What is a purchase allowance? Definition of Purchase Allowance A purchase allowance is a reduction in the buyer’s cost of merchandise that had been purchased. The purchase allowance is granted by the supplier because...
What is a purchase allowance? Definition of Purchase Allowance A purchase allowance is a reduction in the buyer’s cost of merchandise that had been purchased. The purchase allowance is granted by the supplier because...
amount for warehouse rent (and every other expense) for the next budget is $0. Any budgeted expense greater than $0 must be justified. While zero-based budgeting will be more time consuming than focusing on incremental...
.) Companies that use the net method will record the vendor’s invoice as follows: credit Accounts Payable for $980 and debit another account (Inventory, Purchases, etc.) for $980. If the company’s policy is to pay...
the asset’s book value An unfavorable settlement of a lawsuit against the company The retirement of bonds payable at a cost that is greater than the carrying value of the bonds Loss is also used to describe write-down...
from early-payment discounts. (Early-payment discounts of 1% or 2% are usually recorded by the seller in an account such as Sales Discounts and by the buyer using the periodic inventory method in an account such as...
policies such as how and when revenues are recognized, how property is depreciated, how inventory and income taxes are accounted for, and more. Other disclosures in the notes to the financial statements include the...
first year the company had $65,000 of profit, but may end the year with $0 cash. Other examples where cash is paid out, but the profits are not reduced at the time of the payment, include prepayments of insurance...
on the balance sheet are the company’s resources such as cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets . Generally assets are reported at their cost or a lower...
can be converted to cash much faster than inventory. The nature of the company’s sales and how customers pay. If a company has very consistent sales via the Internet and its customers pay with credit cards at the time...
The composition of the current assets is also an important consideration. If the current assets are predominantly in cash, marketable securities, and collectible accounts receivable, that is likely to provide more...
by the adjustments needed to convert the accrual accounting net income to the cash flows from operating activities. A few of the typical adjustments are: Adding back depreciation expense Adding the decrease in accounts...
(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
a vendor’s invoice within the vendor’s early payment discount period. Purchase Discounts Lost is considered to be an interest expense or a financing charge resulting from the buyer not being able to pay the cash...
record the $9 cash discount with a debit to the account Sales Discounts. The buyer will record the $9 savings as a credit to Purchase Discounts or as a reduction to the cost recorded in inventory. My dentist offers a 5%...
securities Accounts receivable, or trade receivables, after deducting an allowance for doubtful accounts Notes receivable maturing within one year of the balance sheet date Other receivables, such as income tax refunds,...
are considered to be a product cost and will be allocated or assigned to the goods produced. The allocated depreciation will be included in the inventory cost of the goods manufactured until the goods are sold. When the...
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
in the control account. To find the amount that a specific customer owes, its recent payments, and its recent purchases on credit, you will quickly get that information from the Accounts Receivable Subsidiary Ledger....
will be reported on the income statement as Shipping Supplies Expense. Accounting for Manufacturing Supplies The cost of manufacturing supplies on hand at the end of an accounting period will be reported in a balance...
in accounts receivable, inventory, accounts payable, and most other current assets and current liabilities. The direct method for reporting the cash from operating activities lists the following: the amounts collected...
the following year with zero balances.) Examples of Balance Sheet Accounts Examples of a corporation’s balance sheet accounts include Cash, Temporary Investments, Accounts Receivable, Allowance for Doubtful Accounts,...
. Mark as wrong Mark as right necessary costs These costs are included in the cost of a plant asset. An example is the installation cost of a new plant asset. (On the other hand, a cost that is the result of negligent...
premium that will be reported as a current asset. prepaid expense (or) unexpired cost A cost that has been paid but is not used up. The portion of an insurance premium that will be reported as a current asset. Mark as...
receivables). 11. The balance sheet of a retailer will value merchandise inventory at which of the following? Select... Cost Selling prices View Coaching A retailer's inventory has to be valued at its cost because...
for Questions 25 - 28: Supplies are a significant expense and a significant asset of a local mail order business. At the beginning of the year, its account Supplies Inventory reported a cost of $12,000. During the year...
sold. Accountants can find the level of correlation between variables by using statistical software. For example, simple linear regression analysis (and multiple regression analysis) software can be used to determine...
Expense. The combination of the unamortized debit balance in Discount on Bonds Payable, the unamortized debit balance in Bond Issue Costs, and the $10,000,000 credit balance in Bonds Payable is referred to as the book...
$232,000. The result was a favorable SG&A expense budget variance of $8,000. Manufacturing overhead costs were budgeted to be $400,000 but were actually $393,000. The result was a favorable manufacturing overhead...
of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating...
expense account to record the amounts that employees paid toward the company’s health insurance costs. For instance, the company might debit its expense account 4210 Employee Health Insurance Expense when recording...
selling price). Therefore, the $2 markup divided by the product’s cost of $8 results in a markup that is 25% of cost. Thus, if a retailer wants its income statement to show a gross profit that is 20% of sales, the...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
, the businesses are referred to as profit centers. If the operating businesses make their own investment decisions, the businesses are referred to as investment centers. The production and administrative departments...
What is the difference between break-even point and payback period? Definition of Break-Even Point The break-even point is the amount of sales required to cover a company’s costs and expenses that are reported on its...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
the amortization of premium on bonds payable. The combination of 1) the unamortized credit balance in the account Premium on Bonds Payable, 2) the unamortized debit balance in the account Bond Issue Costs, and 3) the...
will have: A break-even point in sales dollars of $800,000 [$480,000 divided by 60%] A break-even point in units of product of 40,000 [$480,000 divided by $12 per unit] The break-even calculations are based on the...
, the cost is recorded as an expense in the year of the expenditure.) Examples of Capitalized Costs When a company constructs a new building, the interest incurred to finance its construction is capitalized. This means...
to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
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