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 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.
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...
What is the weakness of traditional cost allocations? Traditional cost allocations are often based on volume such as number of products manufactured, number of direct labor hours, number of production machine hours,...
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...
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...
examples of service departments include: Factory maintenance department Production quality control Factory information technology department Factory cafeteria Purchasing department The various methods (direct, step,...
is the __________-test ratio. 6. The numerator in the calculation of the receivable turnover ratio is the net credit __________ for the year. 7. The inventory turnover ratio is best computed with the numerator being the...
is _________ capital. WORKING GROKWIN Unscramble WORKING KIWGNOR Unscramble 2. Current assets divided by current liabilities is the __________ ratio. CURRENT RERTCUN Unscramble CURRENT RTNURCE Unscramble 3. Cost of...
. It is positive since the increase in Common Stock means there was a cash inflow, cash was provided, and this had a positive or favorable effect on the cash balance. How a Negative Amount is Determined If the asset...
pays for its purchases 90 days after it receives the goods. The corporation does not have sufficient money to purchase the raw materials, pay for the labor, and then wait 90 days to collect the receivable. The...
What is scrap value? Definition of Scrap Value In cost accounting, scrap value refers to a relatively insignificant amount that a manufacturer receives from the sale of production materials that remain after the...
that should be minimized. Examples of Setup Costs Setup costs include the following: Costs of changing the tools or dies on the equipment Preparing and moving materials or components to the equipment Testing the initial...
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...
at the buyer’s location on January 2. On December 30, the seller should record a sale, an account receivable, and a reduction in its inventory. The buyer should record the purchase, the account payable, and the...
. 1. CB Corporation’s balance sheet as of December 31 reported the following: Cash and cash equivalents $20,000 Temporary investments $30,000 Accounts receivable $50,000 Inventory $150,000 Equipment $400,000 Total...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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...
., there are several cost flow assumptions available. However, a company must select one and then use it consistently. Below is an overview of three cost flow assumptions and how they affect the cost of goods sold....
No. 33 required large companies to report supplementary information on the effects of changing prices on its inventory and its property, plant and equipment. (In the late 1970’s the U.S. was experiencing double-digit...
What is the difference between the current ratio and the acid test ratio? The difference between the current ratio and the acid test ratio (or quick ratio) mainly involves the current assets inventory and prepaid...
What is the meaning of base year? In accounting, base year may refer to the year in which a U.S. business had adopted the LIFO cost flow assumption for valuing its inventory and its cost of goods sold. Under the...
as the asset Propane Inventory. As the propane is sold, the dealer will reduce Propane Inventory for the cost of the propane sold and will increase the expense Cost of Goods Sold. Example 3. A manufacturer uses propane...
to the products purchased. Therefore, the unsold products in inventory should include a portion of the transportation-in costs. The products that have been sold, should have their share of the transportation-in costs in...
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...
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.
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
See inventory conformity rule.
See inventory shrinkage.
See inventory: work-in-process (WIP).
as an asset on the company’s balance sheet. 6. When costs are consistently increasing, which of the following inventory cost flow assumptions will result in a large, profitable U.S. business reporting the least amount...
Why doesn't AccountingCoach.com classify the financial ratios? We avoided classifying the financial ratios because a financial ratio may overlap several classifications, and there are several different titles for...
What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
sold, which is reported on the income statement. (The costs of the products that are not sold are reported as inventory on the balance sheet. Hence, the inventory will contain some of the manufacturing salaries and...
sheet. Here are some of the changes: Owner’s equity or stockholders’ equity will increase by the positive amount of net income Accounts receivable will change by the amount of sales/services provided with...
). The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not be...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
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