What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
What is the normal balance of the direct materials variance accounts? I don’t believe there is a normal balance. If a company pays exactly the standard cost of its direct materials, there will be no balance in the...
What is a liquidity ratio? Definition of Liquidity Ratio A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become...
What is separation of duties? What is Separation of Duties The separation of duties is one of various internal control techniques for safeguarding a company’s assets. By separating employee’s duties, the likelihood...
accumulated depreciation is subtracted from the asset’s cost to indicate the asset’s book value. The book value indicates the maximum amount of future depreciation remaining. Since depreciation is defined as the...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
What is the acid test ratio? Definition of Acid Test Ratio The acid test ratio, which is also known as the quick ratio, compares the total of a company’s cash, temporary marketable securities, and accounts receivable...
, the property, plant and equipment are reported at cost minus the accumulated depreciation (except land). If these assets have increased in value, the fair value is not reported because of the cost principle. Also,...
What entry is made when selling a fixed asset? Defining the Entries When Selling a Fixed Asset When a fixed asset or plant asset is sold, there are several things that must take place: The fixed asset’s depreciation...
What is NPV? Definition of NPV NPV is the acronym for net present value, which can be calculated as follows: The present value of the future cash inflows Minus the cash investment Example of NPV Assume that a company...
What does NOI stand for? NOI is the acronym for net operating income. Net operating income is also referred to as income from operations. NOI excludes discontinued operations, extraordinary items, and nonoperating (or...
What is the accounting treatment for an asset that is fully depreciated, but continues to be used in a business? An asset that is fully depreciated and continues to be used in the business will be reported on the balance...
What is the payback reciprocal? The payback reciprocal is a crude estimate of the rate of return for a project or investment. The payback reciprocal is computed by dividing the digit “1” by a project’s payback...
) as of the final moment of an accounting period in accordance with generally accepted accounting principles (GAAP, US GAAP). GAAP’s historical cost principle means that some noncurrent assets are reported at amounts...
How does an expense affect the balance sheet? Definition of Expense An expense is a cost that has been used up, expired, or is directly related to the earning of revenues. Most of a company’s expenses fall into the...
income statement as the cost of goods sold. The goods that are unsold at the end of the accounting period must be reported on the retailer’s balance sheet as inventory. Accounting for the Goods Purchased There are two...
Is there a difference between work-in-process and work-in-progress? It depends on the user of the terms. Definition of Work-in-Process I use the term “work-in-process” to mean a manufacturer’s inventory that is not...
What is the internal rate of return? Definition of Internal Rate of Return The internal rate of return is the interest rate that will discount an investment’s future cash amounts to be equal to cash paid at the...
Why does the internal rate of return equate to a net present value of zero? Internal rate of return and net present value are discounted cash flow techniques. To discount means to remove the interest contained within 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...
Payable, which of the above invoice amounts should be debited to the Equipment account? Select... Invoices 1, 2, 3, 4, and 5 Invoice 1 only Invoices 1 and 4 only Invoices 1, 2, and 4 only View Coaching Accountants...
Our Explanation of Adjusting Entries gives you a process and an understanding of how to make the adjusting entries in order to have an accurate balance sheet and income statement. Eight examples including T-accounts for...
liability accounts normally have credit balances, a contra liability account is expected to have a debit balance. Discount on Bonds Payable and Bond Issue Costs are contra accounts to the liability account Bonds...
the assets' costs to the periods used View Coaching The main purpose of depreciation is to spread or allocate the cost of buildings and equipment to expense in a systematic and rational manner. For the financial...
Featured Review
"I was employed to do basic bookkeeping at my current company. I knew practically nothing about it. I began to research bookkeeping and I came across AccountingCoach. Their materials were so clear, and contained all the information I needed to get up to speed. The website had stopped my random search on the internet, as AccountingCoach’s materials contained everything I needed for my job. I could also work on it at my own pace. It helped me to perform well at my job. The practice questions really help me understand and retain the knowledge I got from their materials. I also loved the videos, as they were very easy to digest. I still refer to their materials regularly." - Rafe J.
Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials
Read all 2,645 reviews
For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.
We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping: