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.
(such as years). Instead, the depreciation is expressed and calculated based on the asset’s usage. Under the units-of-activity method of depreciation, the asset’s cost (less any salvage value) is allocated to the...
Why are wages reported as an expense when the work occurs, but the employees' tax records report them when they are paid? Accrual Method for the Corporation, Cash Method for the Employees The short answer is that...
What is the difference between normal costing and standard costing? Definition of Normal Costing Normal costing for manufactured products consists of following: Actual cost of materials Actual cost of direct labor...
costs, burden, indirect manufacturing costs, and indirect product costs. Since manufacturing overhead is an indirect product cost, it needs to be allocated or assigned to the products manufactured and will cling to the...
because U.S. accounting principles and income tax regulations require manufacturers to follow full absorption costing. This means that the cost of manufactured goods must include the costs of the direct materials,...
for each item (or each job or special order). The job cost record will report each item’s direct materials and direct labor that were actually used and an assigned amount of manufacturing overhead. The job cost...
costs (which are direct materials, direct labor, and manufacturing overhead). Nonmanufacturing overhead costs are the company’s selling, general and administrative (SG&A) expenses plus the company’s interest...
costs. VARIANCES ARECAVINS Unscramble VARIANCES EVNICSAAR Unscramble 2. A word used for the direct materials quantity variance. USAGE GAESU Unscramble USAGE GSAUE Unscramble 3. This direct materials variance is often...
as the subsidiary ledger containing the details for the general ledger account Work in Process. The Work in Process account will now be a control account containing summary amounts for direct materials, direct labor,...
statement as the cost of goods sold. Product costs are also referred to as inventoriable costs. Examples of Product Costs The product costs for a retailer will be the amount paid to the supplier plus any freight-in....
and general management, are expenses of the accounting period and are not applied or assigned to products.) Actual overhead are the manufacturing costs other than direct materials and direct labor. Since the overhead...
and operating budgets. When standard costs are used in a manufacturing setting, a product’s standard cost for a future accounting period will consist of the following: Direct materials: a standard quantity of each...
How do I compute the product cost per unit? Definition of Product Cost per Unit In accounting, a product’s cost is defined as the direct material, direct labor, and manufacturing overhead. Other costs such as...
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...
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.
An accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are...
of subtracting a plant asset’s accumulated depreciation from the asset’s cost. book value (or) carrying value This is the result of subtracting a plant asset’s accumulated depreciation from the asset’s cost....
What is straight line depreciation? Definition of Straight-Line Depreciation Straight-line depreciation is the most common method of allocating the cost of a plant asset to expense in the accounting periods during which...
represents the cost which has not yet been depreciated. Example 1. A company purchases equipment at a cost of $100,000 and it is expected to be useful for 10 years. At the end of 10 years it will be scrapped for $0. A...
A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity’s...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
. If the transaction is a direct conversion of debt to equity (shares of stock) or debt to bonds and no cash receipts or cash payments occur, the transaction is to be disclosed as supplementary information. This...
How do I learn more about the CPA Exam? You can learn more about the Uniform CPA Exam at our free Accounting Career Center. Within our Accounting Career Center are direct links to the state boards of accountancy, CPA...
A cost or expense that is not directly traceable to a department, product, activity, customer, etc. As a result indirect costs and expenses are often allocated to the department, product, etc. For example, a...
How do I calculate depreciation using the sum of the years' digits? Definition of the Sum-of-the-Years’-Digits Depreciation The sum-of-the-years’-digits depreciation (SYD depreciation) is one method for...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
a delivery truck with a cost of $100,000 and it is expected to be used for 5 years. If we also assume that the truck will have no salvage value, the company will record depreciation expense of $100,000 over the five...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
This visual tutorial for the topic Income Statement presents the key components and formats used on a corporation's income statement (which is also known as the statement of operations or profit and loss statement)....
that generally occur for the other products manufactured. A cost system developed for inventory valuation is limited to the cost of direct materials, direct labor, and manufacturing overhead. The total cost of providing...
direct materials, direct labor, and manufacturing overhead. Manufacturers are also required to consistently follow their selected cost flow assumption. Examples of Inventory Valuation Assume that a new company purchased...
the standard cost per pound (or some other unit of measure such as gallons, liters, etc.) Variances direct management’s attention to areas where the company’s operations are deviating from the company’s budgets...
How do you calculate ending inventory? Physically Counting the Items in Inventory One method for calculating the cost of a company’s ending inventory is to 1) physically count the quantity of each of the items in...
.] Under the accrual method of accounting the tenant should report: Rent Expense during the period of time that the space was occupied but was not paid, and A current liability Rent Payable for the amount owed to the...
will be the following: Debit Premium on Bonds Payable for $3,000 Credit Interest Expense for $3,000 Reducing the balance in the account Premium on Bonds Payable by the same amount each period is known as the...
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