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...
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 for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
What is the high-low method? Definition of High-Low Method The high-low method is a simple technique for determining the variable cost rate and the amount of fixed costs that are part of what’s referred to as a mixed...
A method for estimating the inventory of a retailer. This method requires that the retail amounts and the related cost amounts are available for beginning inventory and purchases. An illustration of this technique is...
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
The depreciation method based on the number of units produced by the asset rather than on the passage of time. This method is also referred to as the units of activity method because depreciation is based on some...
See units of production method of depreciation.
What is the FISH inventory method? FISH is the acronym for first-in, still-here. FISH is an attempt to bring humor to the fact that some items have been sitting in inventory for years. Unlike FIFO and LIFO, which are...
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
What is double-entry bookkeeping? Definition of Double-Entry Bookkeeping Double-entry bookkeeping refers to the 500-year-old system in which each financial transaction of a company is recorded with an entry into at least...
What are debits and credits? Definition of Debits and Credits Debits and credits are terms used in accounting and bookkeeping systems for the past five centuries. They are part of the double entry system which results in...
What is an independent variable? In accounting, an independent variable is ideally a factor that causes a change in the total amount of the dependent variable. In other words, an independent variable should be something...
What is the coefficient of determination? The coefficient of determination is a statistic which indicates the percentage change in the amount of the dependent variable that is “explained by” the changes in the...
Accounting Equation (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (20) Marked Wrong (0) Marked Right (0) accounting equation (or) basic accounting equation This algebraic expression is Assets...
What are some tips to make learning debits and credits easy? Here are five tips to make learning debits and credits easier: The accounts for expenses are nearly always debited. For example, when a company pays its...
The technique of recording accounts payable at the amount that will be paid after deducting any discount that is available for paying within the discount period. This has a theoretical advantage over the gross method...
What is the double declining balance method of depreciation? Definition of Double Declining Balance Method of Depreciation The double declining balance method of depreciation, also known as the 200% declining balance...
The preferred method for systematically moving bond discount or premium from the balance sheet over to interest expense on the income statement over the life of the bond. This method is superior to the straight-line...
The allocation of common costs based on the sales value of the products that emerge. For example, a company develops a large parcel of land at a cost of $5 million dollars. Individual lots will be sold for $100,000 to...
See Explanation of Inventory and Cost of Goods Sold.
An accelerated method of depreciation, where two times the straight-line rate is applied to the book value of an asset. The result is more depreciation expense in the early years and less in the later years of the...
What is the gross profit method of inventory? Definition of Gross Profit Method The gross profit method is a technique for estimating the amount of ending inventory. The gross profit method might be used to estimate each...
What is a non-discount method in capital budgeting? Definition of Non-discount Method of Capital Budgeting A non-discount method of capital budgeting is one that does not consider the time value of money. In other words,...
Under this method of recognizing losses on credit sales, a contra asset account Allowance for Doubtful Accounts is reported on the balance sheet. Prior to specifically identifying an account receivable as uncollectible,...
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...
The method of accounting for treasury stock whereby the cost of the stock that is repurchased by the issuing corporation is recorded and is reported in the contra stockholders’ equity account Treasury Stock.
Does the accrual method apply to the purchase of equipment? The accrual method does apply to the purchase of equipment (as well as applying to revenues and expenses). To illustrate, let’s assume that on December 29 a...
A form of accelerated depreciation which means that in the early years of an asset’s life there is more depreciation expense than under the straight-line method. However, in the later years of the asset’s...
What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
Why isn't the direct write off method of uncollectible accounts receivable the preferred method? Definition of Direct Write Off Method Under the direct write off method of accounting for credit losses pertaining to...
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
Accounting Basics (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (26) Marked Wrong (0) Marked Right (0) gross profit (or) gross margin This is the remainder after subtracting the cost of goods...
The 500 year-old accounting system where every transaction is recorded into at least two accounts. To learn more, see Explanation of Debits and Credits.
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
A balance sheet with at least two columns of amounts. The column of amounts that is closest to the words will be the most recent amounts. The column furthest from the words will contain the oldest amounts. The older...
An income statement with at least two columns of amounts. The column of amounts that is closest to the words will contain the amounts for the most recent period of time. The columns furthest from the words will be the...
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