as an asset and expensed later. To defer the cost to the balance sheet is to capitalize the costs. Examples of Costs Being Expensed Costs are reported as expenses in the accounting period when they are used up, have...
as an asset and expensed later. To defer the cost to the balance sheet is to capitalize the costs. Examples of Costs Being Expensed Costs are reported as expenses in the accounting period when they are used up, have...
to the products or to the cost of inventory. The period costs are usually associated with the selling function of the business or its general administration. The period costs are reported as expenses in the accounting...
The method used for removing costs from the inventory of goods. The cost flow can be different from the physical flow of goods. For example, in the U.S. the LIFO cost flow can be used even if the oldest goods are shipped...
standards and U.S. income tax regulations. The details for allocating or assigning the manufacturing costs to the products manufactured are contained in the college course known as cost accounting or managerial...
prime product standard sunk variable 28. This term refers to the combination of direct labor costs and manufacturing overhead costs. Select... conversion drivers fixed inventory mixed object opportunity overhead period...
inventory costs on the balance sheet because the latest, higher costs were removed from inventory ahead of the older lower costs LIFO means that the cost of goods sold on the income statement will contain the higher...
materials and direct labor) will be part of the cost of the items in inventory and the cost of the items sold. Accountants refer to this as full absorption costing. Accountants will also say that the manufactured goods...
to the products purchased. Therefore, the unsold products in inventory should include a portion of the transportation-in costs. The products that have been sold, should have their share of the transportation-in costs in...
, __________ manufacturing overhead rate is often used. Select... an annual a monthly 22. The costs transferred from a manufacturer’s work-in-process inventory to its finished goods inventory is the cost of goods...
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...
remain in inventory at the end of the year. Using FIFO the company assumes that first costs (the oldest costs) for 70 units will be removed from inventory and will become the cost of goods sold. Therefore, the FIFO cost...
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
Are there two ABC methods in accounting? Some accountants use ABC to mean Activity Based Costing. Under this ABC a manufacturer will use many cost drivers to assign overhead costs to products. The objective of Activity...
principle, the cost flow assumption, consistency, and other accounting concepts and principles. When a company elects the LIFO cost flow assumption, it chooses to put its most recent costs in the cost of goods sold, and...
in the most recent higher costs being reported in the cost of goods sold resulting in less gross profit, less net income, less taxable income, and less income taxes than FIFO. LIFO also means that the older lower costs...
An asset such as cash, accounts receivable, or a note receivable where the amount is a fixed, stated amount. Holding these assets during periods of inflation will result in a loss of purchasing power.
A temporary holding place for amounts that need further analysis.
Assets other than cash, accounts receivables, and notes receivables. Holders of nonmonetary assets could avoid holding losses during periods of inflation.
What is inventory valuation? Definition of Inventory Valuation In the U.S., inventory valuation is the dollar amount associated with the items remaining in a company’s inventory. Generally speaking, the amount is the...
inwards is considered to be part of the cost of the items purchased. Hence, for inventory items carriage inwards will be part of the cost of the goods available, the cost of inventory, and the cost of goods sold....
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...
will be due five years later. In addition to the one-time loan costs of $120,000 the company will also have the cost of the borrowed money which is $360,000 ($4 million X 9%) of interest each year for five years. It...
in determining a manufacturer’s cost of goods sold and the cost of its inventory. In traditional cost accounting, the indirect manufacturing costs are allocated to the products manufactured based on direct labor...
What are nonmanufacturing overhead costs? Definition of Nonmanufacturing Overhead Costs Nonmanufacturing overhead costs are the business expenses that are outside of a company’s manufacturing operations. In other...
The systematic allocation of the costs incurred to issue bonds (reported in a contra liability account) to Interest Expense over the life of the bonds.
is to calculate the ending inventory by using the quantities on the company’s inventory system. Those quantities are multiplied by the actual unit costs that reflect the company’s cost flow assumption. (Throughout...
, average) for removing the costs from inventory and sending them to the cost of goods sold. Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that have been sold to customers during the...
__________–__________, __________–__________. 7. LIFO means __________ – __________, __________ – __________. 8. The cost flow assumption where the most recent costs are matched first with current period sales...
, as well as its gross profit, net income, income tax payments, and more.) FIFO. This results in the oldest, lower costs as the first to flow out of inventory and becoming the cost of goods sold LIFO. This results in the...
statements. If a company has small inventory amounts and significant sales, a simple cost system that spreads manufacturing overhead costs solely on the basis of machine hours can result in a reasonably accurate balance...
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...
the goods on the truck belong to the buyer, the buyer should pay the shipping costs. These shipping costs will be an additional cost of the goods purchased. Example of FOB Destination Now assume that a seller quoted...
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 a burden rate in inventory? I assume that the burden rate in inventory refers to a manufacturer’s indirect manufacturing costs, which are also referred to as factory overhead, indirect production costs, and...
of goods manufactured is: The cost of the direct materials used PLUS the cost of the direct labor used PLUS the cost of manufacturing overhead assigned EQUALS = the manufacturing costs incurred in the current accounting...
rate The three product costs are used for calculating the cost of goods sold and the cost of the various inventories. If there is a difference between the total amount of overhead costs applied to the products and the...
the perpetual inventory system, the cost of inventory items purchased are recorded directly into the account Inventory. Under the perpetual system, the costs of the goods sold are removed from the account Inventory when...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
A bearer bond is a bond that is not registered in its owner’s name. The person holding the bond is presumed to be the owner of the bond. The interest on a bearer bond is received by clipping one of the dated...
Featured Review
"I was struggling with my accounting classes at first, as all of the material was confusing. Therefore, I joined PRO Plus and took each of the certificate courses. Before long the material began to make perfect sense. AccountingCoach helped me to get an A in each of my accounting classes, so I could maintain my 4.0 and make it into The National Society of Collegiate Scholars. I have decided to change my major to a bachelor of science in accounting, followed by a masters of science in accounting. I want to get my CPA in California." - Kyle T.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: