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...
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...
will be too small). The owner’s (or stockholders’) equity will also be too low because of the effect on net income (see next bullet point) The income statement for the current period will overstate (report too much)...
suppliers $10,000 and the supplier gives the company a written promissory note to repay the amount in six months along with interest at 8% per year. The company will debit its current asset account Notes Receivable for...
that a company has steady demand of 12,000 units per year for one of its products. The company purchases the product from its supplier at a cost of $100 each. The company’s incremental cost to process an order is $144...
supplier is unable to deliver additional units at the expected time. If the company is a manufacturer, a safety stock of materials could minimize the risk of production being disrupted. Of course there are additional...
payable are required when a company borrows money from a bank or other lender. Notes payable may also be part of a transaction to acquire expensive equipment. In certain cases, a supplier will require a note payable...
in Dollars of Revenue The formula for determining the break-even point in dollars of product or services is the total fixed expenses divided by the contribution margin ratio (or %). For instance, if a company has total...
that the future value of $1,100 has a present value of $1,000. The difference of $100 will be reported as interest income during the 365 days that the company is earning the interest. Example of the Time Value of Money...
inventory details Since the ending inventory of one accounting period will automatically become the beginning inventory for the next accounting period, the calculation of the cost of goods sold for both accounting...
to determine the approximate amount of inventory that has been lost due to theft, fire, or other reasons. The gross profit method of estimating ending inventory assumes that the gross profit percentage or the gross...
volume increases. False Right! The answer is false because an office manager's salary is not likely to change in total as sales volume changes. 6. A retailer's cost of goods sold is an example of a variable...
One of the cost flow assumptions associated with the periodic inventory system. The latest (recent) costs of goods purchased are removed from inventory first and are charged to the income statement as cost of goods sold....
Terms indicating that the buyer must pay to get the goods delivered. (The buyer will record freight-in and the seller will not have any delivery expense.) With terms of FOB shipping point the title to the goods usually...
The method used for removing costs from the inventory of goods. The cost flow can be different from the physical flow of goods. For example, in the U.S. the LIFO cost flow can be used even if the oldest goods are shipped...
The inventory system where purchases are debited to the inventory account and the inventory account is credited at the time of each sale for the cost of the goods sold. Hence, the balance in the inventory account is...
cost of goods sold is 70% of sales. Next, compute the sales value of the merchandise sold since the last time an inventory amount was known. Let’s assume that the sales amounted to $100,000. Given the sales value of...
Inventory is dormant and contains only the cost of the prior year’s ending inventory. With the periodic inventory system, the costs of additional purchases of goods are debited to the temporary account Purchases....
of vendor invoices, receiving reports, etc. Accounting for goods in transit, goods on consignment, etc. The cost of each item in inventory is based on the actual costs of the items purchased or produced by the company...
. With standard costing, the general ledger accounts for inventories and the cost of goods sold contain the standard costs of the inputs that should have been used to make the actual good output. Differences between the...
assumption (FIFO, LIFO, average) The periodic inventory system requires a calculation to determine the cost of goods sold. Perpetual Inventory System In a perpetual system the account Inventory: Is debited whenever...
Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page. 1. The main revenues for a retail store are __________. 2. Sales minus the cost of goods sold equals...
manufactured are referred to as the good __________. Select... bill budgets efficiency output price rate standard unfavorable usage variance 20. When the standard hours for the goods manufactured are less than the...
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...
Our Explanation of Break-even Point illustrates how to determine the number of units or sales dollars that will result in zero net income. The techniques rely on a product's contribution margin or contribution margin...
, work-in-process, finished goods) and the cost of goods sold will contain the standard costs. (Think of the standard costs as the “should be” costs which are tied to the amounts in the company’s profit plan.) Any...
account with the title Inventory Change or with the title (Increase) Decrease in Inventory. This account is presented as an adjustment to purchases in determining the company’s cost of goods sold. Example of Inventory...
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...
What is a sale on credit? Definition of Sale on Credit A sale on credit is revenue earned by a company when it sells goods and allows the buyer to pay at a later date. This is also referred to as a sale on account....
What is the cost of sales? Definition of Cost of Sales Cost of sales is often a line shown on a manufacturer’s or retailer’s income statement instead of cost of goods sold. The cost of sales for a manufacturer is the...
, accountants might state “we need to get a proper “cut-off” between the end-of-the-month transactions and those that belong in the following month. If a company sells goods and has inventories, its monthly close...
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...
documents may be an electronic record. Examples of Source Documents A few examples of a company’s source documents include: Employees’ time cards that support the company’s weekly payroll Vendors’ invoices for...
exchange, it is said that the stock is publicly traded or that the corporation is a publicly-held corporation or a publicly-traded corporation. Definition of Public Sector Public sector refers to government-owned...
are considered to be a product cost and will be allocated or assigned to the goods produced. The allocated depreciation will be included in the inventory cost of the goods manufactured until the goods are sold. When the...
Why is inventory turnover important? Definition of Inventory Turnover A company’s inventory turnover is often expressed as the company’s cost of goods sold for a year divided by the average cost of inventory during...
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...
main operating activities involve the buying and selling of merchandise or goods. Therefore, the retailer’s income statement will report the following operating expenses: Cost of goods sold. These costs are reported...
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...
. If the company issues monthly income statements, the company will prepare adjusting entries to move $1,000 each month from the Prepaid Rent account to Rent Expense. When a retailer purchases goods to be resold, the...
for the goods has declined. As a result, the goods in inventory can be sold for $14,000, but only if the company spends an additional $2,000 to package and ship the goods. If the inventory is not sold, the accountant is...
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