Instead of LIFO If a U.S. corporation’s cost of inventory items are continuously increasing and the corporation has been experiencing operating losses and negative taxable income, the use of FIFO means matching its...
Instead of LIFO If a U.S. corporation’s cost of inventory items are continuously increasing and the corporation has been experiencing operating losses and negative taxable income, the use of FIFO means matching its...
What is a standard cost? Definition of Standard Cost A standard cost is described as a predetermined cost, an estimated future cost, an expected cost, a budgeted unit cost, a forecast cost, or as the “should be”...
More than it should be Examples of the Effect of Overstating Inventory If a corporation overstates its inventory, it will affect the following reported amounts on the corporation’s income statement: Cost of goods sold...
equity. The amount reported as the cost of goods sold will affect the calculations of gross profit and net income. Since the amount reported as the cost of this year’s ending inventory will carry forward to become the...
margin ratio is the percentage of revenues that is available to cover a company’s fixed costs, fixed expenses, and profit. Note that the contribution margin ratio is not the same as the gross margin ratio or gross...
Right! Natural Wrong. 8. Reporting expenses by categories such as salaries, rent, utilities, etc. is known as the _______________ basis. Functional Wrong. Natural Right! 9. Depreciation expense is reported for a...
rules only both GAAP and tax rules 9. If a manufacturer wanted to increase its gross profit in the short term, which of the following would be compatible? Select... Decreasing production Increasing production Select one...
that explains how the amount of cash and cash equivalents has changed during an accounting period is the statement of __________ __________. 15. Sales minus the cost of goods sold is the __________ profit. 16. Sales...
Income Statement Income Statement The income statement is also known as the statement of income, statement of operations, statement of earnings, profit and loss statement, and P&L. It reports a corporation’s...
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...
One of the main financial statements (along with the balance sheet, the statement of cash flows, and the statement of stockholders’ equity). The income statement is also referred to as the profit and loss...
. In a not-for-profit (NFP) organization, the net amount of its total assets minus total liabilities is actually reported as net assets in its statement of financial position. The net assets section for the NFP...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
will have no profit. Example of Margin of Safety Let’s assume that a company currently sells 3,000 units of its only product. The company has estimated that its break-even point is 2,800 units. Therefore, the...
The allocation of common costs based on the sales value of the products that emerge. For example, a company develops a large parcel of land at a cost of $5 million dollars. Individual lots will be sold for $100,000 to...
and in the following sequence: $40, $44, and $46. The corporation ships the oldest item (the one purchased for $40) to a customer at a selling price of $60. However, under the LIFO cost flow assumption the company...
in order to replace the units sold. The use of historical costs during periods of increasing prices means that companies with large amounts of plant assets and inventory will be reporting net income that is greater than...
, work-in-process, finished goods) and the cost of goods sold will contain the standard costs. (Think of the standard costs as the “should be” costs which are tied to the amounts in the company’s profit plan.) Any...
less of ending inventory ($800 vs. $920), $120 more of cost of goods sold, and therefore $120 less of gross profit. The lower gross profit and the associated lower taxable income for a U.S. company can result in less...
plan, a deferred profit sharing plan, and/or a charitable giving plan may require an expense of 25% of its pretax profits. In addition, a U.S. corporation might have a combined federal and state income tax rate of...
Weekly Income Statement When I became a director of a meatpacking company, I was concerned about the thin profit margins, the corporation’s lack of working capital, and my inexperience in the industry. The company...
Our Explanation of Nonmanufacturing Overhead provides examples of a manufacturer's expenses which are not considered to be costs of a product for financial reporting. However, they are operating expenses that will have...
assigning overhead. True Right! ABC is most effective when there are variations in batch size, processes, or customer demands. False Wrong. ABC is most effective when there are variations in batch size, processes, or...
common methods for estimating the cost of a company’s inventory are: Gross profit method Retail method Gross Profit Method of Estimating Ending Inventory The gross profit method allows you to estimate the amount of...
is associated with the finance function, not the main activity of buying/producing and selling. Non-operating Expense Right! Interest is associated with the finance function, which is not the main operations of the...
average number of __________ shares of common stock. Select... authorized issued outstanding 34. If a corporation has cumulative preferred stock, the preferred stock’s __________ requirement is subtracted from the...
, is the amount of total liabilities divided by the amount of total assets. debt to assets ratio (or) debt ratio (or) debt to total assets This ratio, which indicates financial leverage, is the amount of total...
for income tax and before investment income, interest expense, or other non-operating income or expense items. Operating income is also reported as income from operations, operating earnings, or operating profit. Major...
What is ROI? Definition of ROI ROI is the acronym for return on investment. Traditionally, ROI related 1) the income statement profit to the 2) the balance sheet investment. A drawback of ROI is that the accounting...
Accounting Topics Managerial accounting topics often include: Job order costing Process costing Absorption costing vs. variable costing Understanding cost behavior and cost-volume-profit analysis Operational budgeting...
: Public accounting as a sole practitioner or as a member of small to international CPA firms working as an auditor, tax consultant, general consultant, etc. Manufacturing companies, service businesses, etc. working as...
to describe the amount that it is subtracting from its sales revenue to report the amount of its gross profit or gross margin. Companies that provide services will use the term cost of services or cost of service...
existing equipment Purchasing delivery vehicles Constructing additions to buildings Examples of Capital Budgeting Calculations Capital budgeting usually involves the following calculations for each project: Future...
. The combination of all the budgets is referred to as the company’s master budget or profit plan. Budgets help management decide which activities it will undertake and how the company’s resources will be used. If...
materials, it concludes that LIFO will better indicate the company’s true profit. In the year of the change from FIFO to LIFO (and in years when comparisons are presented), the company must disclose the break in...
the heading income statements. Seasoned business owners often refer to this financial statement as the P&L, which is short for profit and loss statement. The word statements (instead of statement) is used in the...
What is the statement of activities? Definition of Statement of Activities The statement of activities is one of the main financial statements issued by a nonprofit organization. It is prepared instead of the income...
Featured Review
"I am currently an accounts payable specialist for a hospital in my city residence. I became a PRO user years ago because I was looking for a website that could assist in improving my bookkeeping skills, as I wish to eventually open my own business one day. I really like the use of the materials, such as the chapter breakdowns, the summaries I can read over, the quizzes to ensure I learned what I was reading, and so much more. I feel I have greatly benefitted using the materials, as they helped build my confidence in becoming a self-employed bookkeeper in the near future. Thank you for building such a useful tool for learning accounting and bookkeeping; I see you are still #1 Best Overall Voted by Google and most websites." - Daryl T.
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: