Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
Losses result from the sale of an asset (other than inventory) for less than the amount shown on the company’s books. Since the loss is outside of the main activity of a business, it is reported as a nonoperating...
Sales. Its detailed purchases and changes in inventory will be presented as one amount with the description Cost of Goods Sold. Perhaps thousands of operating expenses will be presented as one amount with the...
though NIFO cannot be used for valuing inventory and the cost of goods sold on the financial statements, it is useful for making decisions. For example, some companies will use NIFO when determining selling prices. Join...
What is a lump sum payment? A lump sum payment is often associated with a single amount paid to acquire a group of items. For instance, a corporation might pay $50,000 for the inventory and equipment of a small...
Things that are resources owned by a company and which have future economic value that can be measured and can be expressed in dollars. Examples include cash, investments, accounts receivable, inventory, supplies, land,...
It is common for a small quantity to account for most of the value. Examples: 20% of the people may have 80% of the wealth; 20% of the members do 80% of the work; 20% of the items in inventory account for 80% of the...
This could be the difference between cost and the selling price. For example, a retailer may markup its cost by 50% to arrive at a selling price. In the retail method of costing inventory, markup is used to mean the...
What is the difference between assets and fixed assets? Assets are resources owned by a company as the result of transactions. Examples of assets are cash, accounts receivable, inventory, prepaid insurance, land,...
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 is the high-low method? Definition of High-Low Method The high-low method is a simple technique for determining the variable cost rate and the amount of fixed costs that are part of what’s referred to as a mixed...
and the deferral of some costs to a future accounting period. Select... conservatism cost economic entity full disclosure going concern industry practices matching materiality monetary unit time period 16. Assumption...
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...
for the month of June. The weekly statements were not only more timely, they were easier to prepare when it came to inventory and payroll. (When the company had monthly income statements and the month ended on a...
Do variance accounts have an impact on financial statements? Or are they for performance evaluation only? Since the financial statements must reflect the cost principle, both the standard costs and the variances must be...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
What is an outlier? In cost accounting, an outlier could be a cost or its related level of activity that is out of line with other observations. An outlier can be detected by plotting each observation’s cost and...
The result of a corporation buying back its own bonds for an amount that is less than the carrying value of the bonds. The amount of the gain is computed by subtracting the amount spent to repurchase the bonds from the...
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...
What is a fringe benefit rate? Definition of Fringe Benefit Rate A fringe benefit rate is a percentage that results from dividing the cost of an employee’s fringe benefits by the wages paid to the employee for the...
will decrease as one learns or experiences the task. 16. The goal of target __________ is to reduce manufacturing costs so that a product can be priced competitively and yet be profitable. 17. A potential benefit of the...
a reasonable range of activity. Learn more about fixed costs What is a variable expense? An expense is variable when its total amount changes in proportion to the change in sales, production, or some other activity....
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
. PERIOD PRDEOI Unscramble PERIOD EOIRPD Unscramble 6. The amounts earned from a company's main activities. REVENUES VNEERSEU Unscramble REVENUES UNEVRESE Unscramble 7. The costs that are matched with revenues....
. For example, a small retailer can compare her cost of goods sold (perhaps 78%) to a much larger retailer’s cost of goods sold (perhaps 80%). Similarly, one company’s inventory might be 33% (of total assets) while a...
refers to consistency as one of the characteristics or qualities that makes accounting information useful. Example of Consistency Let’s assume that a U.S. corporation uses the FIFO cost flow assumption for valuing its...
on the company’s balance sheet. Generally, the asset account balances are debit balances and are increased with a debit entry and decreased with a credit entry. Examples of Asset Accounts Some examples of asset...
working capital and the current ratio. Examples of Current Assets Examples of current assets and the typical order of liquidity include: Cash and cash equivalents (which includes currency, checking accounts, petty cash,...
assets are not turning to cash. For example, if a company has most of its current assets in the form of inventory and sales slow and customers take more time to pay the amounts they owe, the company may not have the...
are converted to cash in a timely manner. For example, if a company can better manage its inventory and its accounts receivable, the company’s cash and liquidity will increase. This in turn improves the company’s...
instead of 30 days) Purchases Returns and Allowances (credit memos received for returning goods to vendors or for other conditions) These accounts are used by a company that purchases goods for resale and uses the...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
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...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
is a temporary account because its balance is closed to the owner’s capital account at the end of each year in order to begin the next year with a $0 balance.) Examples of permanent accounts are: Asset accounts...
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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