the balance sheet and the income statement. For instance, the balances in the income statement accounts will be the net income or net loss that will be transferred to the owner’s capital account at the end of the...
the balance sheet and the income statement. For instance, the balances in the income statement accounts will be the net income or net loss that will be transferred to the owner’s capital account at the end of the...
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...
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...
Activities involving a batch of products—as opposed to individual items. An example of a batch activity is the setting up of a machine to produce a batch of 1,000 identical items.
A retirement plan that specifies the amount that a retiree will receive, such as 1% of the person’s recent salary times the years of service. The employer’s obligation is to contribute enough money to meet...
Often a 1% or 2% reduction in the amount owed if an invoice is paid within 10 days of the invoice date instead of the customary 30 days.
The practice where an asset purchased within a year is assumed to have been purchased at the mid-point of the year. For example, an asset purchased during the calendar year 2024 is assumed to have been purchased on July...
The ratio of total liabilities to total assets. For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).
Contributions collected by Charity #1 who is merely acting as a collection agent for Charity #2. Also known as flow-through contributions.
One of two broad functional categories for sorting and reporting a nonprofit organization’s expenses. (The other is program expenses.) Supporting services expenses consists of 1) management and general expenses,...
One hundredth (1/100) of a percentage point. In other words, one percentage point is equal to 100 basis points. The difference between an interest rate of 6.5% and 6.75% is 25 basis points.
In activity-based costing this refers to the allocation of the cost of activities (determined by stage 1 allocations) to the cost objects such as products or services.
What is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
to calculate a retailer’s cost of goods sold is to begin with the cost of the goods it had purchased during the accounting period and then adjust it for the change in inventory. For example, if 1,000 units of a...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The report that sorts a company’s accounts receivables into current,...
for the month amounting to $63,000. The sales invoices represent the goods shipped to customers and includes $1,000 of sales taxes pertaining to its retail customers. The company offers credit terms of 1/10, net 30...
of goods sold (COGS) of $5 million, and an average inventory cost of $1 million. This means the company’s inventory turnover was on average 5 (or 5 times) calculated by dividing the COGS of $5 million of cost of goods...
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
was the $400 repair bill + $3,000 of opportunity cost described above + the opportunity cost consisting of future lost profits from lost customers.) Now let’s modify the story. Suppose the machine that was idled by...
and finished goods. The notes to the financial statements will also described how the manufacturer’s inventory is valued. For example, the notes will disclose whether FIFO lower of cost or net realizable value, LIFO,...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
, to reduce rent, etc. To satisfy stockholders who prefer appreciation in the value of the corporation’s common stock instead of receiving cash dividends that require current income tax payments Join PRO to Track...
What is setup cost? Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded as a batch-level cost in activity...
Debts is a contra asset account (an asset account with a credit balance). It is used along with the account Accounts Receivable in order for the balance sheet to report the net realizable value of the company’s...
What to do with the balance in Allowance for Doubtful Accounts? Definition of Allowance for Doubtful Accounts The Allowance for Doubtful Accounts is a contra asset account that is used with the balance in Accounts...
value has been impaired.) Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh your skills to...
What are the accounting entries for a fully depreciated car? Definition of a Fully Depreciated Car A fully depreciated car is one where the car’s historical cost has already been allocated to expense (except for the...
Allowance for Doubtful Accounts is a contra current asset account associated with Accounts Receivable. When the credit balance of the Allowance for Doubtful Accounts is subtracted from the debit balance in Accounts...
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
a company’s costs, assisting in financial decisions, profit planning, calculating break-even points, capital budgeting, and calculating the costs of existing products in order to value the company’s inventory and to...
of the preferred stock agreement requiring it to pay the $9 per share dividend. In turn, the stockholders will be deprived of receiving the $9 dividend in a 7% market. The call price has the effect of limiting how high...
about a gain, then you do report the gain. For example, if a company sells its old delivery truck for cash and the amount received is greater than the truck’s book value, there is no uncertainty and a gain is...
, but we expect to have the item in stock within 5 working days.” A recently organized, regular U.S. corporation will be issuing 100,000 new shares of stock for $100 per share. All of the shares being issued are common...
amount (or the book value) of the asset sold. An example would be a retailer’s disposal of a delivery truck for a cash amount that is greater than the truck’s carrying amount. Another example is a gain from a...
, plant and equipment for a cash amount that is less than the carrying amount (or book value) of the asset sold. Nonoperating expenses and losses are often reported on the income statement after the subtotal Income from...
not be considered to be the fair market value of the business. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
on the income statement over the asset’s useful life. Accountants point out that depreciation is an allocation process which does not result in reporting the asset’s market value. Example of Recording Depreciation...
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