Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
obligations and include deferred revenues. Mark as wrong Mark as right owner's equity This is the difference between the amount of a proprietorship’s assets and liabilities. It consists of the owner’s capital...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
and was $22,000 at the end of the year. During the year the owner invested $5,000 in the business and had withdrawn $24,000 for personal use. The sole proprietorship’s net income for the year was $__________. Any...
which are the amounts owed to vendors who have supplied goods or services. The amount of accounts payable is documented by the vendor invoices that have been approved and processed, but have not yet been paid. Deferred...
What is an equivalent unit of production? Definition of Equivalent Unit of Production An equivalent unit of production is an expression of the amount of work done by a manufacturer on units of output that are partially...
the amounts established at the time that the static budget was prepared and approved.) For costs that vary with volume or activity, the flexible budget will flex because the budget will include a variable rate per unit...
accounts, but with differing amounts. Recurring journal entries may also be referred to as memorized journal entries or standard journal entries. Examples of Recurring Journal Entries A company that prepares monthly...
will be reported by the bank as a current liability, and will be reported as a short-term investment by the depositor (provided the amount is not restricted by the depositor). Example of a Certificate of Deposit James...
of production method, let’s assume that a company has a machine with a cost of $500,000 and a useful life that is expected to end after producing 240,000 units of a component part. Further, the machine’s salvage...
the loan) Credit Notes Payable for $100,000 (the principal amount that is due in two years) Since the principal balance of $100,000 will not be reduced until two years later, the note payable is reported on the balance...
commissions will remain unchanged at the fixed amount of $50,000. If the actual sales are $1,100,000 the budget for sales commissions will also be $50,000. Had the company prepared a flexible budget, the budget for...
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...
What is the operating cycle? Operating cycle definition The operating cycle is the time required for a company’s cash to be put into its operations and then return to the company’s cash account. Operating cycle...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
What is the difference between a budget and a standard? Definition of a Budget In business and other organizations, a budget often refers to a department’s or a company’s projected revenues, costs, or expenses....
Receivable.) Assume the company had a $10,000 plumbing repair done on May 31 and is told the amount will be $10,000 but the bill will not be received until June 3 and payment will be due on June 13. On May 31, the...
What is an asset's useful life? Definition of Asset’s Useful Life An asset’s useful life is the estimated period of time (or total amount of activity) that a long-lived asset will be economically feasible for...
Is rent expense a period cost or a product cost? Definition of Rent Expense Rent expense is often a monthly amount paid by a company for use of a building. Typically, the rent is due on the first day of every month that...
not billed the supplier for the interest since it is not due until February 28. However, as of December 31, your company has earned $1,000 of interest (1/3 of $3,000). For the December financial statements to...
What is accrued income? Definition of Accrued Income Accrued income is an amount that: A company has earned The company has a right to receive The collection is probable Has not yet been recorded in the general ledger...
sheet as part of the current asset cash. (A bank’s balance sheet lists the total amount of its customers’ checking account balances as a current liability.) As part of its internal controls, a company should...
What is a temporary account? Definition of Temporary Account A temporary account is a general ledger account that begins each accounting year with a zero balance. Then at the end of the year its account balance is...
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 the responsibilities of a bookkeeper differ from those of an accountant? I see a bookkeeper’s responsibilities as getting the business transactions into the company’s general ledger. This involves a tremendous...
employees’ wages to pay part of the cost of the insurance, the company will credit its contra expense account 4211 Employee Withholdings for Health Ins. The benefit of using the contra expense account is that the...
as an ordinary annuity or an annuity in arrears. Example of Arrears Assume a corporation has 10,000 shares of 6% $100 cumulative preferred stock. Since the corporation has a limited amount of cash available, the board...
report a corporation’s assets as dollar amounts (rather than reporting details of all of the assets). If an asset cannot be expressed as a dollar amount, it cannot be entered in a general ledger account. For example,...
What is long-term debt? Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year of the balance sheet date. (The...
for each item (or each job or special order). The job cost record will report each item’s direct materials and direct labor that were actually used and an assigned amount of manufacturing overhead. The job cost...
to the condo project. Hence the drop ship allows XYZ to avoid some expensive non-value-added activities. When Premier ships the water heaters, it will bill XYZ and will send the invoice to XYZ. As a result XYZ will have...
cost (had FIFO been used) and the LIFO cost. Definition of Provision The term provision is sometimes used by corporations when reporting an expense that is an estimated or uncertain amount. Two examples include...
if the reconciliation is done by someone other than the person handling and/or recording receipts and payments. Having this additional person prepare the bank reconciliation reduces the odds of an improper use of...
What is not sufficient funds? Definition of Not Sufficient Funds Not sufficient funds or NSF or insufficient funds is a term to describe a check that has been returned by the bank because the balance in the checking...
What is an accounting clerk? Definition of Accounting Clerk An accounting clerk is typically a person with an aptitude for numbers who can process a large volume of details accurately and quickly with a minimal amount of...
a debit balance equal to the cost of the repurchased shares being held by the corporation. The corporation’s cost of treasury stock reduces the corporation’s cash and the total amount of stockholders’ equity. The...
salaries for the company’s marketing team should be reported as an expense in June since the future economic value cannot be measured/determined. Another example is the amount spent to repair equipment that broke...
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