This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
Our Explanation of Accounts Payable provides insights on the bill paying process in a large company. Included are discussions of the three-way match, early payment discounts, end of period accruals, and more.
to address the second part of your question, which involved the R&D costs on the income tax returns. You will need to ask an income tax adviser or do a search on www.IRS.gov regarding the capitalization of R&D...
Our Explanation of Income Statement helps you learn the most important features of a corporation's income statement (also known as the statement of operations or profit and loss statement). We provide more understanding...
Our Explanation of Accounts Receivable and Bad Debts Expense helps you understand the accounting for the losses associated with selling goods and providing services on credit. You will understand the impact on the...
financial statements and at the same time use accelerated depreciation on its income tax returns. Using accelerated depreciation on its U.S. income tax returns will mean greater depreciation expense and smaller taxable...
How do I calculate the amount of sales tax that is included in total receipts? Sales Tax Calculation To calculate the sales tax that is included in a company’s receipts, divide the total amount received (for the items...
What is the return on stockholders' equity (after tax) ratio? Definition of Return on Stockholders’ Equity The financial ratio return on stockholders’ equity (or return on equity) is calculated by dividing a...
How do you calculate Return on Capital Employed (ROCE)? Return on capital employed is used as a measurement of the performance of a division of a company. It assumes that the division is not responsible for its financing...
How do you record a return deposit item on a bank statement? Definition of Return Deposit Item A return deposit item is usually a customer’s check that was part of a company’s bank deposit. When the company’s bank...
What is a static budget? Definition of Static Budget A static budget is a budget in which the amounts will not change even with significant changes in volume. In contrast to a static budget, a company’s sales...
What is a fixed budget? Definition of Fixed Budget A fixed budget is a budget that does not change or flex for increases or decreases in volume. (“Volume” could be sales, units produced, or some other activity.) A...
in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. Sales minus the cost of good sold equals __________ __________. 2. The...
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...
A non-operating item that results from the sale of a long-term asset for more (gain) or less (loss) than its carrying amount or book value.
How do you record the sale of land? Definition of Sale of Land Assume that a retailer sells land that it had been holding for a future store. The retailer must remove the cost of the land from its general ledger asset...
the defined benefit pension plan, the employer commits to depositing enough money into a pension fund in order to cover the future benefits. Since there is uncertainty in the investment returns, the life expectancy of...
ratios: Debt to equity Debt to total assets In these ratios, debt includes the company’s current and noncurrent liabilities such as: Bonds payable Bank loans Other loans Accounts payable Other amounts owed In a...
. When 10 loaves are produced, the total cost of flour will be $4. If 50 loaves are produced, the cost of flour will be $20 (50 loaves X 1 pound X $0.40 per pound). An expense can also be a variable cost. For instance,...
Are commissions a cost of goods sold account or an expense? Definition of Commissions Commissions are compensation for obtaining sales. Hence, sales commissions are a selling expense and will be recorded in general...
. Example of a Special Journal One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
What are the reasons for high inventory days? Definition of Inventory Days I assume that inventory days is referring to the days’ sales in inventory. If so, then inventory days is also related to the inventory turnover...
What is the accounts receivable collection period? Definition of Accounts Receivable Collection Period The accounts receivable collection period is similar to the days sales outstanding or the days sales in accounts...
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of...
A cost or expense where the total changes in proportion to changes in volume or activity. For example, if a company pays a sales commission on all of its sales, commission expense is a variable expense because...
What is the fixed asset turnover ratio? Definition of Fixed Asset Turnover Ratio The fixed asset turnover ratio shows the relationship between a company’s annual net sales and the net amount of its fixed assets. The...
. Instead, the cost of goods sold is computed as follows: cost of beginning inventory + cost of goods purchased (net of any returns or allowances) + freight-in – cost of ending inventory. This account balance or this...
What is the difference between gross margin and contribution margin? Definition of Gross Margin Some use the term gross margin to mean the same as gross profit, which is: net sales minus the cost of goods sold. Others...
returns and in the U.S. the tax depreciation is based on the regulations of the Internal Revenue Service (IRS). The tax regulations specify the useful life of assets but also allow for accelerated depreciation or the...
our Break-even Point (Explanation). 1. Fixed Expenses do not change in total when there is a modest change in sales. True Right! The total of a fixed expense is indeed fixed (does not change) as the volume increases or...
with the general ledger amounts, but they need to be adjusted to the present and future. False Right! The amounts in the general ledger are past, historical amounts. 6. If a company's sales were to triple, some...
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
What is a variable expense? Definition of Variable Expense An expense is variable when its total amount changes in proportion to the change in sales, production, or some other activity. In other words, a variable expense...
What is the average collection period? Definition of Average Collection Period The average collection period is the average number of days between 1) the dates that credit sales were made, and 2) the dates that the money...
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...
How do you reduce a company's break-even point? Definition of Break-even Point The break-even point is the level of sales where a company’s income statement will report exactly zero net income. The level of sales...
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
Our Explanation of Improving Profits will assist you in focusing on the costs and revenues that are relevant (and ignoring those which are not relevant) for improving profits and eliminating losses. Examples of the...
in a later accounting period. This means that the financial statements for two accounting periods will be reporting incorrect amounts. Example of an Accrual Adjusting Entry for Expenses To illustrate, let’s assume...
Featured Review
"AccountingCoach is an amazing self-teaching tool for those first starting out and also for those that need the refresher course. It is written in a very engaging style that motivates you to read and continue to learn. It is very easy to understand, and breaks down a complicated subject matter into a progressive 'simple to learn and achieve success' system. I am enjoying AccountingCoach so much. I chose to be a member for life. Adding AccountingCoach to my toolbox has been one of the best investments I've made." - Cheryl
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: