solvency is also at risk if it is unable to operate profitably. I suspect that the definition of solvency varies among people in the same country and from country to country. You should check the legal system in your...
solvency is also at risk if it is unable to operate profitably. I suspect that the definition of solvency varies among people in the same country and from country to country. You should check the legal system in your...
Is a favorable variance always an indicator of efficiency in operation? In a standard costing system, some favorable variances are not indicators of efficiency in operations. For example, the materials price variance,...
receives cash of $500 but cannot readily determine the reason why it received the $500. Obviously, the company’s asset Cash is to be debited, but the account to be credited (required by the double-entry system) for...
instead of 30 days) Purchases Returns and Allowances (credit memos received for returning goods to vendors or for other conditions) These accounts are used by a company that purchases goods for resale and uses the...
accounts. (However, there could be an entry into the company’s computer system for scheduling the work or shipment, etc.) Reasons for No Accounting Entry When an Order is Received The following is the rationale for no...
(liability) to deliver the service or the product. Stockholders' (Owner's) Equity Wrong. 11. Accounting entries involve a minimum of how many accounts? One Wrong. Two Right! Because of the double-entry system,...
of comprehensive income Balance sheet Cash flow statement Statement of stockholders’ equity Notes to the financial statements Double-Entry; Debit and Credit It is the norm for a corporation to use the double-entry...
expense Not reported on income statement 25. Freight-in under a periodic system Select... Operating revenues Cost of goods sold Operating expense but not COGS Nonoperating revenues Nonoperating expense Not reported on...
because of the double-entry system. accounting equation (or) basic accounting equation This algebraic expression is Assets = Liabilities + Stockholders’ (or Owner’s) Equity. It should remain in balance because of...
expense Not reported on income statement 25. Freight-in under a periodic system Select... Operating revenues Cost of goods sold Operating expense but not COGS Nonoperating revenues Nonoperating expense Not reported on...
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...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
the next purchase of goods occurs. moving average perpetual This cost flow assumption means that a new average cost must be computed after each purchase. This new unit cost is then used until the next purchase of goods...
differences. Since most companies use the double-entry system of accounting, any omission or error in the company’s general ledger Cash account also means that at least one other general ledger account will have a...
will not report amounts anywhere near $100 million. Realistically the financial statements will be reporting negative earnings, few assets and little stockholders’ equity. The company’s value came from the VC’s...
. Permanent accounts are closed at the end of each accounting year. Select... True False 10. A computerized bookkeeping system could mean you will not see an Income Summary account. Select... True False Any questions...
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...
with Debit Balances The following general ledger account classifications normally have debit balances: Asset accounts Expense accounts Loss accounts (Loss on Sale of Plant Asset, Loss from Lawsuit, etc.) Sole...
for FUTA per year per employee will be $42 ($7,000 x 0.006). If an employee earns $5,000 during a calendar year, the employer’s cost for that employee will be $30 ($5,000 x 0.006). Accounting for FUTA Tax In the...
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...
had a flaw. When the retailer notified the supplier, the supplier requested that the retailer donate or discard the item and the supplier will issue a credit memo for $15. Under a periodic inventory system, the retailer...
What is the meaning of debit? Definition of Debit The term debit is similar to the term used in Italy more than 500 years ago when the double entry accounting system was documented. What you need to know today is that...
of the balance sheet. The accounting equation will always remain in balance if the double entry system of accounting is followed accurately. Example of the Accounting Equation Let’s assume that a person starts a new...
or the average methods will vary slightly depending on whether the inventory system is periodic or perpetual and whether a dollar-value method based on price indexes was used. Join PRO to Track Progress Mark the...
in the checking account If there is an error in the company’s cash records, there will be a related error in another account because of the double-entry system of accounting. If a dishonest person is embezzling money...
What is the production volume variance? Definition of Production Volume Variance The production volume variance is associated with a standard costing system used by some manufacturers. This variance arises when there is...
discount. (A supplier offering the discount will record the discounts taken by its customers in the account Sales Discounts.) Purchase Discounts is also a general ledger account used by a company purchasing inventory...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
of labor and a standard cost per hour of labor Manufacturing overhead: a budget for the fixed overhead, the standard variable overhead rate, and the standard quantity for applying a fixed and variable overhead rates In...
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...
and ready for use. If a company purchases goods with terms such as FOB shipping point, the company will be responsible for any costs to get the products from the seller to the company’s warehouse. In that situation,...
units and the partially completed units are expressed in terms of fully completed units. Equivalent units are used in the production cost reports for the producing departments of manufacturers using a process costing...
system, the FIFO cost flow assumption and that 130 units were sold. Therefore, there will be 25 units remaining in inventory. With the FIFO cost flow assumption, the first costs to come out of inventory and become the...
the information that the bookkeeper had entered into the general ledger, will prepare adjusting entries, will prepare the financial statements, and will analyze them. The accountant will likely supervise the bookkeeper...
What is standard costing? Definition of Standard Costing Standard costing is an accounting system used by some manufacturers to identify the differences or variances between: The actual costs of the goods that were...
, labor, and manufacturing overhead. Some manufacturers use standard costs in their accounting system. The term price is used when referring to the amount that a seller has established for its products. Accountants might...
Why does a company's profit appear as a credit on its balance sheet? The accounting equation and the double entry system provide an explanation why a company’s profit appears as a credit on its balance sheet....
of FIFO over LIFO cost, and LIFO allowance instead of LIFO reserve. Example of LIFO Reserve A U.S. company’s accounting system uses FIFO, but the company wants its financial and income tax reporting to use LIFO due to...
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