What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
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.
of purchases and payments. The company may also employ a payroll clerk to process its many employees’ pay and fringe benefits. Perhaps an accounts receivable clerk will be employed to focus solely on the company’s...
Should a retailer's delivery surcharges be reported as revenues or as other income? I believe that a retailer’s delivery surcharges are a price adjustment and should be reported as operating revenues. The...
costs/expenses Increasing the selling prices without causing a decrease in sales Redesigning products to provide additional features that will allow for price increases and/or a reduction in variable...
. The cost of the marketing services was the cash price of $9,900. It would be wrong to record $10,000 as a debit to Marketing Consulting Expenses and to record a credit of $100 in the account Cash Discounts. The reason...
sales for a year by the average balance in Accounts Receivable during the year. accounts receivable turnover ratio This ratio is the result of dividing a company’s credit sales for a year by the average balance in...
to the manufacturing departments and then the departments’ direct and indirect costs (including the depreciation) are allocated to the products that utilize those departments. Manufacturing overhead in general is...
to describe the amount that it is subtracting from its sales revenue to report the amount of its gross profit or gross margin. Companies that provide services will use the term cost of services or cost of service...
for its selling and general administration will be an expense for the period indicated by the meter reading dates. However, the utility bill for the direct and indirect manufacturing operations is part of its...
examples of service departments include: Factory maintenance department Production quality control Factory information technology department Factory cafeteria Purchasing department The various methods (direct, step,...
to Circular E.) Part 1 of the guide is entitled Who Are Employees? and it provides this general rule: “…an individual is an independent contractor if you, the person for whom the services are performed, have the...
on the income statement as Bad Debts Expense or Uncollectible Accounts Expense. Examples of Recording Bad Debts There are two methods for recording the bad debts associated with accounts receivable: Direct write-off...
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...
Our Explanation of Activity Based Costing illustrates how manufacturing overhead costs for a product will differ when costs are allocated using only the number of machine hours, as opposed to being allocated using the...
price per unit minus the fixed expenses per unit. True Wrong. The contribution margin is selling price per unit minus VARIABLE expenses per unit. False Right! The contribution margin is selling price per unit minus...
from the company’s present cash balance. Also assume that the company’s building materials, labor and overhead will amount to $400,000 during the three months of construction. The capitalized interest is based on...
.) If a company purchases an old machine in need of complete updating, the cost of the new components and the labor to rebuild the machine will be capitalized. This means that the total cost of the machine will be...
for the manufacturer’s cash to be used to: pay for the raw materials needed in its products pay for the labor and overhead costs needed to convert the raw materials into products hold the finished products in...
at the time of each sale will be increased or decreased. Example of Product Warranty Liability Assume that an automobile manufacturer has found that it spends $1,000 in labor and parts for the necessary repairs covered...
costs are the raw materials, labor, and manufacturing overhead used to produce the goods. Think of product costs as clinging to the goods produced. The rent associated with the manufacturing operations is part of...
How can a manufacturer determine the precise cost of its products? A manufacturer may never be able to determine the precise cost of its individual products. The reason is that most of the manufacturing costs (other than...
Accounts is a __________-account to accounts receivable. 9. The percentage of receivables approach to estimating bad debts expense focuses on the amounts to be reported on this financial statement: __________...
expense. Bad debts expense is part of the selling, general and administrative (SG&A) expenses. Typically there are two methods for reporting the bad debts expense: direct write-off method, and allowance method....
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
of shares of common stock outstanding. Mark as wrong Mark as right market to book ratio This ratio results when 1) the market price of a share of common stock is divided by 2) the book value of a share of the common...
for a small fee that was immediately expensed. Since then Company X has been very effective in promoting this trademarked brand. Consumers now pay a premium price for this recognized and superior product. A competitor...
or the average methods will vary slightly depending on whether the inventory system is periodic or perpetual and whether a dollar-value method based on price indexes was used. Join PRO to Track Progress Mark the...
account for a certain transaction. Example of a Credit Memo Assume that SellerCorp had issued a sales invoice for $800 for 100 units of product that it shipped to BuyerCo at a price of $8 each. BuyerCo informs...
or stockholders? equity Benefits of Disposing of Obsolete Inventory Since the value of the obsolete items may continue to decrease, it is wise to dispose of the items at any price as soon as possible. The benefits of...
already successful business. You are confident that it will increase your company’s contribution margin by $1,500 a week. A highly-trusted and successful firm will complete the website within 4 weeks at a set price of...
stock’s call price. 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 your current job Refresh your skills to re-enter...
that was prepared by the organization The receiving report that was prepared by the organization The “match” part of the three-way match refers to comparing the quantities, price per unit, terms, and other...
a stock dividend instead of paying a cash dividend for the following reasons: To increase the number of shares of stock outstanding To reduce the market price per share of stock To transfer some of the corporation’s...
What is goodwill? Definition of Goodwill In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase...
What are the journal entries for a stock split? Definition of a Stock Split A stock split usually increases the number of shares of a corporation’s common stock with the intention of reducing the market price of each...
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