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Questions & Answers (Q&A)

Q&A Archive (1,094)

What are wages payable?

Wages payable refers to the wages that a company's employees have earned, but have not yet been paid. Under the accrual method of accounting, this amount is likely recorded with an adjusting entry at the end of the accounting period so that… Read More.

What is an unfavorable variance?

In accounting the term variance usually refers to the difference between an actual amount and a planned or budgeted amount. For example, if a company's budget for repairs expense is $50,000 and the actual amount ends up being $45,000 or $63,000, there… Read More.

What is a post-dated cheque?

A post-dated cheque (or postdated check) is a check written with a future date. To illustrate, let's assume that on May 22 Jim owes a supplier $2,000 for purchases made 40 days ago. Since Jim does not have the money to pay… Read More.

What is operating income?

Operating income is also described as income from operations, operating earnings, or operating profit. Operating income will be shown as a subtotal on many corporations' income statements. The operating income will appear after the corporation's operating expenses are subtracted from the operating… Read More.

What is the cost of goods available?

For non-manufacturing companies using the periodic inventory system in its general ledger, the cost of goods available (COGA, or cost of goods available for sale) for a year is the sum of the following: the costs in the beginning inventory (the prior… Read More.

What is a favorable variance?

In accounting the term variance usually refers to the difference between an actual amount and a planned or budgeted amount. For example, if a company's budget for supplies expense is $30,000 and the actual amount is $28,000 or $34,000, there will be… Read More.

What is a flexible budget variance

First, a flexible budget is a budget in which some amounts will increase or decrease when the level of activity changes. A flexible budget variance is the difference between 1) an actual amount, and 2) the amount allowed by the flexible budget.… Read More.

How do you calculate ending inventory?

There are several ways to calculate the cost of a company's ending inventory. The first method is to 1) physically count the quantity of each of the items in inventory and then 2) multiply those quantities by each item's actual unit cost.… Read More.

What is net working capital?

Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company's total amount of current liabilities from its total amount of current assets. Hence, the formula is: net working capital = current assets minus current liabilities.… Read More.

What is net purchases?

Net purchases is used to describe the combination of the amounts recorded in the following general ledger temporary accounts: Purchases, Purchases Discounts, and Purchases Returns and Allowances. These accounts are used by companies having inventories of goods and which use the periodic… Read More.