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...
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...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
What is a stock split? Definition of Stock Split A stock split usually refers to a corporation dividing its existing number of shares of common stock into a greater number of shares. For instance, a corporation with...
What is a current liability? Definition of Current Liability A current liability is: An obligation that will be due within one year of the date of the company’s balance sheet, and Will require the use of a current...
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...
What are generally accepted accounting principles (GAAP)? Definition of Generally Accepted Accounting Principles Generally accepted accounting principles (commonly referred to as GAAP or US GAAP) are the common...
With regard to depreciation, what does the term mid-month convention mean? Definition of Mid-Month Convention In depreciation, the mid-month convention means that an asset placed into service anytime during a given...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
Would you please help me understand opportunity cost? You might think of opportunity cost as the profit you had to forego. Let’s illustrate this with a little story. Suppose that you are the sole owner of a company...
Why does commitment and contingencies appear on the balance sheet without an amount? Definition of Commitments and Contingencies Commitments and contingencies is a balance sheet line with no amount reported. The line...
Are depreciation, depletion and amortization similar? In accounting the terms depreciation, depletion and amortization often involve the movement of costs from the balance sheet to the income statement in a systematic...
What are dividends? In accounting, dividends often refers to the cash dividends that a corporation pays to its stockholders (or shareholders). Dividends are often paid quarterly, but could be paid at other times. For a...
What is a blank check? Definition of Blank Check A blank check often refers to a check that has been signed by an authorized check signer without completing the other information (date, payee, amount). A blank check...
What is historical cost? Definition of Historical Cost Historical cost is a term used instead of the term cost. Cost and historical cost usually mean the original cost at the time of a transaction. The term historical...
What does arms length transaction mean? Definition of Arms Length Transaction An arms length transaction exists when two independent (unrelated) parties are each attempting to get the best deal possible. Example of Arms...
What is IFRS? IFRS is the acronym for International Financial Reporting Standards. IFRS is used throughout the world except in the United States where U.S. GAAP (generally accepted accounting principles) is followed....
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
What is the provision for bad debts? Definition of Provision for Bad Debts The provision for bad debts could refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for Doubtful Accounts,...
What is a defined benefit pension plan? A defined benefit pension plan is a retirement plan in which the employer commits to paying a specified monthly payment to each eligible employee when he or she retires at a stated...
What does it mean to recognize an expense? Definition of Recognize an Expense To recognize an expense means to report the proper amount of an expense on the income statement for the appropriate accounting period. When...
What are operating expenses? Definition of Operating Expenses Operating expenses are the costs that have been used up (expired) as part of a company’s main operating activities during the period shown in the heading of...
Is there a difference between an expense and an expenditure? Definition of Expense An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or...
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...
What is the difference between a general ledger and a general journal? Definition of General Ledger The general ledger contains the accounts used to sort and store a company’s transactions. The general ledger is...
What does Accumulated Depreciation tell us? Definition of Accumulated Depreciation Accumulated depreciation reports the amount of depreciation that has been recorded from the time an asset was acquired until the date of...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
Are fixed assets the same as plant assets? Definition of Fixed Assets and Plant Assets My experience indicates that people use the term fixed assets to mean the same as plant assets. As a result, I define both fixed...
What is the purpose of depreciation? Purpose of Depreciation The purpose of depreciation is to achieve the matching principle of accounting. That is, a company is attempting to match the historical cost of a productive...
What is a voided check? A voided check is a check written or partially written but then canceled or deleted by the maker of the check. The notation of “void” is used because checks are prenumbered for control...
What is the accounts receivable turnover ratio? Definition of Accounts Receivable Turnover Ratio The accounts receivable turnover ratio (or receivables turnover ratio) is an important financial ratio that indicates a...
What is the difference between net cash flow and net income? Definition of Net Cash Flow Net cash flow is the combination of the cash received and the cash disbursed. In other words, it is the combination of the debit...
What is an outstanding check? Definition of Outstanding Check An outstanding check is a check that a company has issued and recorded in its general ledger accounts, but the check has not yet cleared the bank account on...
What is the difference between a debit and a debit balance? Definition of Debit A debit is an entry on the left side of a T-account. A debit entry is used to record assets, expenses, losses, and owner’s draws in their...
How do you calculate accrued vacation pay? Definition of Accrued Vacation Pay Accrued vacation pay is the amount of vacation pay that a company’s employees have earned, but the company has not yet paid. Example of...
What are the accounting principles, assumptions, and concepts? Definition of Accounting Principles, Assumptions, and Concepts The basic underlying accounting principles, assumptions, and concepts include the following:...
What is the statement of financial position? Definition of Statement of Financial Position The statement of financial position is another name for the balance sheet. It is one of the main financial statements. The...
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...
What is the definition of capital market? Often, capital market refers to the structured market for trading stocks and bonds. Examples are the New York Stock Exchange, the American Stock Exchange, NASDAQ, and the New...
What is an early payment discount? Definition of Early Payment Discount An early payment discount is a reduction in the amount on a supplier’s invoice if the customer pays the supplier promptly. The early payment...
What is budgeting? Definition of Budgeting Budgeting is the process of preparing detailed projections of future amounts. Companies often engage in two types of budgeting: Operational budgeting, and Capital budgeting...
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