What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
What is the effect on financial ratios when using LIFO instead of FIFO? Definition of Effect of LIFO Instead of FIFO During periods of significantly increasing costs, the LIFO cost flow assumption instead of the FIFO...
is there was a transaction for $100 million and Company Y’s cost of the trademark was $100 million. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and...
, a corporation’s stockholders’ equity may have been reduced from the purchase of treasury stock at a high cost. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
Is depreciation expense an administrative expense? Definition of Depreciation Expense Depreciation expense is the systematic allocation of a depreciable asset’s cost to the accounting periods in which the asset is...
of inventory so that it can meet the fluctuating demand of its customers, avoid disruptions in production, and minimize holding costs. Since the costs of the items purchased or produced are likely to change (especially...
is $400,000 and is expected to process 50,000 identical units of product. Some companies will develop standard costs for controlling its operations. For example, the standard cost of processing all identical units in...
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
and the depreciation expense begins. This expense will reduce the company’s profits (net income, earnings). There may also be some additional revenues and costs, and perhaps cost savings, that will also affect the...
costs, burden, indirect manufacturing costs, and indirect product costs. Since manufacturing overhead is an indirect product cost, it needs to be allocated or assigned to the products manufactured and will cling to the...
of the monetary unit assumption, accountants at a U.S. corporation do not hesitate to add the cost of a parcel of land purchased in 2024 to the cost of another parcel of land that had been purchased in 2004. (See...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
What is a fully depreciated asset? Definition of Fully Depreciated Asset A fully depreciated asset is a plant asset or fixed asset where the asset’s book value is equal to its estimated salvage value. In other words,...
What is the difference between expense and loss? Definition of Expense An expense is a cost that a company incurs or uses up when it earns revenues. Examples of Expenses A few examples of the many expenses that a company...
An asset having accumulated depreciation equal to its depreciable cost (cost minus estimated salvage value). The use of an asset after it is fully depreciated will mean no depreciation expense for those accounting...
A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means the latest (recent) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods Sold.
A weighted average cost used with the periodic inventory system. To learn more, see Explanation of Inventory and Cost of Goods Sold.
A long-term asset account that reports the cost of real property exclusive of the cost of any constructed assets on the property. Land usually appears as the first item under the balance sheet heading of Property, Plant...
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
Generally, this rule requires that the cost flow assumption used for tax purposes be the same cost flow assumption used for the financial statements. Consult a tax professional about this and other tax matters.
How do you account for the rebate on an automobile? The rebate on the purchase of an automobile should be recorded as a reduction of the automobile’s cost. The lower automobile cost will result in lower depreciation...
Usually the difference between the cost of inventory at LIFO versus the cost of inventory at FIFO.
The symbol that represents the total cost in the equation of the cost line y = a + bx.
In activity-based costing this refers to the allocation of the cost of activities (determined by stage 1 allocations) to the cost objects such as products or services.
A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
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.
In the equation of a straight line, y = a + bx, ‘bx’ is the total variable cost resulting from the variable cost rate ‘b’ multiplied times the quantity ‘x’.
Buildings is a noncurrent or long-term asset account which shows the cost of a building (excluding the cost of the land). Buildings will be depreciated over their useful lives by debiting the income statement account...
A symbol that indicates the variable cost rate and also the slope of a straight line. For example, in the equation of the straight line, y = a + bx, ‘b’ represents the variable cost rate per unit of...
In standard costing the difference between the actual cost and the standard cost of direct materials or direct labor. The price variance of direct labor is usually referred to as the labor rate variance.
This is a long term asset account that accumulates the cost of a project that has not yet been placed into service. When the project is finished and placed into the service, the cost is removed from this account and is...
The underlying true cause of a cost occurring. In other words, the root cause is more than a mere correlation between an event and a cost. There is a real cause and effect relationship.
the standard quantity of materials. The materials usage variance is favorable when the actual quantity of materials used was less than the standard quantity. In the U.S. the materials usage cost variance is expressed in...
inventory, the finished goods inventory, and the cost of goods sold. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at...
in the accounting period in which it expires or is used up. If the future benefit of a cost cannot be determined, it should be charged to expense immediately. Examples of the Matching Principle To illustrate the...
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...
the balance sheet report the current value of an asset. True Wrong. The purpose of depreciation is to match the cost of the asset to revenues derived from using the asset or to the periods benefiting from the asset. The...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
A method used by retailers to achieve the LIFO cost flow without tracking individual units. A further advantage is that pools of products are used. This will likely mean less liquidation of LIFO cost layers that would...
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