in the statement of cash flows? Meaning of a Negative Amount on Statement of Cash Flows A negative amount on the statement of cash flows (SCF) indicates that the...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
What is a fixed cost? Definition of Fixed Cost A fixed cost is one that does not change in total within a reasonable range of activity. Since the fixed cost remains constant in total, the fixed cost per unit of activity...
Is sales tax an expense or a liability? Definition of Sales Tax In the U.S., a sales tax is a state tax (and possibly an additional city and/or county tax) that is paid by the buyer at the time of purchase. The sales tax...
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...
What is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
What are mixed costs? Definition of Mixed Costs In accounting, the term mixed costs refers to costs and expenses that consist of two components: A fixed component, the total of which does not change as the volume of...
Debits and Credits(Quick Test #2) Download PDF After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers. Note: Some of the...
What is the matching principle? Definition of Matching Principle The matching principle is one of the basic underlying guidelines in accounting. The matching principle directs a company to report an expense on its income...
Income Statement Income Statement The income statement is also known as the statement of income, statement of operations, statement of earnings, profit and loss statement, and P&L. It reports a corporation’s revenues,...
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