with U.S. GAAP. The resulting unit costs are used for inventory valuation and for the calculation of the cost of goods sold. Example of Manufacturing Costs Manufacturing costs are typically divided into three...
with U.S. GAAP. The resulting unit costs are used for inventory valuation and for the calculation of the cost of goods sold. Example of Manufacturing Costs Manufacturing costs are typically divided into three...
are sold, the costs of the products (raw materials, direct labor, and factory overhead) will be expensed as the cost of goods sold. Until the products are sold, the products’ costs will be reported as the current...
associated with the unsold products (including their share of worker compensation costs) will be reported as inventory in the current asset section of the balance sheet. The worker compensation costs associated with...
a company’s costs, assisting in financial decisions, profit planning, calculating break-even points, capital budgeting, and calculating the costs of existing products in order to value the company’s inventory and to...
instead of 30 days) Purchases Returns and Allowances (credit memos received for returning goods to vendors or for other conditions) These accounts are used by a company that purchases goods for resale and uses the...
the efficiency or effectiveness of a company’s management. Examples of Turnover Ratios Some of the turnover ratios are: accounts receivable turnover ratio inventory turnover ratio total assets turnover ratio fixed...
is a temporary account because its balance is closed to the owner’s capital account at the end of each year in order to begin the next year with a $0 balance.) Examples of permanent accounts are: Asset accounts...
to as liquidity ratios or short-term solvency ratios since they assist in evaluating a company’s ability to pay its current obligations: Working capital Current ratio Quick ratio Accounts receivable turnover ratio...
are converted to cash in a timely manner. For example, if a company can better manage its inventory and its accounts receivable, the company’s cash and liquidity will increase. This in turn improves the company’s...
to the products or to the cost of inventory. The period costs are usually associated with the selling function of the business or its general administration. The period costs are reported as expenses in the accounting...
and variable manufacturing __________ costs. 3. A manufacturer’s inventory classifications are raw materials,__________ __________ __________, and finished goods. 4. A manufacturer will have cost of goods __________...
minus 1) Sales Discounts, and 2) Sales Returns and Allowances equals __________ sales. 5. The cost of goods sold is the cost of goods available minus the costs in __________ inventory. 6. If a store sells its old...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
flexible static 20. A company is forecasting its sales for next year to be 150,000 units. At the end of the current year it expects to have 10,000 units in inventory and to end next year with 12,000 units in inventory....
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...
the amounts shown (or not shown) on the face of the financial statements. The notes are also referred to as footnote disclosures. Generally, the notes are the main method for a company to comply with the full disclosure...
What are wages payable? Definition of Wages Payable Wages payable refers to the wages that a company’s employees have earned, but have not yet been paid. Under the accrual method of accounting, this amount is likely...
for the workweek of June 22-28 might be calculated by the time the adjusting entry is prepared in early July and only the amounts for June 29 and 30 will need to be estimated.) The important point with the accrual...
What is DCF? In accounting, DCF refers to discounted cash flows or to the discounted cash flow techniques such as net present value or internal rate of return. DCF is a preferred method for evaluating capital...
What is an expense? Definition of Expense Under the accrual method of accounting, an expense is a cost that is reported on the income statement for the period in which: The cost best matches the related revenues The cost...
. Under the accrual method of accounting, both the borrower and the lender must report any accrued interest as of each balance sheet date. The maker/borrower of the note will report interest expense and interest...
it will be scrapped for no salvage value. Using the straight-line depreciation method, the monthly depreciation will be $5,000 per month ($600,000/120 months). Therefore, each month for 10 years the company will...
.) The profit and loss statement’s period of time could be a year, a year-to-date period such as nine months, a quarter of a year, one month, four weeks, 52 weeks, etc. Under the accrual basis (or method) of accounting...
is debited under the allowance method. The use of Allowance for Doubtful Accounts allows us to see in Accounts Receivable the total amount that the company has a right to collect from its credit customers. The credit...
What is the difference between adjusting entries and correcting entries? Definition of Adjusting Entries Generally, adjusting entries are required at the end of every accounting period so that a company’s financial...
payable will require the issuer/borrower to pay interest, the issuing company will have interest expense. Under the accrual method of accounting, the company will also have another liability account entitled...
of $0 on an income statement prepared using the accrual method of accounting. The break-even point expressed in dollars of revenues is calculated by dividing the company’s total fixed expenses for the accounting...
Cost on Income Statement Let’s assume that a company buys equipment for $100,000 and it is expected to be used for 10 years with no salvage value at the end of its useful life. Using the straight-line method of...
in the company’s general ledger accounts. If it is the end of the accounting period, these amounts must be recorded to comply with the accrual method of accounting. By entering these on an adjusting entry dated for...
for their income statements and balance sheets to be reporting the proper amounts in the appropriate accounting periods under the accrual method of accounting. Join PRO to Track Progress Mark the Question as Read...
such as the accrual adjusting entries that are part of the accrual method of accounting. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career...
as a result of having sold goods on credit. Through the use of the aging method, the company sees that $18,000 of the receivables are 100 days past due. Upon further checking, the company believes that $10,000 of these...
What is the difference between revenues and receipts? Definition of Revenues A company’s revenues are amounts it has earned as the result of business activities such as selling merchandise or performing services. Under...
Why are sales a credit? Definition of Sales In accounting, sales are revenues earned when a company transfers ownership of its goods to its customers. Under the accrual basis or method of accounting, the sale occurs when...
the retailer uses the straight-line depreciation method, during each month of the display racks’ lives the retailer’s monthly income statement will report depreciation expense of $1,000. However, the credit balance...
are earned under the accrual basis or method of accounting. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
, and depreciation expense of $8,000. Therefore, the net income reported on its income statement was $22,000. (The depreciation pertains to a truck purchased in an earlier year.) Depreciation and the Statement of Cash...
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