and it purchases goods with terms FOB shipping point. As a result the company is responsible for paying the cost of the carriage inwards. The company will record the amount in the general ledger account Carriage Inwards...
and it purchases goods with terms FOB shipping point. As a result the company is responsible for paying the cost of the carriage inwards. The company will record the amount in the general ledger account Carriage Inwards...
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...
as a separate cost. Examples of Implicit Costs and Explicit Costs Let’s assume that a company gives a promissory note for $10,000 to a seller of a unique used machine for which the fair value is unknown. The...
What is the difference between a differential cost and an incremental cost? Definition of Differential Cost and Incremental Cost I use the terms differential cost and incremental cost to mean the same thing: the...
What is the difference between FIFO and LIFO? Difference Between FIFO and LIFO The difference between FIFO and LIFO will exist only if the unit costs of a company’s products are increasing or decreasing. U.S. companies...
main operating activities involve the buying and selling of merchandise or goods. Therefore, the retailer’s income statement will report the following operating expenses: Cost of goods sold. These costs are reported...
at a premium. Any discount or premium on the bonds is recorded in a separate account. Another account is used to record the bond issue costs such as legal fees, auditing fees, registration fees, etc. These bond-related...
of vendor invoices, receiving reports, etc. Accounting for goods in transit, goods on consignment, etc. The cost of each item in inventory is based on the actual costs of the items purchased or produced by the company...
Inventory is dormant and contains only the cost of the prior year’s ending inventory. With the periodic inventory system, the costs of additional purchases of goods are debited to the temporary account Purchases....
What is the difference between a cost and an expense? Definitions of Cost and Expense Some people use cost interchangeably with expense. However, we use the term cost to mean the amount spent to purchase an item, a...
issue costs (a debit balance in the contra-liability account Bond Issue Costs) It’s important that the discount, premium, and issue costs have been amortized properly up to the moment when the book value of the bonds...
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...
of the remaining 85% would be counted every month. Cycle counting reduces the need for the costly process of shutting down the manufacturing process in order to count inventory. Cycle counting can also result in more...
What is ERP? Definition of ERP In accounting, ERP is the acronym for enterprise resource planning. ERP could be described as a database software package that supports all of a business’s processes and operations...
What is a depreciable asset? Definition of Depreciable Asset A depreciable asset has the following characteristics: A tangible asset (other than land) Has a useful life of more than a year Is used in the business The...
classify and report their expenses on their internal income statements by the following functions: Manufacturing (further classified by production departments and factory service departments) Selling, general...
: Public accounting as a sole practitioner or as a member of small to international CPA firms working as an auditor, tax consultant, general consultant, etc. Manufacturing companies, service businesses, etc. working as...
of the quantities of every material used in the various steps of manufacturing each product or component part. Example of BOM Assume that a small company manufactures gourmet pies. There will be a bill of materials...
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...
-in-Progress. Construction Work-in-Progress is often reported as the last line within the balance sheet classification Property, Plant and Equipment. There is no depreciation of the accumulated costs until the project is...
Is the installation labor for a new asset expensed or included in the cost of the asset? Accounting for Labor to Install Asset The definition of an asset’s cost is all costs that are necessary to get an asset in place...
cost of $5, the total cost for Item Q should be $75. To foot the invoice means to add up the extended costs and verify the total with the amount appearing as the total on the invoice. For example, if the invoice has...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
to replace the asset. True Right! The original cost is a sunk, past cost. False Wrong. The original cost is a sunk, past cost. Such costs are not relevant to any decision, since decisions involve the present and the...
will have a __________ balance when the variance is unfavorable. Select... credit debit 3. The invoice amount for direct materials purchased will be credited to Accounts Payable for the __________ cost. Select... actual...
Is the cost of goods sold an expense? Why the Cost of Goods Sold is an Expense We often think of expenses as salaries, advertising, rent, commissions, interest, and so on. However, the cost of goods sold is also an...
in inventory). Cost Flow Assumption Is Needed When costs change during the accounting period, a cost flow will have to be assumed. Some common cost flow assumptions include FIFO, LIFO, and average. Join PRO to Track...
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...
The interest rate of debt (bonds, loans) after deducting the income tax savings. For example, if a corporation has issued bonds with an interest rate of 8% and the corporation’s income tax rate is 25%, the...
The analysis of how profits change as volume changes. The calculation of the break-even point is a part of cost-volume-profit analysis.
This is a record on an individual job (product, batch) within the job costing system. For items in process this is a subsidiary record to the general ledger account inventory: work-in-process (WIP).
, if the worker comp premiums are $5 per $100 of factory labor cost, then the worker comp premiums will be variable with respect to the dollars of factory labor cost. If the units of output in the factory correlate...
What are cost flow assumptions? Definition of Cost Flow Assumptions The term cost flow assumptions refers to the manner in which costs are removed from a company’s inventory and are reported as the cost of goods sold....
See first in, first out (FIFO).
The method used for removing costs from the inventory of goods. The cost flow can be different from the physical flow of goods. For example, in the U.S. the LIFO cost flow can be used even if the oldest goods are shipped...
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
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