Financial Ratios (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (45) Marked Wrong (0) Marked Right (0) financial ratios These relate one amount to another amount. For example, earnings might...
Financial Ratios (Flashcards) Download Single-Sided PDF Download Double-Sided PDF All Cards (45) Marked Wrong (0) Marked Right (0) financial ratios These relate one amount to another amount. For example, earnings might...
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...
Financial Statements Video Training Part 2 Balance sheet: accounts receivable, estimated allowance for doubtful accounts, inventory cost flows (FIFO & LIFO) Must-Watch Video Learn How to Advance Your Accounting and...
A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means the latest (recent) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods Sold.
A reduction in the cost of goods purchased that is allowed by the supplier based on the authorized return of goods. Also a general ledger account in which the purchase returns are recorded under the periodic inventory...
An average that changes with an additional purchase. See perpetual moving average in Explanation of Inventory and Cost of Goods Sold.
A rule that requires that the same inventory cost flow be used on the financial statements as is used on the income tax return.
The optimum purchase (or production) quantity which minimizes the combined total cost of carrying inventory and processing additional purchase orders (or production setups).
A business that sells goods from inventory. The business could be a retailer, wholesaler, distributor, manufacturer, etc.
A parody of FIFO used to describe a very slow-moving item in inventory.
Payables arising from the purchase of merchandise inventory and outside services. See accounts payable.
A cost flow assumption where the last (recent) costs are assumed to flow out of the asset account first. This means the first (oldest) costs remain on hand. To learn more, see Explanation of Inventory and Cost of Goods...
The reduction of an asset’s carrying amount. For example, we often reduce or write down inventory from its cost to its net realizable value when the net realizable value is lower.
The shipping cost to be paid by the buyer of merchandise purchased when the terms are FOB shipping point. Freight-in is considered to be part of the cost of the merchandise and should be included in inventory if the...
In some countries turnover refers to sales. Turnover is also associated with some financial ratios such as the inventory turnover ratio, the accounts receivable turnover ratio, and asset turnover ratio.
A reduction in the cost of goods purchased that is granted by a supplier without the physical return of the goods. Also a general ledger account in which the purchase allowances are recorded under the periodic inventory...
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for less than the amount shown in the company’s accounting records.
This is the sum of the beginning inventory of merchandise plus the net cost of the merchandise purchased including freight-in.
An additional quantity of items held in inventory in order to minimize the chance of an item being out of stock.
Financial ratios such as current ratio, quick ratio, receivables turnover ratio, and inventory turnover ratio. To learn more, see Explanation of Financial Ratios
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.
In the EOQ model, the holding costs are the incremental costs of storing or holding an item in inventory for one year.
A method used by retailers for estimating the cost of ending inventory without tracking the individual units of product.
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...
Adjusting Entries Why Adjusting Entries Are Necessary Adjusting entries are required at the end of each accounting period so that a company’s financial statements reflect the accrual method of accounting. Without...
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...
The temporary contra purchases account used in a periodic inventory system which represents the discounts allowed by paying within prescribed credit terms such as 1/10 (1% can be deducted from the amount owed if paid...
A government index that tracks the changes in prices in order to measure general inflation. This index can be used by small companies to obtain the benefits of LIFO without tracking individual units in inventory. See the...
The amount needed to replace an asset such as inventory, equipment, buildings, etc. If an asset’s replacement cost is greater than the asset’s carrying amount, the cost principle prohibits the use of the...
In the context of inventory, net realizable value or NRV is the expected selling price in the ordinary course of business minus the costs of completion, disposal, and transportation. In the context of accounts receivable...
Often a 1% or 2% discount that a buyer may deduct from the amount owed to a supplier (if stated on the supplier’s invoice) for paying in 10 days instead of the customary 30 days. The purchase discount is also...
This is a non-operating or “other” item resulting from the sale of an asset (other than inventory) for more than the amount shown in the company’s accounting records. The gain is the difference between...
Gains result from the sale of an asset (other than inventory). A gain is measured by the proceeds from the sale minus the amount shown on the company’s books. Since the gain is outside of the main activity of a...
A method where only the variable manufacturing costs are assigned to inventory and the cost of goods sold. Fixed manufacturing costs are viewed as expenses of the period in which they are incurred. This method is not...
A current asset representing the cost of supplies on hand at a point in time. The account is usually listed on the balance sheet after the Inventory account. A related account is Supplies Expense, which appears on the...
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...
A quality of accounting information that facilitates comparing a company’s reporting of one accounting period to another. For example, the reader of a company’s financial statements can assume that the...
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....
The temporary contra purchases account used in a periodic inventory system which represents the amounts of merchandise that were returned to suppliers and the amounts allowed as deductions by suppliers for goods not...
A reduction of a markup. In the retail method of estimating inventory, it could mean the elimination of part or all of the additional markup. For example, if an item with a cost of $10 would normally be priced at $15,...
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