to make meaningful comparisons between years. Consistency does allow a company to make a change to a more preferred accounting method. However, the change and its effects must be clearly disclosed for the benefit of the...
to make meaningful comparisons between years. Consistency does allow a company to make a change to a more preferred accounting method. However, the change and its effects must be clearly disclosed for the benefit of the...
be calculated by discounting the bond’s future cash amounts (semiannual interest payments and the maturity amount) back to the amount of cash paid to buy the bond (the present value). Example of Actual or Real...
a lien on the property that protects the lender if the borrower fails to pay the amounts owed. Example of a Mortgage Loan Typically, mortgage loans are long-term loans requiring monthly payments of interest and...
How do you compute a selling price if you know the cost and the required gross margin? Definition of Selling Price A selling price is the amount that a customer will pay to buy a product. If a retailer wants to earn a...
competitors offering a similar product at lower selling prices because of efficiencies, lower costs, or inaccurate cost calculations. Perhaps another competitor will sell a similar product at a lower selling price in...
a $300 digital camera to be used for the next five years. The matching principle would call for an expense (depreciation) of $60 per year for five years. Most accountants would violate the matching principle and expense...
How does one prepare a company's first bank statement reconciliation? To prepare a bank reconciliation for a company that never prepared one previously, I would first make a list of outstanding checks. For example,...
Operating expenses made to return an asset to its previous condition (rather than to make the asset more than it was originally). The amount is charged to an account such as Repairs and Maintenance Expense in the period...
Our Explanation of Standard Costing uses an easy-to-relate to example for illustrating a manufacturer's standard costs and variances. Also provided is a chart which indicates each variance, what it tells you, and where...
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...
These are the official rules that have been released by the Financial Accounting Standards Board. These are part of the generally accepted accounting principles. Before a standard is released, the public had been able to...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
classified into three groups: Raw materials used in the product Direct labor used to make the product Manufacturing overhead incurred to make the product Since the manufacturing overhead costs are indirect costs, they...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
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...
and a $2,000 debit entry will be recorded in its Rent Expense account. If a company collects $500 from a customer who had previously purchased goods on credit, the company will make a debit entry of $500 in its Cash...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
do not mislead a current or potential investor, lender, or other person making a decision with the amounts being reported. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your...
cost is more likely to be used. Knowing how costs behave is important for decision making. For example, a manufacturer will want to know how its costs will increase if a new product line is added (or how costs could...
the recording of the transactions, an accountant or the business owner will review the bookkeeper’s work and make the required adjusting entries before the company’s financial statements are distributed. (Larger...
that should have been used to make the good output. In other words, the actual quantity of materials used to make the good output was different from the standard quantity of materials that should have been used. The...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
its inventory every 72 days.) A limitation of the inventory turnover is that it is an average, which means that some important details may be hidden. For instance, what if four inventory items make up 40% of the...
to be __________ costs for making decisions. Select... fixed relevant variable 5. Generally, managerial accounting is focused on __________, control, and internal decision making. Select... auditing income taxes...
that make up the amount of accumulated other comprehensive income include the following: Unrealized gains/losses on hedge/derivative financial instruments Foreign currency translation adjustments Unrealized...
track the total amounts of refunds that you make during a year. On the other hand, if it is rare for your organization to refund registration fees, you could simply 1) debit the amount you are refunding to the normal...
is guaranteeing that it will pay up to $500,000 if the insured company does not make its required payments for its purchases. We also use bond to mean that a company purchases insurance to protect itself from dishonest...
. Accounting for Commissions Revenues Under the accrual basis of accounting, the commissions do not have to be received in order to be reported as revenues. If a company has earned the commissions but has not yet...
What is the meaning of sundry and sundry debtors? Definition of Sundry Sundry can mean various, miscellaneous, or diverse. Definition of Sundry Debtors Sundry debtors could be referring to a company’s customers who...
A current asset whose ending balance should report the cost of a merchandiser’s products awaiting to be sold. The inventory of a manufacturer should report the cost of its raw materials, work-in-process, and...
, it is possible that the statement amount is not the current amount owed. For instance, it is possible that on July 30 and on August 3 the customer had paid the amounts owed for two of the invoices listed on the...
Are earnings different from profits? Earnings and profits are often used interchangeably. Others might make a distinction between the two words. In the case of earnings per share, earnings means a corporation’s net...
will have a problem when it comes to expenses. After all, expenses have debit balances. Since expenses will reduce a company’s profits, they are not good. Lots of people have tried to make debit mean something more...
are not acceptable, management can make the needed changes before the year actually begins. Budgets can also assist in controlling the actual costs, because managers realize that the costs of their activities will be...
How does petty cash affect expenses? Definition of Petty Cash Petty cash is a small amount of currency and coins that a company has available to make very small payments instead of requesting and processing a company...
the checks were written. However, if a company voids one of its outstanding checks, the company will need to make an entry in its general ledger. The entry will debit Cash in order to increase the account balance. The...
for a corporation to make a dividend payment: The corporation’s board of directors must declare the dividend, and The corporation must distribute the cash Example of Recording a Dividend Payment to Stockholders On the...
in the decision to investigate or not investigate a process. 12. The continuous process of studying how one’s processes, products, etc. compare to the best practices is known as __________. 13. The mathematical...
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