. These situations will likely prevent the manufacturer from achieving significant sales at selling prices that are based on costs plus a desired profit. Given the complexity of a manufacturer’s operations and the...
. These situations will likely prevent the manufacturer from achieving significant sales at selling prices that are based on costs plus a desired profit. Given the complexity of a manufacturer’s operations and the...
will be significant. Example of LIFO with Increasing Costs In the U.S., LIFO is considered to be better when the costs of inventory items are changing. The reason is LIFO is matching the latest costs of products with...
of merchandise on May 15, but allows the customer to pay on June 15. On May 15, the company will credit its income statement account Sales and will debit its current asset account Accounts Receivable. (When the customer...
, such as total credit sales for a day, total collections from customers for a day, total returns and allowances for a day, and the total amount owed by all customers. Hence, if you want to find the amount that a...
for the current period’s expense that is reported on the company’s income statement. If Provision for Doubtful Debts is the name of the account used for recording the current period’s expense associated with the...
What is inventory? Definition of Inventory Inventory is a very significant current asset for retailers, distributors, and manufacturers. Inventory serves as a buffer between 1) a company’s sales of goods, and 2) its...
Does collecting a customer's accounts receivable affect net income? Definition of Accounts Receivable Accounts receivable is a current asset that results when a company reports revenues from sales of products or the...
and Allowances and for Purchase Discounts.) When a company uses the perpetual inventory system, the general ledger account Inventory is continually being updated for all the purchases and sales of goods: The costs of...
of its customers, the company will credit its current asset account Accounts Receivable for $100 and will debit a contra revenue account such as Sales Returns and Allowances. Join PRO to Track Progress Mark the Question...
(or amounts) contained in an appraisal report for a specific property. The appraisal report is generally prepared by a professional appraiser who looks at the property’s features including size, type of construction,...
at its cost of $15,000 Report the inventory at its net realizable value (NRV) of $12,000. (NRV is equal to the estimated sales value of $14,000 minus $2,000 of expenses necessary to get the goods sold for $14,000.) The...
the goods or services, it will debit Deferred Revenue for $10,000 and will credit Sales Revenues or Service Revenues for $10,000. Join PRO to Track Progress Mark the Question as Read Must-Watch Video Learn How to...
sales revenues (quantity and prices) to cover both the product costs of the units sold and the other expenses of the accounting period. Example of Product Cost per Unit The product cost per unit is used for valuing a...
Accounting Basics (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (26) Marked Wrong (0) Marked Right (0) gross profit (or) gross margin This is the remainder after subtracting the cost of goods...
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 Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
’ __________. 10. Purchasing supplies on credit will be recorded with a credit to the account __________ __________. 11. Sales of merchandise and fees earned from providing services are examples of the income statement...
side of a general ledger account? Select... Debit Credit 14. A sale is made with credit terms that allow the customer to pay in 30 days. Under the accrual method of accounting, which account should be debited at the...
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...
the cost of the goods that were sold with the sales of the goods. It also requires the matching of sales commission expense with the related sales. If these cause and effect relationships are not present, an expense is...
of capital than if it had $100 million of common stock outstanding. Select... True False 4. A company’s inventory turnover ratio for the prior year was 9 times. This means that its inventory during the past year had...
Our Explanation of the Balance Sheet provides you with a basic understanding of a corporation's balance sheet (or statement of financial position). You will gain insights regarding the assets, liabilities, and...
will be occurring automatically when using accounting software: Cash will be credited whenever a check is written Cash will be debited when money is received Accounts Receivable will be debited when a sales invoice is...
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...
What is a bookkeeper? Definition of Bookkeeper A bookkeeper is usually employed by a small to mid-size company (or other organization) to process and record the large volume of transactions involving sales, purchases,...
that the company’s net purchases for the year amounted to a net debit of $300,000. This $300,000 debit and the credit of $15,000 in Inventory Change results in the cost of goods sold of $285,000. The logic is that not...
. In essence, the cost of goods sold is being matched with the revenues from the goods sold, thereby achieving the matching principle of accounting. When the cost of goods sold is subtracted from net sales, the result is...
statements. If a company has small inventory amounts and significant sales, a simple cost system that spreads manufacturing overhead costs solely on the basis of machine hours can result in a reasonably accurate balance...
for packaging, sales commissions, and shipping. Therefore, the net realizable value of the inventory is $12,000 (selling price of $14,000 minus $2,000 of costs to dispose of the goods). In that situation the inventory...
the overhead costs—including the cost of excess capacity—on the basis of volume, the remaining products will have to be assigned more of the overhead costs. If management again reacts to the new, higher, allocated...
of the Cash account. Examples of Net Cash Flows The net cash flows include the cash inflows such as the money received from customers who purchased products on credit in an earlier accounting period, cash sales...
revenue account (such as Sales Revenues, Service Revenues, Fees Earned, etc). Example of Deferred Revenue To illustrate deferred revenue, let’s assume that a company designs websites and has been asked to provide a...
$12,000 of depreciation expense. Each month $1,000 of depreciation expense is being matched to the 120 monthly income statements during which the displays are used to generate sales revenues. Depreciation on the Balance...
for 15% of the dollars 70% of the items which account for 5% of the dollars 10. Which of the following is the most logical calculation of a company’s inventory turnover? Select... Annual cost of goods sold divided by...
receivable. 2. In order to encourage customers to remit amounts owed, a company will send __________ that report the amounts owed. 3. The terms FOB shipping point means that the __________ is responsible for the freight...
. Perhaps a U.S. manufacturer using LIFO will deliberately reduce its inventory quantities in low profit years in order to liquidate the old LIFO layers containing low unit costs. Another manufacturer might increase its...
. Example of a Revenue Accrual The accrual of revenues or a revenue accrual refers to the reporting of revenue and the related asset in the period in which they are earned, and which is prior to processing a sales...
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