What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
What is the difference between a land improvement and a leasehold improvement? Definition of Land Improvement A land improvement is a long-term (long-lived) asset resulting from a physical addition to a company’s land....
of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
of a decentralized corporation such as related subsidiary corporations, separate divisions of a corporation, or some other subunits. Depending on the production capacity and the demand for each subunit’s goods or...
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
in a general ledger intangible asset account. If a company designs and registers its trademark, the amount recorded is limited to its cost. Costs incurred to defend a trademark are also recorded in the trademark...
Receivable, Accumulated Depreciation, and allowance accounts used with inventory and investments. Two examples of valuation accounts associated with a liabilities are Bond Issue Costs and Discount on Bonds Payable. The...
expense account to record the amounts that employees paid toward the company’s health insurance costs. For instance, the company might debit its expense account 4210 Employee Health Insurance Expense when recording...
) are not reported on the balance sheet. The same holds for a great management team and an amazing reputation. The cost principle also means that many long-term assets are reported at cost (and not at their current...
of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating...
, the businesses are referred to as profit centers. If the operating businesses make their own investment decisions, the businesses are referred to as investment centers. The production and administrative departments...
statements Being eligible for a U.S. income tax benefit Having less inventory holding costs Being confronted with the total cost of holding items in inventory Join PRO to Track Progress Mark the Question as Read...
What is the difference between expenses and payments? Definition of Expenses and Payments Under the accrual method of accounting, expenses are costs that have been used up or have been incurred in the process of earning...
selling price). Therefore, the $2 markup divided by the product’s cost of $8 results in a markup that is 25% of cost. Thus, if a retailer wants its income statement to show a gross profit that is 20% of sales, the...
sold. Accountants can find the level of correlation between variables by using statistical software. For example, simple linear regression analysis (and multiple regression analysis) software can be used to determine...
these are recorded in accounts such as Purchases, Purchases Returns and Allowances, Purchases Discounts, etc. Must be adjusted at the end of the accounting year in order to report the costs actually in inventory...
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
asset. The deferred expenses that will not become expenses within one year of the date of the balance sheet will be reported in the long-term asset section of the balance sheet under the classification of other assets....
What is workers' compensation insurance? Workers’ compensation insurance is likely to be an insurance policy obtained by a company to cover the medical costs and lost wages for its employees’ work-related...
was $103,000 during the month, it’s June direct labor cost per equivalent unit will be $10 ($103,000 divided by 10,300 equivalent units). This means that $100,000 (10,000 X $10) of labor costs will be assigned to the...
by reading our Nonmanufacturing Overhead (Explanation). 1. Selling expenses should be allocated to the cost of goods sold for external financial reporting. True Wrong. False Right! 2. According to U.S. accounting...
Expense. The combination of the unamortized debit balance in Discount on Bonds Payable, the unamortized debit balance in Bond Issue Costs, and the $10,000,000 credit balance in Bonds Payable is referred to as the book...
purchases = cost of goods available – costs computed for the ending inventory = cost of goods sold. An alternative format is: net purchases plus the decrease in inventory or minus the increase in inventory = cost of...
, the cost is recorded as an expense in the year of the expenditure.) Examples of Capitalized Costs When a company constructs a new building, the interest incurred to finance its construction is capitalized. This means...
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...
of current assets. working capital (or) net working capital This is calculated by subtracting the amount of current liabilities from the amount of current assets. Mark as wrong Mark as right LIFO (or) last in, first out...
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...
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.
. The costs of forming a corporation are known as __________ costs. 4. The maximum number of shares that a corporation can issue is its __________ number of shares. 5. The difference in the number of issued shares of...
. Costs that are used up or expire in the current accounting period are reported on the income statement as __________. 6. The Allowance for Doubtful Accounts reduces the amount reported on the balance sheet for the...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
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...
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...
Our Explanation of Present Value of an Ordinary Annuity uses the appropriate present value factors for discounting a stream of equal cash amounts occurring at equal time intervals. An important feature is the use of loan...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
Why does our company's balance sheet report its land at cost when it is so much more valuable? Accountants are guided by the cost principle. This requires accountants to report assets at their cost when...
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