What is the contribution margin ratio? Definition of Contribution Margin Ratio The contribution margin ratio is the percentage of sales revenues, service revenues, or selling price remaining after subtracting all of the...
What is the contribution margin ratio? Definition of Contribution Margin Ratio The contribution margin ratio is the percentage of sales revenues, service revenues, or selling price remaining after subtracting all of the...
What causes a variation in profit margin and turnover ratios between industries? Mega grocery stores, discount stores, and warehouse clubs often have small profit margins but have high turnover ratios. The small profit...
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...
the future benefit of the cost Examples of Expense Some of the expenses that will be reported on a retailer’s income statement for the month of August include: Cost of goods sold for the August sales. (The date that...
Is there a difference between an expense and an expenditure? Definition of Expense An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or...
What is the purpose of subsidiary ledgers? Definition of Subsidiary Ledger A subsidiary ledger contains the details to support a general ledger control account. For instance, the subsidiary ledger for accounts receivable...
), in units, hours of services provided, etc. The basic calculation of the break-even point in sales dollars for a year is: fixed expenses (fixed manufacturing, fixed SG&A, fixed interest) for the year divided by the...
costs will be referred to as period expenses since they will be reported on the income statement as selling, general and administrative (SG&A) or interest expenses. Example of Period Costs Selling expenses (such as...
can be converted to cash much faster than inventory. The nature of the company’s sales and how customers pay. If a company has very consistent sales via the Internet and its customers pay with credit cards at the time...
to provide the goods or services to the customer or to return the money. Hence, the current liability account Customer Deposits is credited. When the company earns the deposit amount, the current liability will be...
(not sales) in calculating the inventory turnover ratio because the company’s inventory is recorded and reported at its cost (not at its selling prices). However, be cautioned that some people will use sales and...
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....
of goods sold ($225,000 instead of $215,000). The formula for the gross profit is: Net sales – cost of goods sold = gross profit. If net sales for 2023 were $300,000, the gross profit will be incorrectly reported as...
activities. REVENUES URVEEENS Unscramble REVENUES NUEVSREE Unscramble 2. A retailer's revenues. SALES SLSEA Unscramble SALES SSALE Unscramble 3. Costs used up in order to earn revenues. EXPENSES ENEESPSX Unscramble...
account Cash. Select... debit credit 10. The balance you would expect in Accumulated Depreciation. Select... Debit Credit 11. Sales Discounts will likely have a __________ balance. Select... debit credit 12. The entry...
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.
the returns on the owner’s cash investment to be amplified. That is, with financial leverage: an increase in the value of the assets will result in a larger gain on the owner’s cash, when the loan interest rate is...
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...
the accrual method of accounting, which account should be credited at the time of the sale? Select... Accounts Receivable Cash Sales 14. When the company receives the money from its customer that was billed in the prior...
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...
about this topic by reading our Accounts Receivable and Bad Debts Expense (Explanation). 1. When a sale is made with the credit terms of 2/10, net 30, the "10" refers to the __________ discount period. 2....
__________ __________ __________ time. Select... an interval of a moment in 9. The accounts receivable turnover ratio is best calculated using net __________ sales. Select... cash credit cash and credit 10. The payment...
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.
The accounting guideline that permits the violation of another accounting guideline if the amount is insignificant. For example, a profitable company with several million dollars of sales is likely to expense immediately...
The dollar amount associated with the goods in a company’s inventory. Initially the cost per unit is the cost to get the inventory items in place and ready for use. However, under certain circumstances the cost may...
What is the accounting entry when an order is received? There is no accounting entry recorded in a company’s general ledger accounts when an order is received. The reason is that a sale or sales revenues has not yet...
Under the accrual basis of accounting, this account reports the cost of the electricity, heat, sewer, and water used during the period indicated in the heading of the income statement. Because utility companies deliver...
The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the...
costing This costing method allocates all manufacturing overhead costs (including fixed) to products manufactured. This method is required for external financial statements and income tax returns of U.S. companies....
the direct write-off method or the allowance method. Examples of the Write-off of a Bad Account Under the direct write-off method a company writes off a bad account receivable when a specific account is determined to be...
is a contra-asset account. 6. Sales and services that are provided on credit will cause an increase in the asset account __________ __________. 7. Accounts Payable, Wages Payable, and Notes Payable are examples of...
statement. (The cost of goods sold is likely the largest operating expense and it is being matched to the related sales revenue to arrive at a company’s gross profit.) The cost of the items that are not yet sold are...
delivery van, this transaction is outside of the retailer’s main business activities of purchasing and selling merchandise. Therefore, the sale of the van will not be included with the sales of merchandise. Instead, a...
($40,000 X 70%). To comply with the cost principle the company will debit Purchases (or Inventory) for $28,000 and will credit Accounts Payable for $28,000. Early payment discount. Some suppliers offer discounts of 1%...
a huge backlog of orders for the product. Every hour that the machine is running, your company is able to generate sales of $500 while incurring incremental costs and expenses of $200. As a result, your company’s...
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