, average) for removing the costs from inventory and sending them to the cost of goods sold. Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that have been sold to customers during the...
, average) for removing the costs from inventory and sending them to the cost of goods sold. Definition of Cost of Goods Sold The cost of goods sold is the cost of the products that have been sold to customers during the...
How should the cost of a yearly subscription for a newspaper be recorded? Definition of Recording a Yearly Subscription Typically, yearly subscriptions are paid in advance or at the start of the subscription period. If...
What is prepaid insurance? Definition of Prepaid Insurance Prepaid insurance is the portion of an insurance premium that has been paid in advance and has not expired as of the date of a company’s balance sheet. This...
sheet account that is reported under the heading of Property, Plant and Equipment. The asset’s cost (except for the cost of land) will then be allocated to depreciation expense over the useful life of the asset. The...
in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold from the sale of inventory items...
in a logical manner for the following reasons: the portion of the lump sum cost that is recorded in the Land account will not be depreciated the portion of the lump sum cost that is recorded in the Buildings account...
Under the accrual basis of accounting, the account Rent Expense will report the cost of occupying space during the time interval indicated in the heading of the income statement, whether or not the rent was paid within...
The method of accounting for treasury stock whereby the cost of the stock that is repurchased by the issuing corporation is recorded and is reported in the contra stockholders’ equity account Treasury Stock.
Are transportation-in costs part of the cost of goods sold? Definition of Transportation-in Costs Transportation-in costs, which are also known as freight-in costs, are part of the cost of goods purchased. The reason is...
The allocation of common costs based on the sales value of the products that emerge. For example, a company develops a large parcel of land at a cost of $5 million dollars. Individual lots will be sold for $100,000 to...
What is the difference between cost and expense? Definition of Cost A cost might be an expense or it might be an asset. Definition of Expense An expense is a cost that has expired or was necessary in order to earn...
Inventory and Cost of Goods Sold (Word Scramble) Download PDF To see each answer, press or click on the blue "Unscramble" button. If you have difficulty answering the following questions, learn more about this...
What does stepped cost mean? Stepped cost refers to the behavior of the total cost of an activity at various levels of the activity. When a stepped cost is plotted on a graph (with the total cost represented by the...
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...
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...
In the context of inventory this means that the inventory should be reported at the lower of its cost or its net realizable value (NRV). The rule is associated with the conservatism guideline or principle. Net realizable...
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...
__________–__________, __________–__________. 7. LIFO means __________ – __________, __________ – __________. 8. The cost flow assumption where the most recent costs are matched first with current period sales...
What is meant by the full cost of a product? Many (perhaps most) accountants use the term full cost to mean the full manufacturing or production cost of a product. To these accountants this means a product’s cost of...
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...
Are commissions a cost of goods sold account or an expense? Definition of Commissions Commissions are compensation for obtaining sales. Hence, sales commissions are a selling expense and will be recorded in general...
What is the traditional method used in cost accounting? Definition of Traditional Method in Cost Accounting The traditional method of cost accounting refers to the allocation of manufacturing overhead costs to 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...
What is the weakness of traditional cost allocations? Traditional cost allocations are often based on volume such as number of products manufactured, number of direct labor hours, number of production machine hours,...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
This is the expression for replacement cost, which is not an acceptable cost flow, since it violates the cost principle. However, an economist and decision makers would argue that the cost to replace the item is 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...
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...
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...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
of the Cash account. Examples of Net Cash Flows The net cash flows include the cash inflows such as the money received from customers who purchased products on credit in an earlier accounting period, cash sales...
Why does a cost system developed for inventory valuation distort product cost information? The cost system for inventory valuation may have been developed to provide a reasonable total cost of inventory and a reasonable...
Calculation Assume that a company’s beginning inventory was $100 and its ending inventory was $110, which is an increase of 10. Let’s assume that a company purchased $1,000 of goods during the accounting period. A...
that explains how the amount of cash and cash equivalents has changed during an accounting period is the statement of __________ __________. 15. Sales minus the cost of goods sold is the __________ profit. 16. Sales...
that the income statement report the sales occurring during the accounting period and then to match those sales with the cost of the goods that were sold. This means that you cannot simply expense/match the cost of...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
of carriage outwards should be reported on the income statement as an operating expense in the same period as the revenue from the sale of the goods. (Carriage outwards is not part of the cost of goods sold.) Example of...
What is the consistency principle? Definition of Consistency In accounting, consistency requires that a company’s financial statements follow the same accounting principles, methods, practices and procedures from one...
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