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...
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...
What is the difference between gross profit and net profit? Definition of Gross Profit Gross profit is defined as net sales minus the cost of goods sold. Example of Gross Profit Assume that a retailer had gross sales of...
accounts payable This current liability account reports the amounts owed to vendors (suppliers) for goods and/or services that were received on credit. accounts payable This current liability account reports the...
The time from when goods are ordered until the time when the goods are received.
Goods placed with another party without transferring ownership. See consigned goods.
The party receiving goods to be sold. See consigned goods.
In estimating the ending inventory under the retail method the cost ratio is the cost of goods available divided by the retail value of the goods available.
Free Alongside Ship. Terms indicating that the seller’s price includes delivery of goods at a ship’s pier. Title to the goods will transfer to the buyer alongside the ship.
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
on the December 31 balance sheet? Select... Assets decrease Liabilities increase Owner's equity increases Use the following information for answering Questions 28 - 29: On December 1, ABC Co. lent $100,000 to a...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
That part of a manufacturer’s inventory that is in the production process and has not yet been completed and transferred to the finished goods inventory. This account contains the cost of the direct material,...
The first-in, first-out cost flow assumumption under the perpetual inventory system. The first (oldest) costs are the first costs removed from inventory at the time that goods are sold. The most recent costs will remain...
To assign or allocate on a logical basis. For example, the materials price variance in a standard costing system is prorated to the following categories: materials inventory, work-in-process inventory, finished goods...
One of the cost flow assumptions associated with the periodic inventory system. The first (oldest) costs are removed from inventory first and are charged to the income statement as cost of goods sold. The recent costs...
The assigning or dividing up of amounts. For example, depreciation is an allocation process because it assigns an asset’s cost to expense in each of the years the asset is expected to be used. There is also an...
What is a common carrier? A common carrier is a business that transports goods for other companies, organizations, or individuals. The common carrier is responsible for any loss associated with the transport of the...
Used in the periodic inventory method to compute the value of inventory and the cost of goods sold. This average cost is based on the total cost of goods available for sale for the entire year (after all purchases for...
This is granted by banks only to very creditworthy customers. It states that the bank will guarantee amounts that its customer incurred when purchasing goods. A letter of credit might be necessary for a U.S. company...
What is lead time in purchasing? In purchasing, lead time is the estimated time between ordering goods and receiving the goods. For instance, if 100 units of Product X are ordered on April 11 and are expected to be...
The last-in, first-out cost flow assumption under the perpetual inventory system. The last (most recent) costs as of the time that goods are sold are the first costs removed from inventory. The oldest costs as of the...
What is net purchases? Definition of Net Purchases Net purchases refers to the combination of the amounts found in the following general ledger temporary accounts: Purchases (gross amount for goods purchased) Purchases...
inwards is considered to be part of the cost of the items purchased. Hence, for inventory items carriage inwards will be part of the cost of the goods available, the cost of inventory, and the cost of goods sold....
. If that amount is significant, the company will prorate the $400,000 to its inventory and to its cost of goods sold. Let’s also assume that the proration will be based on the company’s $1 million of standard...
What are sales? Definition of Sales In accounting, the term sales refers to the revenues earned when a company sells its goods, products, merchandise, etc. When a company sells a noncurrent asset that had been used in...
Can absorption costing cause an increase in net income? Definition of Absorption Costing Absorption costing is a cost accounting method (required by US GAAP) in which a manufacturer must assign fixed manufacturing...
Why does LIFO usually produce a lower gross profit than FIFO? Definition of LIFO LIFO (which is the acronym for Last In, First Out) is a cost flow assumption in which the most recent costs of inventory items are the...
for the actual goods produced. If the actual quantity of the materials used was more than the standard quantity allowed for the good output, the materials usage variance is unfavorable and the general ledger account...
, assigned, or applied to goods produced. Examples of Actual Overhead A few of the many overhead costs are: Electricity used to power the production equipment Natural gas to heat the production facilities Depreciation of...
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...
How do you estimate the amount of uncollectible accounts receivable? Definition of Estimating Uncollectible Accounts Receivable When a company sells goods and/or provides services on account (on credit) using the...
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
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...
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...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
Our Explanation of Accounting Equation (or bookkeeping equation) illustrates how the double-entry system keeps the accounting equation in balance. You will see how the revenues and expenses on the income statement are...
, how will the accounting equation be affected in the period the services occurred? Select... Assets will not be affected Stockholders' equity will not be affected Both assets and stockholders' equity will...
is available at www.FASB.org. assets liabilities equity revenues expenses gains losses comprehensive income 21. Net assets. Select... assets liabilities equity revenues expenses gains losses comprehensive income 22....
, the sale and the related receivable occur when the goods are shipped (FOB shipping point) or when the goods are received by the customer (FOB destination). While there is no accounting entry in the general ledger, it...
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