The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
The repeated elimination of products without a corresponding decrease in overhead costs. As a result the amount of overhead allocated to each unit of product increases. If selling prices are increased to cover the higher...
It is common for a small quantity to account for most of the value. Examples: 20% of the people may have 80% of the wealth; 20% of the members do 80% of the work; 20% of the items in inventory account for 80% of the...
What is the margin of safety? Definition of Margin of Safety In break-even analysis, the term margin of safety indicates the amount of sales that are above the break-even point. In other words, the margin of safety...
. Examples of an Invoice The seller refers to the invoice it prepares as a sales invoice. The purchaser of the goods or services will refer to the seller’s sales invoice that it receives as a vendor invoice or purchase...
to mean all forms of taxable compensation including wages, salaries, tips, commissions, bonuses, etc. Gross Wages vs Net Wages If an employee works 40 hours during the week of December 25-31 and earns $20 per hour, the...
for the company to recoup its investment. Example of Payback Period Assume a company invests $100,000 in a project that is expected to have the following positive net cash inflows: $30,000 in Year 1 $40,000 in Year 2...
How do you calculate the cost of goods sold for a retailer? Formula for Calculating a Retailer’s Cost of Goods Sold A retailer’s cost of goods sold is: The cost of the retailer’s beginning inventory Plus the cost...
that nearly all large U.S. corporations use the indirect method. Example of the Indirect Method of SCF When the indirect method of presenting a corporation’s cash flows from operating activities is used, this section...
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...
by reading our Nonprofit Accounting (Explanation). 1. A nonprofit's revenues and expenses are reported on its statement of __________ activities. 2. The accounting equation of a nonprofit is Assets = Liabilities +...
describes an __________. 3. Methods that compute the present value of future cash flows are referred to as __________ cash flow techniques. 4. Part of the difference between a company’s net income during a specific...
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
The result of dividing a corporation’s net income by the average amount of common stockholders’ equity during the time interval when the net income was earned. To learn more about this ratio, see Explanation...
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
The account in which the owner’s investment is recorded plus the net income earned by the company minus the draws made by the owner. Current year net income and draws will be in temporary accounts until the end of...
What is the difference between dividends and interest expense? Definition of Dividends Dividends are a distribution of a corporation’s earnings to its stockholders. Dividends are not an expense of the corporation and...
years all expressed in easier to absorb amounts. Example of Trend Analysis Assume you want to see the trend of a service company’s revenues, net income, and number of clients during the years 2017 through 2023. With...
. PERIOD PRDEOI Unscramble PERIOD EOIRPD Unscramble 6. The amounts earned from a company's main activities. REVENUES VNEERSEU Unscramble REVENUES UNEVRESE Unscramble 7. The costs that are matched with revenues....
and its credit terms are 2/10, net 30. If the invoice is paid on July 16, the amount that should be received by the seller is $__________. 5. A company deposited one of its customer’s checks that it received as...
this topic by reading our Inventory and Cost of Goods Sold (Explanation). 1. Under which inventory cost flow assumption is the cost of the most recent purchase matched first with sales revenues? FIFO Wrong. Under FIFO...
that the company’s inventory had been sold. The goal is to have an inventory turnover ratio as large as possible without losing sales and/or customers. Example and Limitations of the Inventory Turnover Ratio As...
to be removed from inventory and matched with the sales revenues reported on the income statement. This means that the oldest costs remain in inventory. LIFO became popular due to inflation and the fact the U.S. income...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
to the present. The rate that discounts the cash flows to a net present value of zero is the internal rate of return. Payback Wrong. The payback model uses the cash flows from the project to determine the time needed to...
referred to as permanent accounts since the balances in these accounts are not closed at the end of the accounting year. Rather, the balances at the end of the year are carried forward to become the beginning balances...
SONIPOIT Unscramble 3. Contributions received by a nonprofit are reported as part of the organization's ____________________. REVENUES EVNUERES Unscramble REVENUES UEEEVRNS Unscramble 4. When an asset is released...
The owner’s equity account that reports the amount invested in the sole proprietorship owned by Tony Mandella plus the cumulative amount of net income minus the cumulative amount of the sole proprietor’s...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
is a debit balance. In other words, the corporation has a negative amount of retained earnings. Example of Deficit Within Stockholders’ Equity Assume a corporation was formed just over three years ago. In its first...
Why isn't a corporation's dividend shown on its income statement? Definition of Dividend A dividend paid by a corporation on its common stock is a distribution of the corporation’s net income (earnings,...
and reduces a company’s net income. However, the interest paid also causes a change in the company’s balance sheet and statement of cash flows. Reporting Interest Paid on the Statement of Cash Flows In the statement...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
in which it is incurred. Hence, interest expense is one of the subtractions from a company’s revenues in calculating a company’s net income. Example of Interest Expense on the Cash Flow Statement Since most...
What is comprehensive income? Definition of Comprehensive Income Comprehensive income for a corporation is the combination of the following amounts which occurred during a specified period of time such as a year,...
revenue that had been prepaid by a customer, the company’s balance sheet’s liability deferred revenue will decrease and retained earnings will increase. Examples of the Effect of Revenue on the Balance Sheet...
What is safety stock? Definition of Safety Stock Safety stock is an additional quantity of an item held by a company in inventory in order to reduce the risk that the item will be out of stock. Safety stock acts as a...
between a company’s revenues and some of its expenses, these expenses should appear on the same income statement as the associated revenues. Accountants describe this as matching expenses with revenues. For instance,...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
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