Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
What are the methods for separating mixed costs into fixed and variable? Definition of Mixed Costs Mixed costs are partially a fixed cost and partially a variable cost. Mixed costs are also known as semivariable costs....
The moving average cost of inventory items under the perpetual inventory system. A new average cost per unit is developed after each purchase of an inventory item. To learn more, see Explanation of Inventory and Cost of...
A difference between an actual cost and a budgeted or standard cost, and the actual cost is the lesser amount. In the case of revenues, a favorable variance occurs when the actual revenues are greater than the budgeted...
year is January 1 through December 31 and the company sells only one type of product. In its beginning inventory are 2 units with a cost of $10 each. The company sells 1 unit on March 1. On April 1, the company...
, the business will have a credit card expense of $300. If July’s sales are $30,000 the credit card expense will be $900. The total credit card expense varies with sales because the fee has a constant rate of 3% of...
, historical cost amounts without any adjustment for changing prices. [During the years 1979 to 1985, some supplementary disclosures on the effects of changing prices had to be included in the notes to the financial...
Isn't all overhead fixed? Not all overhead is fixed. Some manufacturing overhead costs, which are also referred to as indirect factory costs, are variable. A common example of a variable overhead cost is the...
If I want a gross margin of 25%, what percent should I mark up my product? Definition of Gross Margin Gross margin as a percentage is the gross profit divided by the selling price. For example, if a product sells for...
to as the optimum lot size. The formula to calculate the economic order quantity (EOQ) is the square root of [(2 times the annual demand in units times the incremental cost to process an order) divided by (the...
What is an expense? Definition of Expense Under the accrual method of accounting, an expense is a cost that is reported on the income statement for the period in which: The cost best matches the related revenues The cost...
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...
suppliers. If you purchase an asset and the sales tax is required, the sales tax should be recorded as part of the cost of the goods or services received. For example, if you were required to pay sales tax on the new...
by reading our Accounting Principles (Explanation). 1. The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline? Cost Wrong. The cost...
What is LIFO? Definition of LIFO LIFO is the acronym for last-in, first-out, which is a cost flow assumption often used by U.S. corporations in moving costs from inventory to the cost of goods sold. Under LIFO, the most...
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
A variance arising in a standard costing system that indicates the difference between the standard cost of direct materials that should have been used (standard quantity times standard cost) for the good output and the...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
A formula that calculates the optimum quantity to be purchased (or produced) so as to minimize the combined total cost of carrying inventory and processing additional purchase orders (or production setups). The formula...
Waste, scrap, evaporation, etc. in the manufacturing of products. Normal spoilage is considered unavoidable and is part of the cost of producing the good output. Abnormal spoilage is considered avoidable and is not part...
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs...
. Expressed another way, to rotate the stock of goods on hand means that the physical flow of goods will result in the first or oldest goods being sold first. However, the accounting cost flows do not have to agree with...
cost of goods sold is 70% of sales. Next, compute the sales value of the merchandise sold since the last time an inventory amount was known. Let’s assume that the sales amounted to $100,000. Given the sales value of...
) are not reported at their higher liquidation value because of several accounting principles. Below are four accounting principles that come to mind. The cost principle requires that plant assets be reported at amounts...
If cash and a note are exchanged for a plant asset, is the amount of the note used in the depreciation calculation? A plant asset’s cost is depreciated, unless the asset is land. Cost is defined as the cash or cash...
Why would a company use LIFO instead of FIFO? Definitions of FIFO and LIFO FIFO and LIFO are two of the cost flow assumptions used by U.S. companies with inventory items. FIFO moves the first/oldest costs from...
What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of a...
What does capitalize mean? Definition of Capitalize In accounting, the word capitalize means to record an expenditure as an asset. The cost of this asset is then allocated to expense over its useful life. (If the...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The main revenues for a retail store are __________. 2. Sales minus the cost of goods sold equals...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The main revenues for a retail store are __________. 2. Sales minus the cost of goods sold equals...
Depreciation Depreciation In accounting, depreciation is the spreading (allocation) of an asset’s cost over the many accounting periods in which it is used. The assets that are depreciated include buildings, equipment,...
Depreciation (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (35) Marked Wrong (0) Marked Right (0) depreciation This is the systematic allocation of the cost of a building, equipment,...
that best matches the descriptions listed as items 6 - 16: Each principle or term can be used several times. conservatism cost economic entity full disclosure going concern industry practices matching materiality...
The acronym for cost of sales or for the cost of services.
statements are an integral part of each of the annual external financial statements in order for the users to understand the amounts appearing on the face of the financial statements. For example, accounting principles...
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.
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
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