in the factory. In addition to the manufacturing costs, there are selling, general and administrative (SG&A) expenses and perhaps interest expense. Generally, accountants do not consider these expenses to be product...
in the factory. In addition to the manufacturing costs, there are selling, general and administrative (SG&A) expenses and perhaps interest expense. Generally, accountants do not consider these expenses to be product...
of expense, etc. Popular accounting software will include some examples of charts of accounts. Our Explanation of Chart of Accounts includes two hypothetical examples. Join PRO to Track Progress Mark the Question as...
and a $2,000 debit entry will be recorded in its Rent Expense account. If a company collects $500 from a customer who had previously purchased goods on credit, the company will make a debit entry of $500 in its Cash...
prepare a balance sheet as of the end of each day, you will need to make daily adjusting entries in order for the balance sheet to be meaningful. For example, each day more electricity is used and therefore each day...
an impact on the company’s cost of goods sold. The cost of goods sold will likely be the largest expense reported on the income statement. Example of Inventory Cost and Cost of Goods Sold To show the connection...
mean a corporation’s net income after income tax expense. Many business owners refer to the company’s income statement as the profit and loss statement or the P&L. A company reporting a positive amount of net...
prices based on their costs. In the long run, the products’ selling prices must be large enough to cover all of a company’s manufacturing costs (including the variable and fixed indirect manufacturing costs) plus...
by the adjustments needed to convert the accrual accounting net income to the cash flows from operating activities. A few of the typical adjustments are: Adding back depreciation expense Adding the decrease in accounts...
to the expense Purchase Discounts Lost. In our example, if the company pays the invoice in 30 days, it is not entitled to the early payment discount and will therefore have to credit Cash for $1,000. The debit amounts...
four months earlier and the check has not yet cleared the company’s bank account. Example of Writing Off an Old Outstanding Check On January 22, a company issued a check for $124 for a business expense. As of June 30,...
What is an intangible asset? Definition of Intangible Asset An intangible asset is an asset that you cannot touch, since it lacks physical substance. Accountants record intangible assets at their cost when they are...
with Debit Balances The following general ledger account classifications normally have debit balances: Asset accounts Expense accounts Loss accounts (Loss on Sale of Plant Asset, Loss from Lawsuit, etc.) Sole...
to Interest Expense, which is reported on the monthly income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
, and the employer will also incur an expense of $6,200. This means the employer is required to remit $12,400 during the year. For the year 2024, there is a ceiling on the wages, salaries, etc. of $168,600 per employee...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
using the indirect method? A Decrease In Inventory Wrong. An Increase In Accounts Payable Wrong. An Increase In Accounts Receivable Right! Depreciation Expense Wrong. 17. Which of the following will appear as a positive...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
by a corporation reduce the __________ retained earnings section of stockholders' equity. 15. Dividends appear as an expense on the corporation's income statement. True Wrong. Dividends are a distribution of...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
temporary 31. Which of the following is not an asset account? Select... Goodwill Prepaid Expense Unearned Revenue 32. Which of the following is more likely to appear as the first current liability? Select... Accrued...
of the following would not be included in a product's cost for inventory valuation for the financial statements? Factory Supplies Wrong. Factory supplies are included in manufacturing overhead. Quality Control...
costs? Select... Administrative Conversion Manufacturing overhead 9. Manufacturing overhead is which type of cost? Select... Administrative expense Direct product Indirect product 10. A cost that exists, but is not...
and administrative expenses Nonoperating expenses (or other expenses) which were incurred but were outside of the corporation’s main activities. An example is the interest expense incurred by a retailer. Gains An...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
for the shipping costs, which will be an expense in January when the sale is reported. The buyer records the purchase, accounts payable, and the increase in inventory on January 2 when the buyer becomes the owner of the...
plant built for a cost of $1 billion will cost $10 billion at the end of a useful life of 25 years. By computing straight-line depreciation based on the historical cost, the income statement will report depreciation...
What is the cost of goods sold? Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that a retailer, distributor, or manufacturer has sold. The cost of goods sold is reported on the income...
with a prepayment. DEFERRAL EAREDFLR Unscramble DEFERRAL LEREDFRA Unscramble 12. __________ Insurance is an asset account. PREPAID PAIRDEP Unscramble PREPAID APEIPDR Unscramble 13. The type of account that is affected...
amounts withheld from employees’, the employer must match the FICA taxes withheld from employees. In other words, the employer will have an additional expense equal to the total of the FICA taxes withheld from its...
costs. For instance, if the managers within the manufacturing facility but not on the assembly line are paid salaries which total $20,000 per month, this cost is a fixed indirect product cost. The equipment maintenance...
cost over 5 years. In December, ABCO will have very little depreciation expense, which means a small reduction in its December’s net income. However, ABCO’s Cash account will be reduced by $40,000 in December....
and expenses based on their root causes. Because there are many root causes, the company will assign costs based on many cost drivers. This results in more accuracy for the cost and expense of a specific product for a...
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...
Expense. But as the owner, you are likely to be more upset that the employee cost you $3,000 (10 hours X $300) in lost profits and upset customers. In the above story the opportunity cost was $3,000 of lost profit + the...
. For example, an account number beginning with a "1" might signify that the account is an asset account, a "6" might signify an operating expense, etc. True Right! Generally, the larger and more...
receivable is $92,000. Adjustments to the Allowance account are reported on the income statement as bad debts expense. Now, let’s assume that a company’s inventory has a cost of $15,000. However, at the end of the...
will be an explicit cost presented as salary expense on the corporation’s income statement. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping...
taxable income, it likely means lower income tax expense. Example Comparing LIFO and FIFO ABC Store purchases a product and then sells them to its retail customers. ABC began on January 2 and purchased 1 unit of product...
a carrying amount or book value of $2,100,000. (The corporation will then amortize the Premium on Bonds Payable to Interest Expense over the life of the bonds.) Definition of Contra Account A contra account is a general...
be reflected in the company’s general ledger accounts: Any unrecorded depreciation up until the time of the sale must be recorded with a debit to Depreciation Expense and a credit to Accumulated Depreciation The...
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