that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
that was in inventory at a cost of $30,000, the company’s current assets will increase by $20,000. If no other expenses are incurred, working capital will increase by $20,000. If a company borrows $50,000 and agrees...
method) or Inventory (perpetual method) for the cost of the goods or merchandise received, and 2) credit a current liability account such as Accrued Liabilities. After the financial reporting for the accounting period...
of production method, let’s assume that a company has a machine with a cost of $500,000 and a useful life that is expected to end after producing 240,000 units of a component part. Further, the machine’s salvage...
, the inventory turnover ratio divides a company’s cost of goods sold for a recent year by the company’s average inventory during that year. Perhaps the most frequently used accounting ratio is the current ratio,...
will be disbursed for a specific purpose. For instance, a wealthy grandparent may tell a grandchild that the full cost of getting a college education will be fully paid by the grandparent. Example of Blank Check For an...
is Accumulated Depreciation. Let’s assume that a company has property, plant and equipment with a cost of $200,000. The accumulated depreciation associated with these assets is $130,000. Therefore, the total assets...
What is a deferred expense? Definition of Deferred Expense A deferred expense refers to a cost that has occurred but it will be reported as an expense in one or more future accounting periods. To accomplish this, the...
run smoothly with the same amount of monthly fixed costs, which on average are approximately $200,000 per month for the cost of supervisors, rent, depreciation, and other fixed costs. However, if the manufacturer’s...
hours). Improvements in technology can also result in time and cost reductions beyond those in the learning curve. For example, software may become available to assist in the design and coding, computer processing...
future transactions. The accountants’ cost principle prohibits a business from reporting some highly-valued assets such as trademarks, brand names, and an effective management team (assuming these were developed...
by the creditors, and the owners are providing 60% of the assets’ cost. Generally, the higher the debt to total assets ratio, the greater the financial leverage and the greater the risk. How To Be Used As with all...
current liability amount on its balance sheet. It also means that the accounts and amounts recorded as debits will better reflect the historical cost principle. If a company uses the net method, but fails to remit the...
is calculated by dividing a company’s cost of goods sold during a year by the average inventory during the same year. Accounts receivable turnover ratio. This ratio is computed by dividing the credit sales during a...
into one total of $3,994 The operating expenses, nonoperating expenses, and losses are combined into one total of $3,764 The company’s gross profit is not shown as a subtotal. However, the gross profit can be...
of the areas of accounting in which accounting clerks are employed include: Accounts Receivable Accounts payable Payroll accounting Cost estimation Fixed asset accounting Assist in preparing various reports Salary Range...
%). It also indicates that a company without sufficient cash to pay within the early payment discount period will experience a huge opportunity cost. Join PRO to Track Progress Mark the Question as Read Must-Watch Video...
with the accrual basis of accounting Fixed asset accounting Cost accounting Budgeting and profit planning, and more Common titles for accountants include corporate accountant, chief accountant, controller, assistant...
of goods and/or the providing of services Expenses, which include the cost of goods sold, SG&A expenses, and interest expense Gains and losses, such as the sale of a noncurrent asset for an amount that is...
Is depreciation a source of funds? Definition of Depreciation Depreciation is the systematic allocation of the cost of a business asset to expense over the useful life of the asset. The accounting for depreciation is a...
the amount of money currently on hand.) Expense accounts and loss accounts including Cost of Goods Sold, Wages Expense, Rent Expense, Interest Expense, Loss on Disposal of Equipment, Loss from Lawsuit, etc. (The debit...
How do you record a payment for insurance? Definition of Payment for Insurance A company’s property insurance, liability insurance, business interruption insurance, etc. often covers a one-year period with the cost...
useful tool when measuring a manager’s efficiency. Example of a Flexible Budget Let’s assume a company determines that its cost of electricity and supplies will vary by approximately $10 for each machine hour (MH)...
amount for warehouse rent (and every other expense) for the next budget is $0. Any budgeted expense greater than $0 must be justified. While zero-based budgeting will be more time consuming than focusing on incremental...
. For example, a retailer with 100 small stores finds that the annual cost for property insurance to cover all 100 stores is $100,000. If the total actual property damages for the stores never exceeded $40,000 in a year,...
account? A contra asset account is an asset account where the account balance is a credit balance. It is described as “contra” because having a credit balance in an asset account is contrary to the normal or...
for the cost of $10,000 Credit the asset account Cash for the $4,000 that was paid Credit the liability account Notes Payable for $6,000 The liability account Notes Payable reports the principal amount owed at the...
many income statements in the form of depreciation expense and/or as part of a manufacturer’s cost of goods sold. The total capex amount that was spent in a recent accounting period is reported in the statement...
in the current accounting period: Depreciation expense for equipment that was paid for in a prior year Insurance expense for which the premium was paid in a prior year Cost of goods sold from the sale of inventory items...
the financial statements with the management and owners of the company. The accountant will also be involved in budgeting of operations and capital improvements, cost accounting, reports to government agencies, and...
What is depreciation expense? Definition of Depreciation Expense Depreciation expense is the appropriate portion of a company’s fixed asset’s cost that is being used up during the accounting period shown in the...
income statement accounts used in a business include Sales, Sales Returns and Allowances, Service Revenues, Cost of Goods Sold, Salaries Expense, Wages Expense, Fringe Benefits Expense, Rent Expense, Utilities Expense,...
for $10,000. After recording the depreciation to the date of the sale, the car’s book value is $6,000 (cost of $28,000 minus accumulated depreciation of $22,000). The company will have proceeds of $10,000 and a gain...
Why would a company use double-declining depreciation on its financial statements? Definition of Double-Declining-Balance Depreciation The double-declining-balance method of depreciation is a form of accelerated...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
pertains to one or more future accounting periods. To illustrate, assume that on December 1, a company recorded its $2,400 payment for six months of property insurance for December through May. At December 31, one month...
, the account that is credited is __________. Select... Accounts Payable Accounts Receivable Inventory 6. The entry on the right side of a T-account is a __________. Select... debit credit 7. When a company’s...
Our Explanation of Accounting Basics uses a simple story to introduce important accounting concepts and terminology. It illustrates how transactions will be included in a company's financial statements.
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
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