What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
What does the cost principle mean for a company's income statement? If a company has buildings, equipment and inventory, the cost principle will mean that the amount of depreciation expense and the cost of goods...
policies such as how and when revenues are recognized, how property is depreciated, how inventory and income taxes are accounted for, and more. Other disclosures in the notes to the financial statements include the...
(with payment due 30 days later). Company A will record the amount of the sale with a credit to Sales and a debit to Accounts Receivable. Company B will record the purchase (perhaps as inventory) with a credit to...
equivalent unit of production under two cost flow assumptions: weighted-average and FIFO. Example of Equivalent Units of Production Assume that a manufacturer uses direct labor continuously in one of its production...
in the control account. To find the amount that a specific customer owes, its recent payments, and its recent purchases on credit, you will quickly get that information from the Accounts Receivable Subsidiary Ledger....
of the organization Preparing special analyses that assists in making the best decisions Examples of Cost Accounting A significant part of cost accounting involves the unit cost of a manufacturer’s products in order...
in accounts receivable, inventory, accounts payable, and most other current assets and current liabilities. The direct method for reporting the cash from operating activities lists the following: the amounts collected...
the following year with zero balances.) Examples of Balance Sheet Accounts Examples of a corporation’s balance sheet accounts include Cash, Temporary Investments, Accounts Receivable, Allowance for Doubtful Accounts,...
by the adjustments needed to convert the accrual accounting net income to the cash flows from operating activities. A few of the typical adjustments are: Adding back depreciation expense Adding the decrease in accounts...
.) 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...
had a flaw. When the retailer notified the supplier, the supplier requested that the retailer donate or discard the item and the supplier will issue a credit memo for $15. Under a periodic inventory system, the retailer...
include a highly-respected trade name, a valuable patent, a very effective management team and company culture. Example of Assets Examples of assets that are likely to be listed on a company’s balance sheet include:...
of inventory and $1,000 of supplies and prepaid expenses. These amounts result in the following: Current ratio is 1.5 to 1 (1.5:1, or simply 1.5). This is the result of dividing $60,000 by $40,000. Quick ratio is 0.6 to...
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
first year the company had $65,000 of profit, but may end the year with $0 cash. Other examples where cash is paid out, but the profits are not reduced at the time of the payment, include prepayments of insurance...
other than the costs of direct materials and direct labor. Hence, manufacturing overhead is referred to as an indirect cost. Generally accepted accounting principles require that a manufacturer’s inventory and the...
and documentation of the warehousing activities required by zero-based budgeting may lead to a better use of space, better inventory management, etc. If those efficiencies are achievable, perhaps the budget for the...
from early-payment discounts. (Early-payment discounts of 1% or 2% are usually recorded by the seller in an account such as Sales Discounts and by the buyer using the periodic inventory method in an account such as...
of current assets. working capital (or) net working capital This is calculated by subtracting the amount of current liabilities from the amount of current assets. Mark as wrong Mark as right LIFO (or) last in, first out...
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...
+ owner’s __________. 3. The __________-entry system requires that amounts be recorded in at least two accounts for each transaction. 4. When goods are sold on credit, the account that is debited is __________....
using the indirect method? A Decrease In Inventory Wrong. An Increase In Accounts Payable Wrong. An Increase In Accounts Receivable Right! Depreciation Expense Wrong. 17. Which of the following will appear as a positive...
for Doubtful Accounts is a contra account to __________ __________. 4. Inventory is often reported at the lower of __________ or net __________ value. 5. The cost of insurance premiums that have been paid but have not...
of the variance would be charged to the finished goods inventory? $0 Wrong. Try another answer. $800 Wrong. Try another answer. $2,000 Right! Since $50,000 of the $200,000 of standard costs reside in the finished goods...
to the accounting equation: assets = liabilities + stockholders’ equity Assets Assets are the resources that a corporation owns as a result of a purchase transaction. Examples of a corporation’s assets include cash,...
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...
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...
in technology, most of the items in a company’s inventory have had their value dropped dramatically. Should the company report the loss in value now, or should the company wait until the items in inventory are sold....
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...
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 crediting Purchase Returns and Allowances (or Inventory) for $60. If GoodCorp pays SalesMax by June 25, GoodCorp will record the payment as follows: Debit Accounts Payable for $1,140 ($1,200 – $60) Credit Sales...
What are phantom profits? The terms phantom profits or illusory profits are often used in the context of inventory (but can also pertain to depreciation) during periods of rising costs. The amount of phantom or illusory...
liabilities when they come due. For example, if a company’s current assets consist mainly of slow-moving inventory and some slow-paying accounts receivable, the company may not be able to convert its current assets to...
. Perhaps a U.S. manufacturer using LIFO will deliberately reduce its inventory quantities in low profit years in order to liquidate the old LIFO layers containing low unit costs. Another manufacturer might increase its...
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
and cost of goods sold when reporting its financial results. (If the corporation turned over its inventory many times during the year, most of the variance will be allocated to the cost of goods sold, since that is...
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...
's purchasing power does not change over time. 8. Accountants might recognize losses but not gains in certain situations. For example, the company might write-down the cost of inventory, but will not write-up 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...
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