A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
The result of two or more amounts being combined. For example, net sales is equal to gross sales minus sales returns, sales allowances, and sales discounts. The net realizable value of accounts receivable is the...
Payroll taxes include 1) the taxes withheld from employees’ wages and salaries such as Social Security tax, Medicare tax, federal income tax, and state income tax, 2) the employers’ portion of the Social...
Equipment is a noncurrent or long-term asset account which reports the cost of the equipment. Equipment will be depreciated over its useful life by debiting the income statement account Depreciation Expense and crediting...
The book value of an asset is the asset’s cost minus the accumulated depreciation since the asset was acquired. This net amount is not an indication of the asset’s fair market value. The book value of an...
The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. The book value of a company is the amount of owner’s or stockholders’ equity....
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...
Ratio The inventory turnover ratio indicates how many times a company’s inventory turns over in a year. The calculation is: cost of goods sold for a year divided by the average inventory during the same year. Since a...
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...
of the revenue and/or expense amounts in the general ledger pertain to a future accounting period. Mark as wrong Mark as right prepaid expense This is a cost that has been paid but it has not yet expired. An...
statement, statement of earnings). Rather, the equipment’s cost will be reported in the general ledger account Equipment, which is reported on the balance sheet under the classification Property, plant and equipment....
. An unrelated customer asks the company to inform them of the price for constructing a specific residence. The company prepares a detailed calculation of the final price that the customer will pay. The price will...
employees’ wages to pay part of the cost of the insurance, the company will credit its contra expense account 4211 Employee Withholdings for Health Ins. The benefit of using the contra expense account is that the...
a debit balance equal to the cost of the repurchased shares being held by the corporation. The corporation’s cost of treasury stock reduces the corporation’s cash and the total amount of stockholders’ equity. The...
, 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,...
issue bonds to finance projects, operating deficits, or to redeem older bonds that are maturing. For example, a profitable public utility might finance half of the cost of a new electricity generating power plant by...
Accounting Principles The basic underlying accounting principles consist of the following: Economic entity assumption Going concern assumption Time period assumption Monetary unit assumption Cost principle or...
analysis may include the following: There is an $8,000 unfavorable variance which needs to be analyzed The $8,000 variance can be separated into a price variance and a quantity variance The price variance identifies...
life of the cell phones could be 10 years). Also assume that the company has purchased 100 smart phones at a total cost of $120,000. The company also estimates that the phones will have no salvage value at the end of...
FIFO and LIFO is best with which type of products? Definition of FIFO and LIFO FIFO and LIFO pertain to the flow of products’ costs out of inventory to the cost of goods sold that is reported on the income statement....
, the businesses are referred to as profit centers. If the operating businesses make their own investment decisions, the businesses are referred to as investment centers. The production and administrative departments...
What is the meaning of base year? In accounting, base year may refer to the year in which a U.S. business had adopted the LIFO cost flow assumption for valuing its inventory and its cost of goods sold. Under the...
What is a plant-wide overhead rate? Definition of Plant-wide Overhead Rate A plant-wide overhead rate is often a single rate per hour or a percentage of some cost that is used to allocate or assign a company’s...
value that can be measured Assets are recorded at their cost and (except for some securities) are not adjusted for changes in market value. Long-term assets such as buildings and equipment are depreciated and therefore...
What is a purchase allowance? Definition of Purchase Allowance A purchase allowance is a reduction in the buyer’s cost of merchandise that had been purchased. The purchase allowance is granted by the supplier because...
in dollars or in units, the numerator is __________ costs. FIXED DFEIX Unscramble FIXED XFDIE Unscramble 8. A cost that is partly fixed and partly variable is referred to as a ____________ cost. MIXED DEXIM Unscramble...
of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating...
a vendor’s invoice within the vendor’s early payment discount period. Purchase Discounts Lost is considered to be an interest expense or a financing charge resulting from the buyer not being able to pay the cash...
revenues, etc.) and operating expenses (cost of sales, SG&A expenses) appear first The subtotal Gross profit is the result of subtracting the Cost of sales from the Net sales The subtotal Operating income is the...
Return Let’s assume that a company using the periodic inventory system, purchased merchandise having a cost of $1,000 with terms of net 30 days. This was recorded with: A debit to Purchases for $1,000 A credit to...
What is an intangible asset? Definition of Intangible Asset An intangible asset is an asset that you cannot touch, since it lacks physical substance. Accountants record intangible assets at their cost when they are...
assume that a company has net sales of $800,000 and its cost of goods sold is $600,000. As a result, its gross profit is $200,000 (net sales of $800,000 minus its cost of goods sold of $600,000) and its gross margin...
is interest income to be reported during the 365 days that the company waits for the $11,000. Importance of the Time Value of Money in Accounting The time value of money is important in accounting because of the...
to the date of the disposal Remove the equipment’s cost and the up-to-date accumulated depreciation, record the cash received, and record the resulting gain or loss The first step requires a journal entry that: Debits...
No. 33 required large companies to report supplementary information on the effects of changing prices on its inventory and its property, plant and equipment. (In the late 1970’s the U.S. was experiencing double-digit...
What is the journal entry to record a one-year subscription for a magazine? Ways to Record One-Year Subscriptions Let’s assume that the cost of the one-year subscription for a monthly trade publication is $120. Let’s...
or moment, there is an inconsistency between the numerator and the denominator. For example, the numerator in the inventory turnover ratio is the cost of goods sold for the 365-day year, while the denominator reflects...
years. Materiality allows you to expense the entire $20 cost in the year it is acquired. The reason is that no investor, creditor, or other interested party would be misled by immediately expensing the $20 wastebasket....
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