. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
. These accountants do not include selling, administrative, or interest costs in their definition of the full cost of a product. Their view is consistent with the way that inventory and the cost of goods sold are...
generally have a 120 or 150 credit college degree including at least 30 credits of accounting courses plus 30 credits of other business courses. A bookkeeper is likely to be employed at a smaller company or organization...
will be recorded in the inventories and the cost of goods sold accounts. Since the company must pay its vendors and production workers the actual costs incurred, there are likely to be some differences. The differences...
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...
activities. The combination of the cash inflows and the cash outflows from a company’s operations (activities outside of its investing and financing activities). loss on disposal, net of tax. An accounting loss on the...
, etc. The manufacturer has 40,000 production machine hours. Using the traditional method of cost accounting, the company will allocate or assign $50 of overhead of each machine used to produce the output. Applying $50...
an account receivable is actually removed from the company’s receivables. Under the direct write off method there is no contra asset account such as Allowance for Doubtful Accounts. This means that the balance sheet...
What is the difference between a budget and a standard? Definition of a Budget In business and other organizations, a budget often refers to a department’s or a company’s projected revenues, costs, or expenses....
of the inputs used for the actual products manufactured. Example of Variance Analysis Assume that a company manufactured 10,000 units of product (output). The company’s standards indicate that it should have used...
for 20% of the inventory value. Under this system, the “A” items will receive the most attention since they account for 70% of the value. This ABC is sometimes referred to as Pareto analysis or Pareto’s rule and...
What is the proper accounting for supplies? Definition of Supplies Office supplies are items used to carry out tasks in a company’s departments outside of manufacturing or shipping. Office supplies are likely to...
or LIFO, but require the same cost flow assumption be used on both the company’s tax return and on the company’s financial statements. With inflation being the norm, profitable companies using LIFO are matching the...
. Let’s begin by assuming that a company’s product has a cost of $75 and the company desires a 25% gross margin (or 25% of the selling price). Let’s use “SP” to indicate the product’s required selling price...
What is accrued payroll? Definition of Accrued Payroll Accrued payroll includes wages, salaries, commissions, bonuses, and other payroll related expenses that have been earned by a company’s employees, but have not yet...
Are the sales taxes part of a retailer's sales? Definition of Sales Taxes Sales taxes are likely state and local taxes collected by the sellers of specified goods and the providers of specified services. The sales...
at the end of each accounting period. As a result, Accumulated Depreciation is viewed as a permanent account. Example of Depreciation Accounts Assume a company has equipment which is used in its business. The...
it indicates that the company has paid more than the amount owed, has made an incorrect entry, etc.) Equity accounts including the stockholders’ equity accounts Common Stock, Paid-in Capital in Excess of Par Value,...
will be closed at the end of each year. However, the account’s debit balance is closed directly to the owner’s capital account. (The owner’s draws are not reported as an expense on the company’s income...
spent to acquire or improve a company’s fixed assets. The capital expenditures increase the respective asset accounts which are reported in the noncurrent asset section of the balance sheet entitled property, plant...
What is the days' sales in accounts receivable ratio? Definition of Days’ Sales in Accounts Receivable The days’ sales in accounts receivable ratio (also known as the average collection period) tells you the...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
a company’s assets, liabilities, and owner’s or stockholders’ equity. The balances in these accounts as of the final moment of an accounting year will be reported on the company’s end-of-year balance sheet....
What is the entry when merchandise has been received but not the vendor's invoice? Definition of Merchandise Received but Not Vendor’s Invoice If a retailer receives merchandise from one of its vendors, but has...
in the accounting periods in which the asset is being used. More Information on the Depreciation Entry It is important to understand the following: The depreciation entry will cause a decrease in the company’s net...
of a Mortgage Loan Payable Let’s assume that a company has a mortgage loan payable of $238,000 and is required to make monthly payments of approximately $4,500 per month. Each of the monthly payments includes a $3,000...
Why are the amounts on the financial statements rounded to thousands or millions? Definition of Rounding Amounts on Financial Statements Rounding the amounts on a company’s financial statements means dropping the less...
What is the difference between the current ratio and the quick ratio? Definition of Current Ratio The current ratio is the proportion, quotient, or relationship between the amount of a company’s current assets and the...
of these two balance sheet amounts in the denominator. Using the average of only two days can also be misleading if the company’s year ends at the low point of business activity. For example, when a company’s peak...
What are accruals? Definition of Accruals The accounting and bookkeeping term accruals refers to adjustments that must be made before a company’s financial statements are issued. Accruals involve the following types of...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
, a company borrows $100,000 with an annual interest rate of 12%. The interest for each month is to be paid on the last day of the month. No principal payment is required until the loan comes due in two years. On July 1...
What is a multiple-step income statement? Multiple-Step Income Statement Definition A multiple-step income statement presents two important subtotals before arriving at a company’s net income. For a company that sells...
What is a general ledger? Definition of General Ledger A general ledger is a grouping of perhaps hundreds of accounts that are used to sort and store information from a company’s business transactions. The general...
The balance sheet and income statement are connected. Definition of Balance Sheet and Income Statement The balance sheet reflects the accounting equation: Assets = Liabilities + Owner’s (Stockholders’) Equity When a...
What is a trade discount? Definition of Trade Discount A trade discount is a routine reduction from the regular, established price of a product. The use of trade discounts allows a company to vary the final price based...
Method Assume that the cost of electricity at a small manufacturing facility is a mixed cost since the company has only one electricity meter for air quality, cooling, lighting, and for its production equipment. The...
of Adjusting the Inventory Account When using the periodic method, balance in the inventory account can be changed to the ending inventory’s cost by recording an adjusting entry. To illustrate, let’s assume that the...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. A company owes its suppliers $38,000 and it owes its bank $50,000. The suppliers and the bank are...
as a "snapshot" of a company's financial position is the ______________ sheet. BALANCE ABAENLC Unscramble BALANCE LAECBAN Unscramble 2. The __________ method (or basis) of accounting reports expenses when...
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