much of the data entry tasks. This includes entering the bills from vendors, paying bills, processing payroll data, preparing sales invoices, mailing statements to customers, etc. The accountant is likely to have a...
much of the data entry tasks. This includes entering the bills from vendors, paying bills, processing payroll data, preparing sales invoices, mailing statements to customers, etc. The accountant is likely to have a...
What is a credit memo? Definition of Credit Memo One type of credit memo is issued by a seller in order to reduce the amount that a customer owes from a previously issued sales invoice. Another type of credit memo, or...
, 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...
are likely to be different from the income tax laws and regulations. Generally, a profitable regular corporation’s financial statements will report both income tax expense and a current liability such as income taxes...
hourly-paid employees for the amounts they earned between June 22 and June 30. Prior to issuing its June 30 financial statements, the company must record an accrual adjusting entry dated June 30 to record the amounts...
participating in the internship program. Other students with fewer things going for them and who are burnt out from studying accounting theory, may need to actually work in the accounting field before taking another...
. The transfer price is the amount that Sub2 will pay Sub 1 for each component it needs. If Sub 1 has idle capacity, it can make an additional profit even with a transfer price of less than $20. However, Sub2 will be...
of the year. Accumulated Depreciation is a matching principle. In each accounting period, part of the cost of certain assets (equipment, building, vehicle, etc.) will be moved from the balance sheet to depreciation...
, such as Sales Discounts or Discounts for xxx. Let me give you an example from the meat industry. We had 40,000 pounds of beef without a local customer, so we sold it to a company 1,000 miles away for the local price of...
inventory. Example of Importance of Accurate Inventory Here is an example of why accuracy in calculating inventory is important. After accounting for the total cost of 1) the items purchased or produced in the current...
amount, since reducing inventory has a positive effect on the company’s cash balance.) Additional Information The change in the inventory is reported as an adjustment to the company’s net income in the cash from...
: The cost of the merchandise that is sold is being matched with the revenues from selling the goods. Selling, general and administrative expenses (SG&A). These costs are reported as operating expenses on the income...
margin ratio is the percentage of revenues that is available to cover a company’s fixed costs, fixed expenses, and profit. Note that the contribution margin ratio is not the same as the gross margin ratio or gross...
of the accounting year the balances in these accounts are not closed. Instead, the ending balances will be carried forward to become the beginning balances in the next accounting year. (This is different from the income...
will appear as steps or stairs rising from left to right. To illustrate a stepped cost, let’s assume that you are developing a website and find that the monthly cost of hosting the site is based on the number of...
. The appraised value is an attempt to determine the property’s current market value. The appraisal report for real estate will usually report the appraised value of the land separate from the appraised value of the...
Reconciling the Bank Statement When preparing a bank reconciliation, you may find the following tip to be helpful: “Put it where it ain’t.” My now deceased neighbor (Herb) insisted that I share this tip, which he...
depreciation cannot exceed the asset’s cost. The cost principle prohibits a company from recording an asset that was not acquired in a transaction. Hence, a company cannot report its highly successful management team...
be sold without a sales effort. Until that effort is made and an item is actually sold, the company cannot report the $10 increase from $40 to $50. This is referred to as the revenue recognition principle. In other...
liability until it is moved from the balance sheet to the income statement as an expense. This is done to achieve the accountants’ matching principle. Examples of Deferred Expenses Let’s assume that a large...
What is YOY? In financial analysis and data analytics, YOY is the acronym for year over year. YOY indicates the change from the comparable amount reported in the same period one year earlier. Below are three examples of...
of contra accounts that will result in the balance sheet totals being different from the post-closing trial balance totals include: Allowance for Doubtful Accounts Discount on Bonds Payable Bond Issue Costs Owner’s...
any wages she earns from January 1-4) will be included in her January 9 paycheck. Given this information, the company has wages payable of $560 ($400 + $160) as of December 31. Reporting Wages Payable on the Balance...
is required to make regular deposits into the bond sinking fund, which is likely managed by an independent trustee. The combination of the required deposits plus the income and gains from the sinking fund’s...
method of accounting) begins operations on December 27. The employees working from December 27 through December 31 will receive their first paychecks on January 4. If the employees earn a total of $5,000 of wages during...
Revenues for $24,000. During 2024 ABC must move $2,000 each month from the liability account on its balance sheet to a revenue account on its income statement. This deferring of revenue to the periods in which it is...
in inventory is a component in the calculation of the Cost of Goods Sold, which is often presented on a company’s income statement. An increase in inventory will be subtracted from a company’s purchases of goods,...
%)]. Since bonds are a form of debt, the existing stockholders’ ownership interest in the corporation will not be diluted. Therefore, the future gains from use of the bond proceeds (minus the bond interest payments)...
a debit entered on the left side of a general ledger account. (There will also need to be a credit amount entered on the right side of another account.) The abbreviation for debit is dr. (which is also related to the...
How do you calculate the average balance in accounts receivable? The average will be more representative if you include additional balances in the computation. For example, if you compute the average balance for the year...
What is a sole proprietorship? Definition of Sole Proprietorship A sole proprietorship is a form of business organization that is owned by one person and is easy to start. The owner is referred to as a sole proprietor....
. The employee is unable to pay for the repair and has no other means for getting to work. The company agrees to lend the employee $800 and to withhold $100 per week from the employee’s weekly payroll checks until the...
. As the amount of prepaid insurance expires, the expired portion is moved from the current asset account Prepaid Insurance to the income statement account Insurance Expense. This is usually done at the end of each...
What is the average collection period? Definition of Average Collection Period The average collection period is the average number of days between 1) the dates that credit sales were made, and 2) the dates that the money...
assume that at the end of the accounting year the account Eve Jones, Drawing has a debit balance of $24,000. This balance is the result of Eve withdrawing $2,000 per month from her sole proprietorship for her personal...
the periodic inventory system there is no entry to credit the Inventory account or to debit the account Cost of Goods Sold. Hence, the Inventory account contains only the ending balance from the previous year. As a...
What is a flexible budget? Definition of a Flexible Budget A flexible budget is a budget that adjusts or flexes with changes in volume or activity. The flexible budget is more sophisticated and useful than a static...
Are salaried employees entitled to overtime pay? Some salaried employees are entitled to overtime pay. The salaried employees entitled to overtime pay are referred to as nonexempt employees. Nonexempt means that the...
to the accounts indicated. Definition of General Ledger The general ledger contains the accounts used by the company to sort and store the amounts from all of the company’s transactions (including all of the payments,...
and inventories. If the actual costs vary only slightly from the standard costs, the resulting variances will be assigned to the cost of goods sold. If the variances are significant, they should be prorated to the...
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