the banking system and eventually the bank of the payee will take the amount of the check from the payee’s checking account. The payee will in turn reinstate the liability amount owed to it by Company X. In essence...
the banking system and eventually the bank of the payee will take the amount of the check from the payee’s checking account. The payee will in turn reinstate the liability amount owed to it by Company X. In essence...
What is the income summary account? Definition of Income Summary Account The Income Summary account is a temporary account used with closing entries in a manual accounting system. (Computerized accounting systems may...
bookkeeping or accounting system, another general ledger account will also be misstated by the same amount. Example of Understated Assume that a company reports its accounts payable as $210,000. Also assume that the...
Spreading the physical counting of inventory throughout the year. For example, a company may physically count a different 10% of its inventory each month instead of counting 100% of its inventory once per year.
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
to calculate a retailer’s cost of goods sold is to begin with the cost of the goods it had purchased during the accounting period and then adjust it for the change in inventory. For example, if 1,000 units of a...
with the heading current assets. Current assets are listed in the order in which they are expected to turn to cash. This is known as the order of liquidity. Since cash is the most liquid asset, it is listed first. After...
reports the major changes in a corporation’s cash and cash equivalents. Amounts are grouped according to operating, investing, and financing activities. Mark as wrong Mark as right double-entry accounting (or)...
of direct materials actually used is the direct materials __________ usage (or quantity or efficiency) variance. 10. Which of the following terms would NOT be considered a price variance in a standard cost system?...
with the current assets accounts receivable and inventory. While these two assets are initially recorded at cost, there are occasions when the company will collect less than the cost. When that occurs, the company must...
What are goods in transit? Definition of Goods in Transit Goods in transit refers to inventory items and other products that have been shipped by a seller, but have not yet reached the purchaser. When goods are in...
What does it mean to rotate stock? Definition of Rotating Inventory Stock To rotate stock means to arrange the oldest units in inventory so they are sold before the newer units. The goal is to avoid losses due to getting...
as __________ entries. 8. In a manual accounting system, the entries made at the end of the accounting year to the income statement accounts after the financial statements have been prepared are __________ entries. 9....
increases each month of the year. The cost of goods sold was a constant 70% of sales. The balance in accounts receivable was $40,000 at the start of the year and $60,000 at the end of the year. The balance in inventory...
or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. In a conventional or traditional costing system, the manufacturing overhead costs were often...
What is a source document? Definition of Source Document A source document is an original record which contains the detail that supports or substantiates a transaction that will be (or has been) entered in an accounting...
. Using the information in our previous calculation, the receivables turnover ratio was 8. Therefore, the average collection period was 45 days [360 days/8]. A logical next step is to compare the average collection...
What is LIFO? Definition of LIFO LIFO is the acronym for last-in, first-out, which is a cost flow assumption often used by U.S. corporations in moving costs from inventory to the cost of goods sold. Under LIFO, the most...
manufactured during the accounting period minus the cost of finished goods in ending inventory. The cost of sales for a retailer is the cost of merchandise in its beginning inventory plus the net cost of merchandise...
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...
is the amount at the final moment of the accounting year The inventory at the final moment of the year may be much smaller than the inventory throughout the year To calculate the accounts receivable turnover ratio and...
, and manufacturing overhead that are included in the products that moved from the manufacturing area to the finished goods inventory during the accounting period. The calculation is presented as a schedule or statement....
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
inventory using the periodic inventory method contained an error of $10,000. The correct/actual cost of the inventory at the end of the first year was $110,000. The physical inventory at the end of the second year...
Reports too much. If an error overstates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported is more than the correct amount.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
An actual count of the goods owned by the company. The actual counts are then compared to the quantities reported on the detailed inventory records. If a difference exists, the quantity shown on the inventory record...
Usually the difference between the cost of inventory at LIFO versus the cost of inventory at FIFO.
Reports too little. If an error understates the inventory and the company’s net income, the amount of inventory and the amount of net income being reported are less than the correct amounts.
? (If so, you are assuming a FIFO cost flow.) Would you match the $110 cost with the sale? (That’s the LIFO cost flow assumption.) If you would matched the average of $105, you would be using the weighted-average cost...
international general standards to provide assurance of the __________ in processes and products. 4. MRP is the acronym for material requirements __________. 5. One of the primary inputs for an MRP system is each...
, while liabilities and owner’s (stockholders’) equity accounts have credit balances. This is consistent with the accounting equation where assets = liabilities + owner’s equity. In addition to the asset,...
only once. conversion drivers fixed inventory mixed object opportunity overhead period prime product standard sunk variable 27. The term which refers to the combination of direct materials and direct labor costs....
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 average time it takes for a retailer’s or manufacturer’s inventory to turn to cash. If a manufacturer turns its inventory six times per year (every two months) and allows customers to pay in 30 days, its...
Merchandise that has been shipped by a supplier but the merchandise has not yet reached the customer’s location. Goods in transit that were shipped FOB Shipping Point should be included in the customer’s...
How do I calculate the cost of goods sold for a manufacturing company? Calculation of the Cost of Goods Sold for a Manufacturer The calculation of the cost of goods sold for a manufacturing company is: Beginning...
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...
A ratio consisting of an income statement account balance divided by the average balance of a balance sheet account. For example, the inventory turnover is computed as follows: Cost of Goods Sold divided by the average...
Featured Review
"As a trainer/lecturer of English for Specific Purposes with a focus on Financial and Business English, AccountingCoach.com is THE website I recommend to my students. They are speakers of other languages and AccountingCouch.com makes the world of finance and Accounting in English accessible to them. They need nothing more to convince themselves of accounting and finance terminology. This is their go-to resource. Apart from improving their English levels, professionally they gain insight as well. They are getting core information, updates, and learn about trends. To this effect many students have commented. Your website is also a tremendous support to me when it comes to doing quizzes, finding material to improve reading skills and when setting exam papers. And all of that for free! Thank you Mr Averkamp. For sharing your knowledge, for making such a contribution to education, for reaching students across the globe. You are changing the world. With sincere gratitude!" - Trudie F.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: