What is the difference between cost and price? Definition of Cost and Price In accounting, the term cost can mean the cash or cash equivalent amount a company paid to acquire an asset or the amount of an expense it...
What is the difference between cost and price? Definition of Cost and Price In accounting, the term cost can mean the cash or cash equivalent amount a company paid to acquire an asset or the amount of an expense it...
of goods and/or the providing of services Expenses, which include the cost of goods sold, SG&A expenses, and interest expense Gains and losses, such as the sale of a noncurrent asset for an amount that is...
on Bonds Payable A debit to Bond Issue Costs Between the date that a bond is issued and the date that the bond matures, the discount, premium, and/or issue costs must be amortized to the account Interest Expense....
: Assets of $900 = Owner’s Equity of $900. In words, the equation indicates that SJCO has resources of $900 and that the owner has the only claim to its resources. The equation also indicates that the resources of $900...
and Maintenance Expense. Until the invoice from Joe’s Plumbing Service is paid, Joe’s invoice serves as a supporting document for the balance in the corporation’s Accounts Payable. (The invoice is also a...
owed by the borrower. On any given date, the borrower is liable for the unpaid principal balance plus any accrued interest expense up to that point. The borrower’s balance sheets will report: A current liability for...
Accounts. This credit balance will cause the amount of accounts receivable reported on the balance sheet to be reduced. Any adjustment to the Allowance account will also affect Uncollectible Accounts Expense, which is...
of the sale. In order to know the asset’s book value at the time of the sale, the depreciation expense for the asset must be recorded right up to the date that the asset is sold. If the cash received is greater than...
will be closed at the end of each year. However, the account’s debit balance is closed directly to the owner’s capital account. (The owner’s draws are not reported as an expense on the company’s income...
in the product cost will be part of the cost of goods sold that is reported on the income statement. The remaining $5,000 of rent for nonmanufacturing functions is expensed each month without being allocated to the...
during the asset’s construction The interest on the debt related to the asset’s construction Adding the capitalized interest to the asset’s cost instead of reporting it as interest expense of the current...
account for emergency computer maintenance services and had not recorded the credit to its Cash account, it is also omitting the debit to the account Computer Maintenance Expense. The bank reconciliation could prevent...
by a certified public accountant. (The bank does not require the borrower to incur the expense of a CPA’s review or audit.) Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance...
its earnings (net income after income tax expense) were $9,410,000 and it had 900,000 shares of common stock from January 1 through June 30, and 1,100,000 shares from July 1 through December 31. The corporation will...
balances in the discount, premium, or issue costs accounts must be amortized to interest expense over the life of the bonds. Example of Recording a Bond Issue Assume that a corporation issues $100 million of bonds...
. (This means that 5/6 of the payment is a prepaid asset and only 1/6 of the payment should be reported as an expense on each of the monthly income statements.) A company’s customer paid in advance for...
costs (which are direct materials, direct labor, and manufacturing overhead). Nonmanufacturing overhead costs are the company’s selling, general and administrative (SG&A) expenses plus the company’s interest...
, the company’s Marketing Consultants Expense will be the account that is understated by $20,000. As a result of the $20,000 understatement, the company’s income statement will report too little of SG&A expenses,...
/declare the dividend. Hence, the board of directors may decide that a dividend will not be declared. Definition of Dividends It is important to note that the dividends declared and paid by a corporation are not an...
to the expense Purchase Discounts Lost. In our example, if the company pays the invoice in 30 days, it is not entitled to the early payment discount and will therefore have to credit Cash for $1,000. The debit amounts...
four months earlier and the check has not yet cleared the company’s bank account. Example of Writing Off an Old Outstanding Check On January 22, a company issued a check for $124 for a business expense. As of June 30,...
Unscramble MATCHING AMTHNIGC Unscramble 2. Another name for book value is _________ value. CARRYING GIRCANYR Unscramble CARRYING CARRGYNI Unscramble 3. When an asset is depreciated using the _____________-line method,...
contains all of its asset, liability, owner equity, revenue, expense, gain, and loss accounts. Each account contains the transaction amounts that pertain to the account title. Definition of a Trial Balance A trial...
a vendor’s invoice within the vendor’s early payment discount period. Purchase Discounts Lost is considered to be an interest expense or a financing charge resulting from the buyer not being able to pay the cash...
ledger accounts will need to be adjusted with a credit to the Cash account and a debit to an account such as Bank Fees Expense. Therefore, as part of the bank statement reconciliation you need to show the bank service...
prepare a balance sheet as of the end of each day, you will need to make daily adjusting entries in order for the balance sheet to be meaningful. For example, each day more electricity is used and therefore each day...
in the factory. In addition to the manufacturing costs, there are selling, general and administrative (SG&A) expenses and perhaps interest expense. Generally, accountants do not consider these expenses to be product...
of insurance expense each and every year.) Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your current job Refresh...
in the bank’s liability account is reduced by a debit. In the company’s general ledger, the bank debit memo will reduce the company’s checking account (which is an asset) and will require the company to credit its...
per unit is $4 Fixed SG&A expenses per month is $12,000 Variable SG&A expenses per unit is $2 Fixed interest expense per month is $1,000 Using the above information the contribution margin per unit is $14 (the...
as a current liability such as Accrued Expenses Payable. On the corporation’s income statements, the interest that occurred (whether paid or not paid) during the period of the income statement will be reported as...
prices based on their costs. In the long run, the products’ selling prices must be large enough to cover all of a company’s manufacturing costs (including the variable and fixed indirect manufacturing costs) plus...
. Under the accrual method of accounting, both the borrower and the lender must report any accrued interest as of each balance sheet date. The maker/borrower of the note will report interest expense and interest...
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...
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...
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...
by the adjustments needed to convert the accrual accounting net income to the cash flows from operating activities. A few of the typical adjustments are: Adding back depreciation expense Adding the decrease in accounts...
Accounting Principles The basic underlying accounting principles consist of the following: Economic entity assumption Going concern assumption Time period assumption Monetary unit assumption Cost principle or...
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