Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
and the FIFO cost flow assumption, its inventory will be reported at the cost of $2,400 (200 units X $12). On the other hand if the company uses the periodic system and the LIFO cost flow assumption, its inventory will...
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...
What is inflation accounting? In the U.S., inflation accounting has resulted in optional supplementary disclosures on the effects of 1) general inflation, and 2) changes in the prices of specific types of assets. In...
the budgeted expenses The amount by which actual net income was less than the budgeted net income The amount by which current revenues were less than the previous year’s revenues The amount by which actual expenses...
. It is this cost that your company should report as expense on its June income statement. The amount of the utility bills with meter reading dates of June 30 should be reported as a current liability (accounts payable)...
What is deferred revenue? Deferred Revenue Deferred revenue is money received by a company in advance of having earned it. In other words, deferred revenues are not yet revenues and therefore cannot yet be reported on...
in inventory will have an average turnover ratio of 3.3 ($3,000,000 divided by $900,000). In other words, the fast selling items are turning every 18 days (365 days/20) and the majority of the items are turning on...
What is gross margin? Definition of Gross Margin Gross margin is the amount remaining after a retailer or manufacturer subtracts its cost of goods sold from its net sales. In other words, gross margin is the retailer’s...
selling prices reducing advertising expenses increasing advertising expenses closing a facility or outlet adding a facility or outlet many other possibilities Unfortunately, the amounts that are readily available (such...
($58,428.56 – $1,576.68) The 36th and final monthly payment of $1,771.44 will consist of interest of $5.89 (the principal balance after the 35th payment of $1,765.55 X 4% X 1/12) plus a principal payment of...
turned over 10 times during the year, or approximately every 36 days (360 or 365 days per year divided by the turnover of 10). Whether the accounts receivable turnover ratio of 10 is good or bad depends on the...
How do I calculate the amount of sales tax that is included in total receipts? Sales Tax Calculation To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items...
and the standard hours of labor for making the good output Example of Relationship Between Direct Materials Variances and Direct Labor Variances There can be a connection between the direct materials variances and the...
amounts withheld from employees’, the employer must match the FICA taxes withheld from employees. In other words, the employer will have an additional expense equal to the total of the FICA taxes withheld from its...
What is Additional Medicare Tax? Definition of Additional Medicare Tax The Additional Medicare Tax is one of the U.S. government’s payroll withholding taxes that is paid solely by employees and the self-employed. In...
expense associated with bonds payable is deductible from a U.S. corporation’s taxable income. In other words, a profitable corporation will save paying income tax on the amount of the interest expense. The amount of...
in Accounts Receivable and its balance in Allowance for Doubtful Accounts was a credit balance of $3,000. As a result, the December 31 balance sheet will be reporting that $97,000 will be turning to cash. During the...
amount per share of common stock. The par value is also referred to as the corporation’s legal capital. On the other hand, if a corporation issues preferred stock, this stock’s par value is meaningful since its...
to determine the approximate amount of inventory that has been lost due to theft, fire, or other reasons. The gross profit method of estimating ending inventory assumes that the gross profit percentage or the gross...
of expensive products such as a special machine, yacht, building, system, or for a batch of products. Generally, job costing is used when each job (or batch) is sufficiently different from other jobs and the costs are...
the money, there has to be some interest cost. In other words, there is some interest cost, but it is implicit. (To record the interest cost, accountants will discount the $10,000 by the approximate interest rate that...
to prepare its external financial statements. Example of Materials Usage Variance Even though a company uses a standard cost system in its accounting, the company’s external financial statements must comply with the...
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
Should inventories be reported at their cost or at their selling prices? Definition of Inventory Cost Inventories are reported at cost, not at selling prices. A retailer’s inventory cost is the cost to purchase the...
How do I study for an accounting final exam? Here are the AccountingCoach suggestions for studying for an accounting final exam (or other introductory financial accounting exams). Try our free Quizzes Work our free...
What is a non-discount method in capital budgeting? Definition of Non-discount Method of Capital Budgeting A non-discount method of capital budgeting is one that does not consider the time value of money. In other words,...
expense over the life of the asset cannot exceed the asset’s cost regardless of the depreciation method. In other words, the difference between accelerated depreciation and straight-line depreciation is a “timing...
as an annual amount per unit or as a percentage of an item’s cost. The calculation of the cost to store inventory should be the incremental annual costs or the company’s opportunity costs. In other words, if a...
reconciliation, since both the bank and the company’s general ledger are in agreement. On the other hand, if ABC had not recorded the returned check in its general ledger accounts as of May 31, ABC’s May 31 bank...
What is the difference between an adjunct account and a contra account? Definition of Adjunct Account An adjunct account is a general ledger account that is related to another general ledger account. The combination of...
depends on the tax regulations in the year that the asset is put into service. It is possible there is some “bonus” depreciation, a required 7-year life, an accelerated method assumed, etc. These tax regulations...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The report that sorts a company’s accounts receivables into current,...
Right! The amount owed for accrued expenses is reported in a liability account such as Accrued Expenses Payable. Since a liability account is expected to have a credit balance, a credit entry will increase the normal...
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...
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...
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...
the direct write-off method is required.) Allowance Method The allowance method requires a company to anticipate that some amount of the accounts receivable will not be collected. In other words, prior to writing off an...
time—no inflation. 4. Which principle/guideline requires the company's financial statements to have footnotes containing information that is important to users of the financial statements? Conservatism...
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