What is the gross profit method of inventory? Definition of Gross Profit Method The gross profit method is a technique for estimating the amount of ending inventory. The gross profit method might be used to estimate each...
What is the gross profit method of inventory? Definition of Gross Profit Method The gross profit method is a technique for estimating the amount of ending inventory. The gross profit method might be used to estimate each...
What is the book value of bonds payable? Definition of Book Value of Bonds Payable The book value of bonds payable is also known as the carrying value of bonds payable. The book value of bonds payable is the net or...
What is a letter of credit? A letter of credit is a letter or document issued by a bank for use by one of its customers. The letter of credit states that the bank will guarantee payment up to the stated amount for...
What are the limitations of the payback period? Definition of Payback Period The payback period is a common (but not the best) tool for screening a company’s potential investments. It uses the potential investment’s...
What is the weakness of traditional cost allocations? Traditional cost allocations are often based on volume such as number of products manufactured, number of direct labor hours, number of production machine hours,...
How do you write off a bad account? Definition of the Write-off of a Bad Account The write-off of a bad account usually refers to eliminating an account receivable due to the customer’s inability to pay the amount...
See paid-in capital in excess of par value – common stock, or paid-in capital in excess of par value – preferred stock.
What are some examples of financing activities? Definition of Financing Activities Financing activities often refers to the cash flows from financing activities, which is one of the three main sections of the statement...
What is the meaning of pro rata? Pro rata is a Latin term that means in proportion. Pro rata is related to prorate, a term used in cost accounting. To illustrate the term pro rata, let’s assume that a company’s...
What are the elements of financial statements? Definition of Elements of Financial Statements The elements of financial statements are the classes of items contained in the financial statements. Examples of Elements of...
What is the cost of goods manufactured? Definition of Cost of Goods Manufactured The cost of goods manufactured is a calculation of the production costs of the goods that were completed during an accounting period. In...
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...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
What are out-of-pocket costs? Out-of-pocket costs are those costs or expenses that require a cash payment in the current period or during a project. For example, the wages of the person setting up a machine for a new...
How do I write off old outstanding checks? Definition of an Old Outstanding Check We will assume that an outstanding check has appeared on the outstanding check list that is part of the company’s bank reconciliation...
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...
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
What is the cost of goods sold? Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that a retailer, distributor, or manufacturer has sold. The cost of goods sold is reported on the income...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
What is the statement of cash flows? Definition of Statement of Cash Flows The statement of cash flows (SCF) is one of the required external financial statements. The SCF is commonly referred to as the cash flow...
A table showing the present value factors to be applied to the recurring equal amount occurring at the end of each equal time interval.
What is the meaning of debit? Definition of Debit The term debit is similar to the term used in Italy more than 500 years ago when the double entry accounting system was documented. What you need to know today is that...
What are the effects of overstating inventory? Definition of Overstating Inventory Overstating inventory means that the reported amount for the cost of a company’s inventory is greater than the actual true cost based...
Inventory and Cost of Goods Sold Inventory Inventory is usually the most significant current asset of a retailer or manufacturer. Generally, inventory is reported on the balance sheet at its cost (or lower). When the...
This is a national organization of certified public accountants. For more information go to www.aicpa.org.
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
What is the purpose of depreciation? Purpose of Depreciation The purpose of depreciation is to achieve the matching principle of accounting. That is, a company is attempting to match the historical cost of a productive...
Inventory and Cost of Goods Sold(Quick Test #2) Download PDF After you have answered all 20 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers....
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
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