method When this method for reporting bad debts expense is used, a contra asset account is not used. Instead, Bad Debts Expense is debited when a bad account is written off. direct write-off method When this method for...
method When this method for reporting bad debts expense is used, a contra asset account is not used. Instead, Bad Debts Expense is debited when a bad account is written off. direct write-off method When this method for...
of the present and future situation. It is also wise to consider the financial ratios to be averages. For example, the sales are unlikely to have occurred evenly throughout the year. Therefore, the resulting number of...
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...
remain in inventory at the end of the year. Using FIFO the company assumes that first costs (the oldest costs) for 70 units will be removed from inventory and will become the cost of goods sold. Therefore, the FIFO cost...
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
Temporary differences between the reporting of a revenue or expense for financial statements (books) and the reporting of the item for income tax purposes. For example, it is common for companies to depreciate equipment...
a delivery truck with a cost of $100,000 and it is expected to be used for 5 years. If we also assume that the truck will have no salvage value, the company will record depreciation expense of $100,000 over the five...
Our Explanation of Depreciation emphasizes what the depreciation amounts on the income statement and balance sheet represent. Learn why depreciation is an estimated expense that does not assist in determining the current...
expense. Bad debts expense is part of the selling, general and administrative (SG&A) expenses. Typically there are two methods for reporting the bad debts expense: direct write-off method, and allowance method....
, investing, and financing activities. It also includes supplemental information. Mark as wrong Mark as right inventory This current asset reports the cost of a retailer’s or manufacturer’s goods on hand. It also...
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....
, 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....
Our Explanation of Present Value of a Single Amount discusses the time value of money and the need to discount future amounts to the time of an investment or other transaction. The present value of 1 table is used to...
? (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...
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 weighted average cost used with the periodic inventory system. To learn more, see Explanation of Inventory and Cost of Goods Sold.
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.
A part of a manufacturer’s inventory that includes direct and indirect materials. Also see inventory: materials.
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.
This visual tutorial for the topic Income Statement presents the key components and formats used on a corporation's income statement (which is also known as the statement of operations or profit and loss statement)....
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...
variable costs and expenses equals the __________ __________. 4. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost. 5. Which of the following would be considered to be the...
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....
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
.] Under the accrual method of accounting the tenant should report: Rent Expense during the period of time that the space was occupied but was not paid, and A current liability Rent Payable for the amount owed to the...
will be the following: Debit Premium on Bonds Payable for $3,000 Credit Interest Expense for $3,000 Reducing the balance in the account Premium on Bonds Payable by the same amount each period is known as the...
CDNUITSO Unscramble DISCOUNT OUSNTICD Unscramble 5. Sorting the accounts receivable according to the dates of the sale invoices is the _________ of accounts receivable. AGING IGNGA Unscramble AGING AGGIN Unscramble 6....
rate is estimated prior to the start of an accounting year and then used during the accounting year to attach indirect manufacturing costs to products. Mark as wrong Mark as right normal costing This product costing...
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...
), and industry-specific requirements. U.S. corporations whose stock is publicly-traded are also required to file financial reports to the U.S. Securities and Exchange Commission (SEC). Generally, US GAAP requires that a...
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...
An assumption that determines the order in which costs should flow out of a balance sheet account (e.g. Inventory, Investments, Treasury Stock) when the item is sold. For an illustration of the cost flow assumption, see...
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...
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...
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...
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...
with significant amounts of inventory and plant assets. For example, when inventory is measured by using the first-in, first-out cost flow assumption under US GAAP, the actual historical cost of inventory that is...
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