Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
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...
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...
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...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
the following information to answer questions 24 – 29: A company borrowed $100,000 on December 1 by signing a six-month note that specifies interest at an annual percentage rate (APR) of 12%. No interest or principal...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
__________ behave within a reasonable or relevant range of volume or activities. Select... costs revenues 3. Which professional organization has its primary focus on management accounting? Select... AAA AICPA FASB IMA...
Why is manufacturing overhead allocated to products? Definition of Manufacturing Overhead Allocated to Products Manufacturing overhead refers to the indirect production costs of producing goods, products, component...
What is a service department? Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department does not produce any of the...
What are indirect manufacturing costs? Definition of Indirect Manufacturing Costs Indirect manufacturing costs are a manufacturer’s production costs other than direct materials and direct labor. Indirect manufacturing...
direct labor cost was $189,520 (18,400 hours at $10.30 per hour). This means a TOTAL (efficiency and rate) variance of $9,520. Some of that variance is due to the rate being $0.30 too much and some of that variance is...
What is the difference between prime costs and conversion costs? Cost Categories of a Manufactured Product Prime costs and conversion costs pertain to the three cost categories of a manufactured product: Direct materials...
What are the advantages of departmentalizing manufacturing overhead costs? The departmentalizing of manufacturing overhead costs allows for better planning and control if the head of each department is held responsible...
. If the vendor authorized an allowance of $100, the amount due if paid within 10 days is $__________. 15. The __________-way match in accounts payable involves the vendor’s invoice, the company’s purchase order and...
such as current, 1-30 days past due, 31-60 days past due, and so on. The following image is a condensed example: Typically, the older the receivable, the more likely it will not be collected in full. Therefore, the...
they come due. Therefore, a larger current ratio is better than a smaller one. In this question, the current assets are cash (and cash equivalents) of $30,000 + temporary investments of $10,000 + accounts receivable of...
ratio will change. 14. If obsolete inventory items that have no salvage value are included at their original cost in a company’s Inventory account, which of the following will still be accurate? Select... Amount of...
, due to the double-entry system. 12. What is the normal balance for an expense account? Select... Debit balance Credit balance View Coaching The normal balance for an expense account is a debit balance. (Rent Expense...
What is the difference between periodic and perpetual inventory systems? Periodic Inventory System In a periodic system the account Inventory: Has only the ending balance from the previous accounting year Excludes the...
What does amortization mean? Definition of Amortization In general, the word amortization means to systematically reduce a balance over time. In accounting, amortization is conceptually similar to the depreciation of a...
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....
Is the deposit for a booth at a future trade show an asset? The deposit for a booth at a future trade show is an asset until the trade show occurs. Once the trade show occurs the deposit amount should be moved from the...
What is the maximum amount of earnings subject to the Social Security tax in 2022 and 2023? 2022 Annual Earnings Limit for Social Security Payroll Tax The maximum amount of an employee’s 2022 earnings (and a...
Where do you account for payroll taxes on the income statement? Definition of Payroll Taxes Payroll taxes are based on the wages (salaries, commissions, bonuses, etc.) of a company’s employees and on a self-employed...
What is the difference between an accrual and a deferral? Definition of an Accrual An accrual pertains to: expenses that should be reported now, but have not yet been recorded or paid, and revenues that should be...
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
What are LIFO layers? Definition of LIFO Layer LIFO is the acronym for Last-In, First-Out. In the context of inventory, it means that the cost of the most recently purchased units will be the first costs to be matched...
What is accumulated other comprehensive income? Definition of Accumulated Other Comprehensive Income Accumulated other comprehensive income is a separate line within the stockholders’ equity section of the balance...
What is payroll accounting? Definition of Payroll Accounting Payroll accounting involves a company’s recording of its employees’ compensation including: gross wages, salaries, bonuses, commissions, and so on that...
was acquired.) The depreciation entry is an estimate based on the asset’s historical cost, its estimated useful life, and its estimated salvage value. The depreciation entry is an allocation of the asset’s cost, it...
What is the direct write-off method? Definition of Direct Write-off Method The direct write-off method is one of the two methods normally associated with reporting accounts receivable and bad debts expense. (The other...
How do you calculate the gain or loss when an asset is sold? Definition of Gain or Loss on Sale of an Asset The gain or loss on the sale of an asset used in a business is the difference between 1) the amount of cash that...
What is the difference between assessed value and appraised value? Definition of Assessed Value Assessed value will likely be the amount that a local or state government has designated for individual properties. This...
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...
What is an irrevocable letter of credit? Definition of Irrevocable Letter of Credit An irrevocable letter of credit is a financial instrument used by banks to guarantee a buyer’s obligations to a seller. It is...
What is a financial statement? Definition of Financial Statement Generally, the term financial statement could be referring to: General-purpose, external financial reports that are distributed by a company to people...
In adjusting entries, how do I know which T-accounts to use? We illustrate the common adjusting entries with the use of T-accounts in the Explanation of the Topic Adjusting Entries available for your reading at no...
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