Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
Budgetary slack means providing a cushion in a budget in order to avoid an unfavorable variance at the end of the budget year. The budgetary slack might be achieved by entering budget expense amounts that are larger than...
Preferred stock where past, omitted dividends do not have to be paid before a dividend can be paid to common stockholders. In the case of noncumulative preferred stock, only its current year dividend needs to be paid in...
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company’s operating cycle is longer than one year, an item is a current asset if it will...
The expense associated with a commitment to repair or replace a product for a specified period of time. The expense should be reported on the income statement at the time that the sale of the product is reported in order...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
One of the types of adjusting entries that are made at the end of the accounting period in order to report (1) revenues that have been earned but have not yet been entered into the accounting records, and/or (2) expenses...
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...
Why use normal costing instead of actual costing? Definition of Normal Costing For a manufacturer, normal costing means assigning the following costs to the actual goods produced each month: Actual direct materials...
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...
variable costs and expenses equals the __________ __________. 4. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost. 5. Which of the following would be considered to be the...
Our Explanation of Inventory and Cost of Goods Sold will take your understanding to a new level. You will see how the income statement and balance sheet amounts are affected by the various inventory systems and cost flow...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs...
A variance arising in a standard costing system that indicates the difference between the actual variable manufacturing costs incurred and the expected variable manufacturing overhead costs based on some activity such as...
Costs that have been divided up and assigned to periods, departments, products, etc. In depreciation it is the asset’s cost that is assigned to each of the years that the asset is in use. In cost accounting it is...
A decision whether to make some products or equipment in-house versus purchasing the products or equipment from another company. As in any decision, one must compare the relevant costs and other opportunities. It is...
How do we deal with a negative contribution margin ratio when calculating our break-even point? Definition of Negative Contribution Margin A negative contribution margin ratio indicates that a company’s variable costs...
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...
and perhaps fraudulent invoice. Example of Three-Way Match The “three-way” part of the three-way match refers to the three documents that will be compared: The vendor’s invoice that was received and will become...
, but will not have recorded the current liability, accounts payable. The accounts payable person/department will have the retailer’s purchase order and receiving ticket/record, but is awaiting the vendor’s...
What is a lien? Definition of Lien A lien is a legal document filed by a creditor (lender) in order to record its claim on certain assets of the debtor (borrower). The lien is likely filed at the county government office...
. Examples of Accounts Payable Often a company will send a purchase order to a supplier requesting goods. When the supplier delivers the goods it also issues a sales invoice stating the amount and the credit terms such...
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...
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...
What are direct materials? Definition of Direct Materials Direct materials are defined as: Traceable matter that is converted by a manufacturer into products Part of manufacturer’s production costs A variable cost of 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...
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...
will report on its income statement the insurance expense incurred for its selling, general and administrative functions. However, the insurance costs associated with the manufacturing function are included in the cost...
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...
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...
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....
profits and less taxable income. Select... FIFO LIFO 23. The cost flow assumption that results in the recent costs being reported on the balance sheet is __________. Select... FIFO LIFO 24. The cost flow assumption...
! Credit Wrong. 4. An account payable on the books of the buyer should be an account __________ receivable on the books of the seller. 5. Accounts payable are also known as __________ trade payables. 6. PO is the...
in commissions expense that were actually incurred in order to get December’s sales Its December 31 balance sheet will not be reporting its $5,000 liability to Sales Rep Company In order for New Corp’s December’s...
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