What causes a variation in profit margin and turnover ratios between industries? Mega grocery stores, discount stores, and warehouse clubs often have small profit margins but have high turnover ratios. The small profit...
What causes a variation in profit margin and turnover ratios between industries? Mega grocery stores, discount stores, and warehouse clubs often have small profit margins but have high turnover ratios. The small profit...
What is a service department? Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department does not produce any of the...
Is rent expense a period cost or a product cost? Definition of Rent Expense Rent expense is often a monthly amount paid by a company for use of a building. Typically, the rent is due on the first day of every month that...
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
What is the difference between a differential cost and an incremental cost? Definition of Differential Cost and Incremental Cost I use the terms differential cost and incremental cost to mean the same thing: the...
Are direct costs fixed and indirect costs variable? Direct Costs vs. Indirect Costs The terms direct costs and indirect costs could be referring to a product, a department, a machine, geographic market, etc. (which are...
What is credit analysis and financial analysis? Credit analysis is associated with the decision to grant credit to a customer. It is also part of a bank’s lending procedures for making a loan and monitoring the...
How do I calculate the after-tax cost of debt? Definition of After-Tax Cost of Debt The after-tax cost of debt is the interest paid on the debt minus the income tax savings as the result of deducting the interest expense...
What is zero-based budgeting? Definition of Zero-Based Budgeting Zero-based budgeting, or ZBB, is a rigorous budgeting process that requires that every dollar of every expense in the budget be justified, even if the...
How do you calculate the break-even point in terms of sales? Definition of Break-even Point in Sales Dollars The break-even point in sales dollars can be calculated by dividing a company’s total fixed expenses by the...
Our Explanation of Financial Accounting introduces some of the basic accounting concepts and how they affect the income statement, balance sheet, and other financial statements.
pertains to one or more future accounting periods. To illustrate, assume that on December 1, a company recorded its $2,400 payment for six months of property insurance for December through May. At December 31, one month...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
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...
in the market value of the asset The sum of the depreciation expense recorded since the asset was purchased 11. A credit balance in the account Allowance for Doubtful Accounts should indicate which of the following?...
is an example of a variable expense. 3. Property taxes and rent are often fixed expenses. True Right! Property taxes do not vary with sales. Rather they are fixed, because they are based upon an assessed value of the...
These are positive income statement amounts that are not revenues. One of these occurs when plant assets are sold for more than their book value. gains These are positive income statement amounts that are not revenues....
of accounting. Example of Book Depreciation Let’s assume that equipment used in a business has a cost of $500,000 and is expected to be used for 10 years. If the company assumes no salvage value at the end of the 10...
of __________ service or support departments. 5. To be in compliance with generally accepted accounting principles, selling and administrative expenses and interest expense should be allocated to the cost of products...
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 Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
minus 1) Sales Discounts, and 2) Sales Returns and Allowances equals __________ sales. 5. The cost of goods sold is the cost of goods available minus the costs in __________ inventory. 6. If a store sells its old...
-average cost perpetual FIFO perpetual LIFO perpetual moving average specific identification others (such as a retailer’s dollar-value retail LIFO system) As the list indicates, the calculation of inventory and the...
than the asset’s book value. Losses An example is the Loss on Sale of a Plant Asset which resulted from selling a plant asset for less than the asset’s book value. The net result (or combination) of these components...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
for $20,000 (which reduces Revenues) and credit a liability account such as Deferred Service Revenues or Unearned Service Revenues for $20,000. 17. On December 10, a website design company received $15,000 as an advance...
in the future. This check is not considered to be cash until the date of the check. postdated (or) postdated check This refers to a check with a date in the future. This check is not considered to be cash until the date...
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...
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...
These accounts provide the details for the summary amounts found in a general ledger control account. subsidiary ledger accounts These accounts provide the details for the summary amounts found in a general ledger...
of assets for personal use) are made by a sole proprietor? Select... Assets and owner's equity will decrease Assets will decrease and owner's equity will increase No effect on the accounting equation 14. What...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
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...
statement? Select... Balance sheet Income statement 23. Which adjusting entries involve advance payments? Select... Accrual-type Deferral-type 24. Which adjusting entries involve amounts that will be paid in future...
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...
statement will display the amounts for the most recent accounting year and also the amounts for the prior year or two. 38. A corporation’s stockholders’ equity is an excellent indicator of the corporation’s market...
or if the company is in a unique industry would the inventory be at an amount other than its cost. Sales Value Wrong. Because of the cost principle, inventory is carried at cost. Only if there is some impairment or if...
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