. In an investment center the manager is responsible for investment decisions as well as costs and revenues. For instance, in a large corporation with many subsidiary companies, the corporation may give authority to the...
. In an investment center the manager is responsible for investment decisions as well as costs and revenues. For instance, in a large corporation with many subsidiary companies, the corporation may give authority to the...
targeted or planned profit margin ratio for the current accounting period, and 3) the profit margin ratios of other companies in the same industry during the same accounting period. Example of Profit Margin Ratio Assume...
of money, the smaller the amount of the discount. In turn, a larger discount will mean a smaller present value. A smaller discount will result in a greater present value. DCF is also useful for calculating the...
will have full access to the job cost sheets without having access to other information in the general ledger. Since companies are integrating accounting records with their other information into one database, I...
statement when they occur even if payment will take place 30 days later. The accrual method of accounting, which is also known as the accrual basis of accounting, is required for large corporations. (The cash method of...
What is budgeting? Definition of Budgeting Budgeting is the process of preparing detailed projections of future amounts. Companies often engage in two types of budgeting: Operational budgeting, and Capital budgeting...
in previous years and to other companies in the same industry. Even with a favorable inventory turnover ratio, a company may have some excess and obsolete inventory items. Therefore, it is wise to compare the...
to the company’s respective state after several years. Therefore, rather than allowing checks to become stale and then remitting the amounts to a state government, companies should contact the payees of any checks...
for Allocating Manufacturing Overhead to Products US GAAP and US income tax regulations require manufacturers to assign variable and fixed manufacturing costs to the products they manufacture so that the units in...
or from obtaining a bank loan are not revenues Revenues are amounts that companies earned by selling products or providing services. When the cash is received (at the time of the sale or service or at a later date) is...
, companies need to review its staffing in light of current levels of business and the recent advances in software and technology. Perhaps the company can function just fine with a few less salaried employees. Lastly,...
is $400,000 and is expected to process 50,000 identical units of product. Some companies will develop standard costs for controlling its operations. For example, the standard cost of processing all identical units in...
is an average from a previous time. It is important to realize that a financial ratio will likely vary between industries. Hence, a company’s ratios should be compared to its own past financial ratios and to the...
companies are likely to round the round the financial statement amounts to the nearest thousand, while large corporations are likely to round to the nearest million. Rounding is acceptable because of the accountant’s...
or LIFO, but require the same cost flow assumption be used on both the company’s tax return and on the company’s financial statements. With inflation being the norm, profitable companies using LIFO are matching the...
.) 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...
is more subjective and could lead to some exaggerated amounts. Outside of the financial statements amounts, companies could get estimated current or replacement values from appraisers. Join PRO to Track Progress Mark...
will be transferred from CWIP to Equipment and depreciation will begin.) To complicate matters, companies that produce items under a long-term contract will use an account entitled Construction-in-Process. Your question...
What is interest income? Definition of Interest Income Interest income is the amount of interest earned on investments (that promise to pay interest) and/or compensation for agreeing to receive cash payments from...
can be compared to the ratios of other companies in the same industry. An accounting ratio can also be compared to the company’s same ratio in recent periods to see whether the company is improving or declining....
that companies must provide. The cost of the workers’ compensation insurance is paid by the employer. Many view the cost as another fringe benefit and will include the cost in its fringe benefit rate. Hence, the cost...
discount as a sales discount. The buyer may refer to the early payment discount as a purchases discount.) Not all companies offer early payment discounts. If the discount is allowed it will appear on the sales invoice....
should be systematically recognized/reported as an expense on the appropriate income statements. Some examples include the expensing of prepaid insurance premiums and the depreciation of assets used in the...
subsidiary companies. A benefit of decentralization is having the decision makers closer to the markets to make better and faster decisions. Another benefit of decentralization is having more individuals share the work...
for controlling operations, and estimating selling prices when quoting prices for new work. Other Examples of Accounting Some of the many other examples of accounting include: Advising on accounting systems Income tax...
some use Sales because the Cost of Goods Sold number is not readily available for every company. In order to have comparability with all companies, they may have opted to use Sales.) Join PRO to Track Progress Mark the...
Depreciation However, U.S. companies continue to use the term reserve in regards to the accounting for inventories using the LIFO cost flow method. For example, the company will use a contra inventory account entitled...
not paid as of the end of the accounting period. For most companies the amounts in Notes Payable and Interest Payable are reported on the balance sheet as follows: the amount due within one year of the balance sheet...
, the written note specifies the principal amount, the date due, and the interest to be paid. For most companies, if the note will be due within one year, the borrower will classify the note payable as a current...
operate comfortably with a very low current ratio. It is wise to compare a company’s current ratio to that of other companies in the same industry. You are also wise to compare a company’s recent current ratio to...
What is the cost of goods available? Definition of Cost of Goods Available For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods...
causes of the overhead costs. Examples of Cost Allocations The following are only a few of the many cost allocations that occur in some companies or organizations: The cost of a manufacturing building is allocated to...
that companies using the periodic inventory system in their general ledger accounts often have sophisticated inventory systems outside of the general ledger for tracking the items it purchases, produces, sells and has...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
price per unit minus the fixed expenses per unit. True Wrong. The contribution margin is selling price per unit minus VARIABLE expenses per unit. False Right! The contribution margin is selling price per unit minus...
Our Explanation of Accounting Principles provides you with clear and concise descriptions of the basic underlying guidelines of accounting. You will see how the accounting principles affect the balance sheet and income...
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...
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