materials and direct labor) will be part of the cost of the items in inventory and the cost of the items sold. Accountants refer to this as full absorption costing. Accountants will also say that the manufactured goods...
materials and direct labor) will be part of the cost of the items in inventory and the cost of the items sold. Accountants refer to this as full absorption costing. Accountants will also say that the manufactured goods...
by reading our Accounting Basics (Explanation). 1. Which financial statement reports the revenues and expenses for a period of time such as a year or a month? Balance Sheet Wrong. The balance sheet reports assets,...
of comprehensive income Balance sheet Cash flow statement Statement of stockholders’ equity Notes to the financial statements Double-Entry; Debit and Credit It is the norm for a corporation to use the double-entry...
See inventory conformity rule.
See inventory: work-in-process (WIP).
See inventory shrinkage.
, reduces the Inventory account, increases the Cost of Goods Sold, updates all balances in the general ledger accounts, provides for a trial balance and financial statements on demand, and more. Of course, the bookkeeper...
). The quick ratio differs from the current ratio in that some current assets are excluded from the quick ratio. The most significant current asset that is excluded is inventory. The reason is that inventory might not be...
Why doesn't AccountingCoach.com classify the financial ratios? We avoided classifying the financial ratios because a financial ratio may overlap several classifications, and there are several different titles for...
Is a utility bill an expense? The utility bill for a retailer or for a service company is an expense. Under the accrual basis of accounting, the utility bill is an expense for the period indicated by the meter reading...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
of its current liabilities in the calculation of the company’s quick ratio. Examples of Quick Assets Common examples of quick assets include: Cash and cash equivalents Temporary marketable securities Accounts...
What is the reorder point? Definition of Reorder Point The reorder point is the quantity of units in inventory at which time an order should be placed to purchase additional units. The reorder point is calculated by...
sheet. Here are some of the changes: Owner’s equity or stockholders’ equity will increase by the positive amount of net income Accounts receivable will change by the amount of sales/services provided with...
functions (e.g. selling, general administration, etc.) are part of the expenses reported on the company’s income statement. Under the accrual method of accounting, the amounts are reported in the accounting period in...
What is stock? Definition of Stock In business there are at least common meanings for the term stock: Some people use the word stock to mean inventory. In other words, they mean the goods (products, component parts,...
are considered to be liquidity ratios: Current ratio Quick ratio or acid test ratio The amount of a company’s working capital is also cited as an indicator of liquidity. However, a company with a large amount of...
because of the double-entry system. accounting equation (or) basic accounting equation This algebraic expression is Assets = Liabilities + Stockholders’ (or Owner’s) Equity. It should remain in balance because of...
Bookkeeping Video Training Part 8 Adjusting entries: accrued expenses, reversing the accrual of expenses after the accounting period is over Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
of its products are sold from inventory? Its Liquidity Decreases Wrong. Its Liquidity Increases Right! Its Liquidity Is Unchanged Wrong. 11. Which of the following amounts will be used in both the calculation of the...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
until the items are sold). Consistency Consistency means that the same method of accounting should be followed from period to period. For example, if a U.S. company has adopted the LIFO cost flow assumption for valuing...
by reading our Manufacturing Overhead (Explanation). 1. Selling, general and administrative costs are part of manufacturing overhead. True Wrong. SG&A costs and interest expense are reported as expenses on the...
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
An average that changes with an additional purchase. See perpetual moving average in Explanation of Inventory and Cost of Goods Sold.
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for less than the amount shown in the company’s accounting records.
A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
A parody of FIFO used to describe a very slow-moving item in inventory.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
Financial Statements Video Training Part 2 Balance sheet: accounts receivable, estimated allowance for doubtful accounts, inventory cost flows (FIFO & LIFO) Must-Watch Video Learn How to Advance Your Accounting and...
The accounting focused on determining the cost per unit of a manufacturer in order to value inventory and cost of goods sold. It is also used to determine unit costs of items processed in service businesses, such as a...
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
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