See weighted-average cost flow assumption and moving-average cost of inventory.
See weighted-average cost flow assumption and moving-average cost of inventory.
This phrase has two connotations. One is the cost of holding inventory. In this case the carrying cost is the cost of capital tied up in inventory, the cost of storage, insurance, and obsolescence. Often this is...
Usually means to scrap a long-term plant asset and receive no proceeds from its disposal.
What is a deferred credit? A deferred credit could mean money received in advance of it being earned, such as deferred revenue, unearned revenue, or customer advances. A deferred credit could also result from complicated...
The point at which several products emerge from a common process.
What is the difference between reserve and provision? Definition of Reserve Many decades ago, U.S. accountants decided to eliminate the word reserve when reporting the balances in contra asset accounts. The accounting...
The repurchase of bonds by the issuer of the bonds.
How do I calculate the cost of goods sold for a manufacturing company? Calculation of the Cost of Goods Sold for a Manufacturer The calculation of the cost of goods sold for a manufacturing company is: Beginning...
What is a burden rate in inventory? I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead, indirect production costs, and...
How does an expense affect the balance sheet? Definition of Expense An expense is a cost that has been used up, expired, or is directly related to the earning of revenues. Most of a company’s expenses fall into the...
What is a journal entry? Definition of a Journal Entry In manual accounting or bookkeeping systems, business transactions are first recorded in a journal…hence the term journal entry. Journal entries that are recorded...
What is the statement of comprehensive income? Definition of Statement of Comprehensive Income The statement of comprehensive income is one of the five financial statements required in a complete set of financial...
What is the proper accounting for supplies? Definition of Supplies Office supplies are items used to carry out tasks in a company’s departments outside of manufacturing or shipping. Office supplies are likely to...
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,...
What are goods in transit? Definition of Goods in Transit Goods in transit refers to inventory items and other products that have been shipped by a seller, but have not yet reached the purchaser. When goods are in...
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...
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...
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...
The systematic allocation of the discount on bonds payable (reported as a debit in a contra-liability account) to Bond Interest Expense over the life of the bonds. The journal entry to amortize contains a debit to the...
Could a company's statement of cash flows show a positive net cash flow from operating activities even though it reported a net loss on its income statement? Yes, a company with a net loss on its income statement could...
What is a capital expenditure versus a revenue expenditure? Definition of Capital Expenditure A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset...
The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method...
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
What is retained earnings? Definition of Retained Earnings Retained earnings is the cumulative amount of earnings since the corporation was formed minus the cumulative amount of dividends that were declared. Retained...
How can I learn bookkeeping? You can learn bookkeeping at no cost on our website AccountingCoach.com. We recently expanded our Explanation of Bookkeeping, and we have many other topics that are relevant including debits...
What is a contra asset account? Definition of Contra Asset Account A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance...
See exchange of similar nonmonetary assets.
What is the periodic inventory system? Definition of Periodic Inventory System The periodic inventory system does not update the general ledger account Inventory when a company purchases goods to be resold. Rather than...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
Officers of a corporation are appointed by the board of directors to execute the policies that have been established by the board of directors. The officers include the chief executive officer (CEO), the chief operations...
The balance of the owner’s capital account excluding the current year’s net income and current year’s draws by the owner.
When does a negative cash balance appear on the balance sheet? Definition of Negative Cash Balance A negative cash balance results when the cash account in a company’s general ledger has a credit balance. The credit or...
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 definition of net sales? Definition of Net Sales Net sales is a company’s gross sales of products minus any sales discounts and sales returns and allowances. When a company makes a sale, the general ledger...
Is the reversal of a previous year's accrued expense permanent? Definition of Reversal of Accrued Expense An accrued expense typically requires an accrual adjusting entry recorded at the end of an accounting year (or any...
What is a provision for discounts allowable? The provision for discounts allowable is likely to be a balance sheet account that serves to reduce the asset account Accounts Receivable. The provision account’s counter...
The method of accounting for treasury stock whereby the cost of the stock that is repurchased by the issuing corporation is recorded and is reported in the contra stockholders’ equity account Treasury Stock.
Are salaried employees entitled to overtime pay? Some salaried employees are entitled to overtime pay. The salaried employees entitled to overtime pay are referred to as nonexempt employees. Nonexempt means that the...
Why is prepaid insurance a short term asset? Definition of Prepaid Insurance as a Short-term Asset Prepaid insurance is usually a short term or current asset because insurance premiums are rarely billed for periods...
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
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