See cash basis of accounting.
See cash basis of accounting.
A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...
.) Companies that use the net method will record the vendor’s invoice as follows: credit Accounts Payable for $980 and debit another account (Inventory, Purchases, etc.) for $980. If the company’s policy is to pay...
See accrual basis of accounting.
The most common method of preparing the statement of cash flows. Under this method the starting point is the net income reported on the income statement. To learn more, see Explanation of Cash Flow Statement.
A technique used to determine the variable rate (slope of a total cost line) of an independent variable and the fixed amount by using just two points: the highest point and the lowest point. For example, if at the...
What is the aging method? Definition of Aging Method The aging method usually refers to the technique for estimating the amount of a company’s accounts receivable that will not be collected. The estimated amount that...
What is the accrual method? Definition of Accrual Method The accrual method of accounting reports revenues on the income statement when they are earned even if the customer will pay 30 days later. The accrual method of...
The direct method could refer to the method of preparing the statement of cash flows. The direct method could also refer to the method of allocating a manufacturing facility’s service departments to its production...
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....
A technique using simultaneous equations to allocate a manufacturer’s service departments’ costs to both other service departments and to production departments.
See sum-of-the-years’ digits method of depreciation.
. The merchandise held by a retailer is usually in the Inventory account at which amount? Select... Cost Sales value 22. Which inventory system will reduce the general ledger account Inventory and increase the general...
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...
) specific identification, and others. The inventory systems could be periodic or perpetual. Hence, the combination of the cost flow assumptions and the system used can result in differing amounts for the cost of goods...
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
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...
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...
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
What is the difference between the direct method and the indirect method for the statement of cash flows? Main Difference between Direct and Indirect Method of SCF The main difference between the direct method and the...
The method used for removing costs from the inventory of goods. The cost flow can be different from the physical flow of goods. For example, in the U.S. the LIFO cost flow can be used even if the oldest goods are shipped...
period in order to report the amount of its ending inventory for its balance sheet and the cost of goods sold for its income statement. Computing the Inventory Amount Under the Periodic Inventory Method At the end of an...
See units of production method of depreciation.
The depreciation method based on the number of units produced by the asset rather than on the passage of time. This method is also referred to as the units of activity method because depreciation is based on some...
A mathematical technique that determines the best-fitting line through a series of points. This is used in regression analysis.
Systematically moving the same amount each accounting period from a balance sheet account to an income statement account. For example, if the amount of Discount on Bonds Payable on a 10-year bond is not significant, then...
The depreciation method that results in the same equal amount of depreciation expense for each full year over the life of the asset. See Explanation of Depreciation for an illustration and further discussion of...
What is the high-low method? Definition of High-Low Method The high-low method is a simple technique for determining the variable cost rate and the amount of fixed costs that are part of what’s referred to as a mixed...
A depreciation technique where a constant percentage (such as 200%, 150%, or 125%) is applied to the book value of an asset. (As an asset is depreciated its book value declines.) This technique results in greater...
A method for recognizing bad debts expense arising from credit sales. Under this method there is no allowance account. Rather, an account receivable is written-off directly to expense only after the account is determined...
, but will not recognize the variety of activities and efforts that occur with different products. The traditional method may have been reasonable or at least sufficient for the company’s external financial statements...
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...
be combined, such as raw materials and supplies, or raw materials and work-in-process. In addition, a manufacturer (and others with inventory) should disclose the method for valuing the inventory. This includes whether...
See inventory: finished goods (FG).
The system where the general ledger account Inventory is not updated during the year. Rather, the merchandise purchased is recorded in temporary purchases accounts. At the time a balance sheet is presented, the inventory...
The incremental cost of storing or holding inventory. It is an annual percentage that includes the cost of rent, insurance, cost of capital, deterioration and obsolescence.
The multiplication of a quantity times its cost. For example, if 100 items are in inventory at a cost of $3.46 each, the inventory extension is $346.
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