Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
Fees earned from providing services and the amounts of merchandise sold. Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received...
Why is Rent Expense a debit and Service Revenues a credit? Why Rent Expense is a Debit Rent expense (and any other expense) will reduce a company’s owner’s equity (or stockholders’ equity). Owner’s equity which...
is it)? Accounts Receivable (asset) Wrong. Accounts Receivable would be credited if the $1,000 received was a collection of an amount billed previously. Prepaid Services (asset) Wrong. Prepaid Services is an asset...
in inventory is a component in the calculation of the Cost of Goods Sold, which is often presented on a company’s income statement. An increase in inventory will be subtracted from a company’s purchases of goods,...
or when they have been used up. Mark as wrong Mark as right operating revenues These revenues refer to amounts earned by a company from its main products or services. operating revenues These revenues refer to amounts...
that under the accrual basis of accounting: Revenues are reported in the accounting period in which they are earned (as opposed to when cash is collected) Expenses are reported in the accounting period when they best...
What is the significance of FOB Shipping Point and FOB Destination? Significance of FOB Shipping Point and FOB Destination The terms FOB shipping point and FOB destination have significance in accounting because they...
Why do purchases appear as expenses on an income statement? Definition of Purchases In the context of companies that sell merchandise, the term purchases refers to the purchases of goods that are intended to be sold to...
When calculating inventory turnover, do you use sales or the cost of goods sold? I calculate the inventory turnover by using the cost of goods sold. I use the cost of goods sold because inventory is in the general ledger...
An expense outside of a company’s main operating activities of buying and selling merchandise or providing services. For example, interest expense is a nonoperating expense.
A person or organization that gives or donates money, property, services, etc.
A projection or estimate of the future quantities and selling prices of products and/or services.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
In activity-based costing this refers to the allocation of the cost of activities (determined by stage 1 allocations) to the cost objects such as products or services.
A bill issued by a seller of merchandise or by the provider of services. The seller refers to the invoice as a sales invoice and the buyer refers to the same invoice as a vendor invoice.
An organization without owners and with the main purpose of providing services needed by society. After application and approval by the U.S. Internal Revenue Service, a nonprofit organization may be granted tax exempt...
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...
from disposing of an old asset, etc. The net cash flows also include the cash outflows such as paying for new equipment, paying for goods and services from the last accounting period, repaying bank loans, making a...
What is the allowance method? Definition of Allowance Method The allowance method usually refers to one of the two ways for reporting bad debts expense that results from a company selling goods or services on credit....
such as the sale of goods and fees earned from providing services Nonoperating revenues (or other income), earned peripheral activities. An example is interest income that is earned by a retailer when it invests its...
at the time of the previous physical inventory. Let’s assume this occurred on the prior December 31. Determine the cost of all the goods that were purchased since December 31. Combine Step 1 and Step 2 to arrive at...
Financial Statements Video Training Part 9 Income statement: revenues, cost of goods sold, expenses, nonoperating items Must-Watch Video Learn How to Advance Your Accounting and Bookkeeping Career Perform better at your...
What is work-in-process inventory (WIP)? Definition of Work-in-process Inventory Work-in-process (WIP) inventory pertains to the goods for which the manufacturing has begun, but not yet completed. In other words, WIP is...
more, see Explanation of Inventory and Cost of Goods Sold. A current asset resulting from selling goods or services on credit (on account). Invoice terms such as (a) net 30 days or (b) 2/10, n/30 signify that...
What is the periodic inventory system? Definition of Periodic Inventory System The periodic inventory system does not update the general ledger account Inventory when a company purchases goods to be resold. Rather than...
that is used up or expires in the accounting period. As a result, the cost is reported as an expense on the income statement. Definition of a Product Cost A product cost is a cost that is either directly or indirectly...
Terms indicating that the seller will incur the delivery expense to get the goods to the destination. With terms of FOB destination the title to the goods usually passes from the seller to the buyer at the destination....
will have no entries until it is adjusted at the end of the accounting year so that it reports the cost of the ending inventory. Under the periodic system, the cost in the account Purchases will be added to the cost of...
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.
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.
A balance sheet liability account that reports amounts received in advance of being earned. For example, if a company receives $10,000 today to perform services in the next accounting period, the $10,000 is unearned in...
This current liability account will show the amount a company owes for items or services purchased on credit and for which there was not a promissory note. This account is often referred to as trade payables (as opposed...
The party who delivered its goods to another party (consignee). The objective is for consignee to sell the goods for the consignor. Also see consigned goods.
On account. Goods purchased with terms of net 10 days, net 30 days, or 2/10, net 30 are goods purchased on credit. Goods sold with similar terms are sales on credit.
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...
in the company’s general ledger account Materials Purchase Price Variance. The company’s general ledger accounts for inventories (raw materials, work-in-process inventory, finished goods) and the cost of goods sold...
. Expressed another way, to rotate the stock of goods on hand means that the physical flow of goods will result in the first or oldest goods being sold first. However, the accounting cost flows do not have to agree with...
rate The three product costs are used for calculating the cost of goods sold and the cost of the various inventories. If there is a difference between the total amount of overhead costs applied to the products and the...
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