of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
of warranty is referred to as an assurance-type warranty. In accounting jargon, the assurance-type warranty is an example of a contingent that is both probable and can be estimated. Therefore, a company must record in...
What does an accountant do? Some accountants are directly involved in preparing an organization’s financial statements. This is likely to include maintaining the general ledger and supervising some employees. Other...
selling price). Therefore, the $2 markup divided by the product’s cost of $8 results in a markup that is 25% of cost. Thus, if a retailer wants its income statement to show a gross profit that is 20% of sales, the...
to product sales) additional cash payments or cash outflows of $750,000 (for payments related to the product line’s costs and expenses) These cash flows indicate that the net incremental cash flows are expected to be...
) are not reported on the balance sheet. The same holds for a great management team and an amazing reputation. The cost principle also means that many long-term assets are reported at cost (and not at their current...
, the cost is recorded as an expense in the year of the expenditure.) Examples of Capitalized Costs When a company constructs a new building, the interest incurred to finance its construction is capitalized. This means...
of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating...
What is the difference between break-even point and payback period? Definition of Break-Even Point The break-even point is the amount of sales required to cover a company’s costs and expenses that are reported on its...
$232,000. The result was a favorable SG&A expense budget variance of $8,000. Manufacturing overhead costs were budgeted to be $400,000 but were actually $393,000. The result was a favorable manufacturing overhead...
, the businesses are referred to as profit centers. If the operating businesses make their own investment decisions, the businesses are referred to as investment centers. The production and administrative departments...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
was $103,000 during the month, it’s June direct labor cost per equivalent unit will be $10 ($103,000 divided by 10,300 equivalent units). This means that $100,000 (10,000 X $10) of labor costs will be assigned to the...
What is the difference between expenses and payments? Definition of Expenses and Payments Under the accrual method of accounting, expenses are costs that have been used up or have been incurred in the process of earning...
Expense. The combination of the unamortized debit balance in Discount on Bonds Payable, the unamortized debit balance in Bond Issue Costs, and the $10,000,000 credit balance in Bonds Payable is referred to as the book...
What are assets? Definition of Assets In accounting and bookkeeping, a company’s assets can be defined as: Resources or things of value that are owned by a company as the result of company transactions Prepaid expenses...
profit, less asset amount, or a greater liability amount. This is based upon which principle/guideline? Conservatism Right! Conservatism is used in order to 'break a tie'. Accountants should strive to be...
a repair service to get its equipment back in working order. On January 5, AVCO received the repair bill for the quoted cost of $8,000 with terms of net 10 days. AVCO’s first accounting entry for the repair was made...
be the same: the asset’s cost. Cost An asset’s cost is the cash equivalent amount paid for the asset plus the necessary costs to get the asset in place and ready for use. The asset’s cost is the maximum total...
. The costs of forming a corporation are known as __________ costs. 4. The maximum number of shares that a corporation can issue is its __________ number of shares. 5. The difference in the number of issued shares of...
. Costs that are used up or expire in the current accounting period are reported on the income statement as __________. 6. The Allowance for Doubtful Accounts reduces the amount reported on the balance sheet for the...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
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...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
: the number of years needed for an amount to double, or the interest rate needed in order for an amount to double Example 2. To illustrate how to approximate the number of years needed for an amount to double using the...
is reported on the income statement and the related accounts receivable is reported on the balance sheet (until the receivables are collected). Unfortunately, some customers may not pay the amount owed to the company....
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
on. The budgeted amount of revenue is then compared to the budgeted amount of expenses in order to determine if the revenues are adequate. Learning of a potential problem before the year begins is a huge benefit because...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
the check from the list of __________ checks. 17. Another step when voiding or writing off a check written one year ago that has never cleared the bank is to __________ the Cash account. Select... debit credit 18. The...
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 Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
Our Explanation of Future Value of a Single Amount will show you the power of compounded interest on a single deposit. You will see how the future value tables can be useful as well as the rule of 72.
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
Our Explanation of Bonds Payable covers the recording of bonds, the accrual of interest expense, and the amortization of the discount and premium on bonds payable. You gain an understanding on why the market value of...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
(wages, interest, utilities), deferred revenues, and bonds payable. Stockholders’ equity includes paid-in capital, retained earnings, accumulated other comprehensive income, and treasury stock. Because of the cost...
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...
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