What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of a...
What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of a...
or moment, there is an inconsistency between the numerator and the denominator. For example, the numerator in the inventory turnover ratio is the cost of goods sold for the 365-day year, while the denominator reflects...
Why is the distinction between product costs and period costs important? The distinction between product costs and period costs is important to: Properly measure a company’s net income during the time specified on its...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
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.
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...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
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...
., 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....
materials and direct labor) will be part of the cost of the items in inventory and the cost of the items sold. Accountants refer to this as full absorption costing. Accountants will also say that the manufactured goods...
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...
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...
-in-process, finished goods, and supplies to identify the inventory items which have not turned over in a long time. Those items may need to be scrapped so that a loss can be reported and cash will not flow for income...
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...
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...
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...
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...
, the allocated manufacturing cost will be included as part of the following costs: Cost of goods that are in inventory (a current asset on the balance sheet) Cost of goods that were sold (as the expense cost of goods...
standards and U.S. income tax regulations. The details for allocating or assigning the manufacturing costs to the products manufactured are contained in the college course known as cost accounting or managerial...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
See inventory: work-in-process (WIP).
See inventory conformity rule.
See inventory shrinkage.
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...
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,...
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...
are considered to be liquidity ratios: Current ratio Quick ratio or acid test ratio The amount of a company’s working capital is also cited as an indicator of liquidity. However, a company with a large amount of...
). 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...
produced. In other words, the utility bill will be clinging to the units produced. Some of the utility cost will be clinging to the units in inventory and therefore will be part of the cost of the asset inventory. Some...
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...
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
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