What is the difference between normal costing and standard costing? Definition of Normal Costing Normal costing for manufactured products consists of following: Actual cost of materials Actual cost of direct labor...
What is the difference between normal costing and standard costing? Definition of Normal Costing Normal costing for manufactured products consists of following: Actual cost of materials Actual cost of direct labor...
What is cycle counting? Cycle counting refers to physically counting a portion of the inventory items on many days throughout the year instead of counting all of the items on a single day near the end of the year. For...
What is the purpose of subsidiary ledgers? Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable...
What is EOQ? Definition of EOQ EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of an item to be purchased at one time in order to minimize the combined annual costs of...
How is the material usage variance account reported on the financial statements? Definition of Materials Usage Variance The materials usage variance (in a standard costing system) results from using more or less than the...
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...
What is an equivalent unit of production? Definition of Equivalent Unit of Production An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially...
Which assets are classified as current assets? Definition of Current Assets Current assets include cash and assets that are expected to turn to cash within one year of the balance sheet date. Current assets also include...
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...
How do I study for an accounting final exam? Here are the AccountingCoach suggestions for studying for an accounting final exam (or other introductory financial accounting exams). Try our free Quizzes Work our free...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
Manufacturing Overhead For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
Standard Costing For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If you have...
The process of becoming outdated or no longer being economically feasible (often caused by technology advances). For example, personal computers and computer chips from 2010 are obsolete even though they can be operated....
Is standard costing GAAP? Definition of Standard Costing Standard costing is a cost accounting system used by some manufacturers to assist in planning and controlling its manufacturing operations. When standard costing...
How do I record exterior cement work? Is it an asset or an expense? If the cement work was done to repair or maintain existing cement work, then the expenditure should be recorded as an expense. Even if the cost is very...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
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...
What is a bookkeeper? Definition of Bookkeeper A bookkeeper is usually employed by a small to mid-size company (or other organization) to process and record the large volume of transactions involving sales, purchases,...
Quality & Other Terms(Quick Test) 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. Note: Some of the...
Working Capital and Liquidity For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided. If...
Current assets minus current liabilities.
See current ratio.
See working capital.
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
The inventory system where purchases are debited to the inventory account and the inventory account is credited at the time of each sale for the cost of the goods sold. Hence, the balance in the inventory account is...
The multiplication of a quantity times its cost. For example, if 100 items are in inventory at a cost of $3.46 each, the inventory extension is $346.
See direct materials inventory.
The ABC inventory system is different from activity-based costing. The ABC inventory system is used in order to focus on the most important items in inventory. Usually a relatively few items will account for a very...
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...
The system where the general ledger account Inventory is not updated during the year. Rather, the merchandise purchased is recorded in temporary purchases accounts. At the time a balance sheet is presented, the inventory...
This indicates (on average) how many days it takes to sell the merchandise held in inventory. To learn more, see Explanation of Financial Ratios.
A general ledger inventory account that has a credit balance instead of an asset’s usual debit balance. An example is the account Reduction of Inventory to Net Realizable Value.
See inventory: finished goods.
See inventory: finished goods (FG).
See inventory carrying costs.
See Explanation of Inventory and Cost of Goods Sold.
An actual count of the goods owned by the business.
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