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...
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...
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.
What is an equivalent unit of production? Definition of Equivalent Unit of Production An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially...
How do you write off a bad account? Definition of the Write-off of a Bad Account The write-off of a bad account usually refers to eliminating an account receivable due to the customer’s inability to pay the amount...
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...
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...
What is the statement of cash flows? Definition of Statement of Cash Flows The statement of cash flows (SCF) is one of the required external financial statements. The SCF is commonly referred to as the cash flow...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
Where in the chart of accounts is a suspense account located? Suspense Account in the Chart of Accounts A suspense account could be located in any one of these sections of an organization’s chart of accounts: Asset...
What are some of the accounting courses in a college accounting degree? The accounting courses often included in a 120- or 150-credit college accounting degree are: fundamentals of financial accounting fundamentals of...
How do I calculate the after-tax cost of debt? Definition of After-Tax Cost of Debt The after-tax cost of debt is the interest paid on the debt minus the income tax savings as the result of deducting the interest expense...
Why does a company debit Purchases instead of Inventory? Definition of Purchases and Inventory When a company uses the periodic inventory system the amount of the company’s inventory is determined by a physical count...
Subscription Expense and will credit Cash (or Accounts Payable). If the amount of the subscription is significant, the company should debit the cost of the subscription to the current asset account Prepaid Expenses and...
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
What are the advantages of departmentalizing manufacturing overhead costs? The departmentalizing of manufacturing overhead costs allows for better planning and control if the head of each department is held responsible...
Why would a company use LIFO instead of FIFO? Definitions of FIFO and LIFO FIFO and LIFO are two of the cost flow assumptions used by U.S. companies with inventory items. FIFO moves the first/oldest costs from inventory...
How should the sale of gift certificates be recorded in the general ledger? Definition of Gift Certificates Gift certificates (and gift cards) are often sold by a retailer to a buyer for cash. The buyer can then redeem...
Which accounts get closed at the end of a fiscal year? The temporary accounts get closed at the end of an accounting year. Temporary accounts include all of the income statement accounts (revenues, expenses, gains,...
Where does the purchase of equipment show up on a profit and loss statement? Reporting the Purchase of Equipment Assuming that the purchase of equipment is a long-term or noncurrent asset that will be used in a business,...
Where can I find a sample of a cash flow statement? A cash flow statement or statement of cash flows should be presented with a U.S. corporation’s annual financial statements. If a corporation’s stock is publicly...
Why is the Cash Flow Statement identified as one of the financial statements? The Cash Flow Statement or Statement of Cash Flows is required as part of a full set of financial statements because of the Financial...
What is the face value of a bond payable? Definition of Face Value of a Bond Payable The face value of a bond payable is the amount printed on the bond. The face value is also referred to as the following: Face amount...
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 is a limitation of the inventory turnover ratio? Definition of Inventory Turnover Ratio The inventory turnover ratio is often calculated by dividing a company’s cost of goods sold for a recent year by the average...
How do you compute the selling price of a bond? Definition of Selling Price of Bond The selling price (or the market value) of a bond is the present value of the future contractual cash amounts that are going to be...
How does the aging of accounts receivable determine bad debts expense? Definition of Aging of Accounts Receivable The aging of accounts receivable sorts the amounts that a company is owed (from customers who had...
Is the current portion of long term debt adjusted monthly? A monthly adjustment to the current portion of long term debt is necessary when: 1. the company issues monthly balance sheets, and 2. the amount to be paid on a...
What is the meaning of sundry and sundry debtors? Definition of Sundry Sundry can mean various, miscellaneous, or diverse. Definition of Sundry Debtors Sundry debtors could be referring to a company’s customers who...
What is the proper use of the words lend and borrow? If a company is granted a loan from its bank, the company is borrowing money from its bank, and the bank is lending money to one of its customers. In other words, the...
is the cost of goods on hand, it makes sense to relate it to the cost of goods sold. Assume that during the past year a company’s inventory had an average cost of $10,000. (This was the average of the amounts in the...
Are the sales taxes part of a retailer's sales? Definition of Sales Taxes Sales taxes are likely state and local taxes collected by the sellers of specified goods and the providers of specified services. The sales taxes...
Can you help me understand the golden rules of accounting? The golden rules of accounting are not presented in any of the U.S. accounting books that I have reviewed. I assume the reason for omitting the golden rules of...
Where can I find the amount of income taxes paid by a corporation? Definition of Income Taxes Paid by a Corporation The amount of income tax paid by a corporation is different from the amount of income tax (income tax...
How does the purchase of a new machine affect the profit and loss statement? Definition of New Machine’s Effect on Profit The purchase of a new machine that will be used in a business will affect the profit and loss...
When do you adjust the amount of prepaid expenses? Definition of Adjusting Prepaid Expenses The balance in the current asset account Prepaid Expenses should be adjusted prior to a company issuing its financial...
Financial Statements Video Training Part 12 Statement of cash flows: introduction, cash flows from operating activities Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
Is the rental cost of a building considered overhead? Definition of Rent as Overhead The rental cost of a building used in manufacturing is part of manufacturing overhead. Manufacturing overhead is assigned or allocated...
What is the meaning of a favorable budget variance? Definition of a Favorable Budget Variance A favorable budget variance means that the actual amount that occurred was better for the company (or organization) than the...
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