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GENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for generalADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
SALES JOURNAL
Definition and explanation Sales invoice Format of sales journal Posting from sales journal to subsidiary and general ledger Example Sales journal with sales tax column Definition and explanation The sales journal (also known as sales book and sales day book) is a special journal that is used to record all credit sales. Everytransaction that
GROSS PROFIT ANALYSIS ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & ACCOUNTING FOR CONSIGNMENT Directions! Read the whole text carefully and think the correct word that should fill in the blank space (s) and then confirm your answer by pressing the 'see answer' button. Don't press the 'see answer' button before reading the question text. If you are unable to solve these fill-in-the-blank questions, read accounting for consignmentchapter
EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. EXERCISE-11 (INTERNAL RATE OF RETURN METHOD The first step is to compute internal rate of return factor by dividing investment required to purchase truck by net annual cash inflows. Internal rate of return factor = Investment required/Net annual cash inflow. = $273,400/$50,000. = 5.468.GENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for generalADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
SALES JOURNAL
Definition and explanation Sales invoice Format of sales journal Posting from sales journal to subsidiary and general ledger Example Sales journal with sales tax column Definition and explanation The sales journal (also known as sales book and sales day book) is a special journal that is used to record all credit sales. Everytransaction that
GROSS PROFIT ANALYSIS ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & ACCOUNTING FOR CONSIGNMENT Directions! Read the whole text carefully and think the correct word that should fill in the blank space (s) and then confirm your answer by pressing the 'see answer' button. Don't press the 'see answer' button before reading the question text. If you are unable to solve these fill-in-the-blank questions, read accounting for consignmentchapter
EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. EXERCISE-11 (INTERNAL RATE OF RETURN METHOD The first step is to compute internal rate of return factor by dividing investment required to purchase truck by net annual cash inflows. Internal rate of return factor = Investment required/Net annual cash inflow. = $273,400/$50,000. = 5.468. GROSS PROFIT ANALYSIS Gross profit = Nets sales revenue – Cost of goods sold. For example, if the annual net sales revenue of a company is $1,000,000 and its cost of goods sold is $600,000, the gross profit would be $400,000 (= $1000,000 – $600,000). The gross profit figure is very important for any business because it is used to cover all operating expenses and DIRECT AND INDIRECT MATERIALS COST The cost of direct materials purchased consists of price paid to supplier (including sales taxes) plus duties and shipment cost. The quantity of materials left unused in the stock at the end of an accounting period is presented in balance sheet as a line item named “Raw Materials Inventory”. DIFFERENCE BETWEEN CONSIGNMENT AND SALE In the fields of accounting, business and finance, the meaning and usage of the term consignment significantly differ from those of a regular sale. The term consignment refers to a complete business model which involves all business activities like purchase and transportation of goods, sale of goods, expenditures, and ascertainment of profit or loss. The EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS Qualitative characteristics of financial statements. There are mainly five types of financial statements; statement of financial position, income statement, statement of changes in equity, statement of cash flows and disclosure notes. The former four mainly show the relevant financial data to a business but the last one mostly includes the non CASH RECEIPTS JOURNAL The cash receipts journal manages all cash inflows of a business organization. In other words, this journal is used to record all cash coming into the business. For recording all cash outflows, another journal known as cash disbursements journal or cash payments journal is used.. For making entries in a cash receipts journal, the receipt of cash is usually divided into the following categories: EXERCISE-1 (TARGET PROFIT ANALYSIS, BREAK-EVEN POINT Break even point in units can be computed by using either equation method or contribution margin method. Both the methods are given below: Equation method: Sales = Variable expenses + Fixed expenses. $180Q = $126Q + 270,000. $180Q – $126Q = $270,000. $54Q = STEP DOWN METHOD OF COST ALLOCATION Unlike direct method, the step method (also known as step down method) allocates the cost of a service department to other service departments as well as to operating departments.The cost allocation under step method is a sequential process. It begins with the allocation of cost of the service department that provides the greatest amount of service to other service departments and ends with REORDER LEVEL OF STOCK Reorder level of stock (also known as reorder point or ordering point) in a business is a preset level of stock or inventory at which the business places a new order with its suppliers to obtain the delivery of raw materials or finished goods inventory.. Every business has to maintain a certain level of raw materials or finished goods in its store. This is done in order to sustain theGENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for generalADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
SALES JOURNAL
Definition and explanation Sales invoice Format of sales journal Posting from sales journal to subsidiary and general ledger Example Sales journal with sales tax column Definition and explanation The sales journal (also known as sales book and sales day book) is a special journal that is used to record all credit sales. Everytransaction that
GROSS PROFIT ANALYSIS ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & ACCOUNTING FOR CONSIGNMENT Directions! Read the whole text carefully and think the correct word that should fill in the blank space (s) and then confirm your answer by pressing the 'see answer' button. Don't press the 'see answer' button before reading the question text. If you are unable to solve these fill-in-the-blank questions, read accounting for consignmentchapter
EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. EXERCISE-11 (INTERNAL RATE OF RETURN METHOD The first step is to compute internal rate of return factor by dividing investment required to purchase truck by net annual cash inflows. Internal rate of return factor = Investment required/Net annual cash inflow. = $273,400/$50,000. = 5.468.GENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for generalADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
SALES JOURNAL
Definition and explanation Sales invoice Format of sales journal Posting from sales journal to subsidiary and general ledger Example Sales journal with sales tax column Definition and explanation The sales journal (also known as sales book and sales day book) is a special journal that is used to record all credit sales. Everytransaction that
GROSS PROFIT ANALYSIS ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & ACCOUNTING FOR CONSIGNMENT Directions! Read the whole text carefully and think the correct word that should fill in the blank space (s) and then confirm your answer by pressing the 'see answer' button. Don't press the 'see answer' button before reading the question text. If you are unable to solve these fill-in-the-blank questions, read accounting for consignmentchapter
EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. EXERCISE-11 (INTERNAL RATE OF RETURN METHOD The first step is to compute internal rate of return factor by dividing investment required to purchase truck by net annual cash inflows. Internal rate of return factor = Investment required/Net annual cash inflow. = $273,400/$50,000. = 5.468. GROSS PROFIT ANALYSIS Gross profit = Nets sales revenue – Cost of goods sold. For example, if the annual net sales revenue of a company is $1,000,000 and its cost of goods sold is $600,000, the gross profit would be $400,000 (= $1000,000 – $600,000). The gross profit figure is very important for any business because it is used to cover all operating expenses and DIRECT AND INDIRECT MATERIALS COST The cost of direct materials purchased consists of price paid to supplier (including sales taxes) plus duties and shipment cost. The quantity of materials left unused in the stock at the end of an accounting period is presented in balance sheet as a line item named “Raw Materials Inventory”. DIFFERENCE BETWEEN CONSIGNMENT AND SALE In the fields of accounting, business and finance, the meaning and usage of the term consignment significantly differ from those of a regular sale. The term consignment refers to a complete business model which involves all business activities like purchase and transportation of goods, sale of goods, expenditures, and ascertainment of profit or loss. The EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS Qualitative characteristics of financial statements. There are mainly five types of financial statements; statement of financial position, income statement, statement of changes in equity, statement of cash flows and disclosure notes. The former four mainly show the relevant financial data to a business but the last one mostly includes the non CASH RECEIPTS JOURNAL The cash receipts journal manages all cash inflows of a business organization. In other words, this journal is used to record all cash coming into the business. For recording all cash outflows, another journal known as cash disbursements journal or cash payments journal is used.. For making entries in a cash receipts journal, the receipt of cash is usually divided into the following categories: EXERCISE-1 (TARGET PROFIT ANALYSIS, BREAK-EVEN POINT Break even point in units can be computed by using either equation method or contribution margin method. Both the methods are given below: Equation method: Sales = Variable expenses + Fixed expenses. $180Q = $126Q + 270,000. $180Q – $126Q = $270,000. $54Q = STEP DOWN METHOD OF COST ALLOCATION Unlike direct method, the step method (also known as step down method) allocates the cost of a service department to other service departments as well as to operating departments.The cost allocation under step method is a sequential process. It begins with the allocation of cost of the service department that provides the greatest amount of service to other service departments and ends with REORDER LEVEL OF STOCK Reorder level of stock (also known as reorder point or ordering point) in a business is a preset level of stock or inventory at which the business places a new order with its suppliers to obtain the delivery of raw materials or finished goods inventory.. Every business has to maintain a certain level of raw materials or finished goods in its store. This is done in order to sustain theGENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for general ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & Profit and loss on consignment Cr. EXERCISE-1 (TARGET PROFIT ANALYSIS, BREAK-EVEN POINT Break even point in units can be computed by using either equation method or contribution margin method. Both the methods are given below: Equation method: Sales = Variable expenses + Fixed expenses. $180Q = $126Q + 270,000. $180Q – $126Q = $270,000. $54Q = STANDARD COSTING AND VARIANCE ANALYSIS Problem-1 (Materials, labor and variable overhead variances) Problem-2 (Variance analysis; journal entries) Problem-3 (Computation of actual hours worked by working backward) Problem-4 (Materials and labor variances; computations from incomplete or missing data) Problem-5 (Comprehensive variance analysis, complex computations)QUALITY COSTS
OPERATING RATIO
Operating ratio (also known as operating cost ratio or operating expense ratio) is computed by dividing operating expenses of a particular period by net sales made during that period.Like expense ratio, it is expressed in percentage.. Formula: Operating ratio is computed as follows: The basic components of the formula are operating cost and net sales. Operating cost is equal to cost of goods EARNINGS PER SHARE (EPS) RATIO Earnings per share (EPS) ratio measures how many dollars of net income have been earned by each share of common stock during a certain time period. It is computed by dividing net income less preferred dividend by the number of shares of common stock outstanding during the period. ISSUING STOCK FOR NON-CASH ASSETS Companies need long term fixed assets (land, building and vehicles etc.) to carry out various business activities. One way to acquire these assets is to purchase them for cash and another way is to acquire them in exchange of company’s stock. Issuing stock for non-cash tangible and intangible assets is common among companies butvaluation
EXERCISE-17 (AFTER-TAX CASH FLOWS IN NET PRESENT VALUE Net annual cash inflow = Annual cash inflow – Annual cash expenses. = $45,000 – $5,000. = $40,000. * Value from “ present value of an annuity of $1 in arrears table “. ** Tax savings from depreciation tax shield – depreciation is a tax deductible expense. The printing machine has a positive net present value of $40,402 that makes the PRESENT VALUE OF A SINGLE PAYMENT IN FUTURE The value of money changes over time. The value of a dollar in hand today is more than the value of a dollar to be received a year from now because if you have a dollar in hand today you can invest it elsewhere and earn some interest on it. The present value of anGENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for general ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & Profit and loss on consignment Cr. EXERCISE-1 (TARGET PROFIT ANALYSIS, BREAK-EVEN POINT Break even point in units can be computed by using either equation method or contribution margin method. Both the methods are given below: Equation method: Sales = Variable expenses + Fixed expenses. $180Q = $126Q + 270,000. $180Q – $126Q = $270,000. $54Q = STANDARD COSTING AND VARIANCE ANALYSIS Problem-1 (Materials, labor and variable overhead variances) Problem-2 (Variance analysis; journal entries) Problem-3 (Computation of actual hours worked by working backward) Problem-4 (Materials and labor variances; computations from incomplete or missing data) Problem-5 (Comprehensive variance analysis, complex computations)QUALITY COSTS
OPERATING RATIO
Operating ratio (also known as operating cost ratio or operating expense ratio) is computed by dividing operating expenses of a particular period by net sales made during that period.Like expense ratio, it is expressed in percentage.. Formula: Operating ratio is computed as follows: The basic components of the formula are operating cost and net sales. Operating cost is equal to cost of goods EARNINGS PER SHARE (EPS) RATIO Earnings per share (EPS) ratio measures how many dollars of net income have been earned by each share of common stock during a certain time period. It is computed by dividing net income less preferred dividend by the number of shares of common stock outstanding during the period. ISSUING STOCK FOR NON-CASH ASSETS Companies need long term fixed assets (land, building and vehicles etc.) to carry out various business activities. One way to acquire these assets is to purchase them for cash and another way is to acquire them in exchange of company’s stock. Issuing stock for non-cash tangible and intangible assets is common among companies butvaluation
EXERCISE-17 (AFTER-TAX CASH FLOWS IN NET PRESENT VALUE Net annual cash inflow = Annual cash inflow – Annual cash expenses. = $45,000 – $5,000. = $40,000. * Value from “ present value of an annuity of $1 in arrears table “. ** Tax savings from depreciation tax shield – depreciation is a tax deductible expense. The printing machine has a positive net present value of $40,402 that makes the PRESENT VALUE OF A SINGLE PAYMENT IN FUTURE The value of money changes over time. The value of a dollar in hand today is more than the value of a dollar to be received a year from now because if you have a dollar in hand today you can invest it elsewhere and earn some interest on it. The present value of an EXERCISE-1 (TARGET PROFIT ANALYSIS, BREAK-EVEN POINT Break even point in units can be computed by using either equation method or contribution margin method. Both the methods are given below: Equation method: Sales = Variable expenses + Fixed expenses. $180Q = $126Q + 270,000. $180Q – $126Q = $270,000. $54Q = GROSS PROFIT ANALYSIS Gross profit = Nets sales revenue – Cost of goods sold. For example, if the annual net sales revenue of a company is $1,000,000 and its cost of goods sold is $600,000, the gross profit would be $400,000 (= $1000,000 – $600,000). The gross profit figure is very important for any business because it is used to cover all operating expenses andEXPENSE RATIO
Expense ratio (expense to sales ratio) is computed to show the relationship between an individual expense or group of expenses and sales. It is computed by dividing a particular expense or group of expenses by net sales. Expense ratio is expressed in percentage. Formula: The numerator may be an individual expense or a group of SPECIFIC IDENTIFICATION METHOD Specific identification method can be applied in situations where different purchases can be physically separated. Under this method, each item sold and each item remaining in the inventory is identified. The cost of specific items that are sold during a period is included in the cost of goods sold for that period and the cost of specific items remaining on hand at the end of a period is NET PRESENT VALUE (NPV) METHOD Net present value method (also known as discounted cash flow method) is a popular capital budgeting technique that takes into account the time value of money.It uses net present value of the investment project as the base to accept or reject a proposed investment in projects like purchase of new equipment, purchase of inventory, expansion or addition of existing plant assets and the EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT The Washington Corporation is currently using first-in, first-out (FIFO) method of inventory valuation. The president wants to know the effect of a change in inventory valuation method from first-in, first-out (FIFO) to last-in, first-out (LIFO) method. TRIPLE/THREE COLUMN CASH BOOK The triple column cash book (also referred to as three column cash book) is the most exhaustive form of cash book which has three money columns on both receipt (Dr) and payment (Cr) sides to record transactions involving cash, bank and discounts. A triple column cash book is usually maintained by large firms which make and receive payments in cash as well as by bank and which frequently EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. NET PROFIT (NP) RATIO Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship between net profit after tax and net sales. It is computed by dividing the net profit (after tax) by net sales. Formula: For the purpose of this ratio, net profit is equal to gross profit minus operating expenses and income tax. GROSS PROFIT RATIO (GP RATIO) Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross profit and total net sales revenue. It is a popular tool to evaluate the operational performance of the business . The ratio is computed by dividing the gross profit figure by netsales.
GENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for generalADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
ADVANTAGES AND DISADVANTAGES OF ABSORPTION COSTING Advantages: The main advantages of using absorption costing system are as follows: Absorption costing takes account of the fixed overheads that are involved in the manufacturing process and includes them into the cost of the product, which presents a more realistic cost of a product. Absorption Costing is the most suitable method for thepurposes
ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
ACCOUNTING FOR CONSIGNMENT Directions! Read the whole text carefully and think the correct word that should fill in the blank space (s) and then confirm your answer by pressing the 'see answer' button. Don't press the 'see answer' button before reading the question text. If you are unable to solve these fill-in-the-blank questions, read accounting for consignmentchapter
CASH RECEIPTS JOURNAL The cash receipts journal manages all cash inflows of a business organization. In other words, this journal is used to record all cash coming into the business. For recording all cash outflows, another journal known as cash disbursements journal or cash payments journal is used.. For making entries in a cash receipts journal, the receipt of cash is usually divided into the following categories: EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. EXERCISE-11 (INTERNAL RATE OF RETURN METHOD The first step is to compute internal rate of return factor by dividing investment required to purchase truck by net annual cash inflows. Internal rate of return factor = Investment required/Net annual cash inflow. = $273,400/$50,000. = 5.468.GENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for generalADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
ADVANTAGES AND DISADVANTAGES OF ABSORPTION COSTING Advantages: The main advantages of using absorption costing system are as follows: Absorption costing takes account of the fixed overheads that are involved in the manufacturing process and includes them into the cost of the product, which presents a more realistic cost of a product. Absorption Costing is the most suitable method for thepurposes
ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
ACCOUNTING FOR CONSIGNMENT Directions! Read the whole text carefully and think the correct word that should fill in the blank space (s) and then confirm your answer by pressing the 'see answer' button. Don't press the 'see answer' button before reading the question text. If you are unable to solve these fill-in-the-blank questions, read accounting for consignmentchapter
CASH RECEIPTS JOURNAL The cash receipts journal manages all cash inflows of a business organization. In other words, this journal is used to record all cash coming into the business. For recording all cash outflows, another journal known as cash disbursements journal or cash payments journal is used.. For making entries in a cash receipts journal, the receipt of cash is usually divided into the following categories: EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. EXERCISE-11 (INTERNAL RATE OF RETURN METHOD The first step is to compute internal rate of return factor by dividing investment required to purchase truck by net annual cash inflows. Internal rate of return factor = Investment required/Net annual cash inflow. = $273,400/$50,000. = 5.468. QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS Relevance: The information provided in the financial statements must be relevant to the needs of its users. Although the main statutory recipients of these statements are ‘shareholders’, but there are many other stakeholders that rely on these statements during their decision making process e.g. Fund Providing Institutions (Banks, Insurance Companies, Assets Funding Firms etc.), potential GROSS PROFIT ANALYSIS Gross profit = Nets sales revenue – Cost of goods sold. For example, if the annual net sales revenue of a company is $1,000,000 and its cost of goods sold is $600,000, the gross profit would be $400,000 (= $1000,000 – $600,000). The gross profit figure is very important for any business because it is used to cover all operating expenses and EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. DIFFERENCE BETWEEN CONSIGNMENT AND SALE In the fields of accounting, business and finance, the meaning and usage of the term consignment significantly differ from those of a regular sale. The term consignment refers to a complete business model which involves all business activities like purchase and transportation of goods, sale of goods, expenditures, and ascertainment of profit or loss. The PRESENT VALUE OF AN ANNUITY Annuity means a stream or series of equal payments. For example, you have made an investment that will generate an interest income of $5,000 for you at the end of each year for five years. The income of $5,000 at the end of each year is an annuity. This article explains the computation of present CASH RECEIPTS JOURNAL The cash receipts journal manages all cash inflows of a business organization. In other words, this journal is used to record all cash coming into the business. For recording all cash outflows, another journal known as cash disbursements journal or cash payments journal is used.. For making entries in a cash receipts journal, the receipt of cash is usually divided into the following categories: STEP DOWN METHOD OF COST ALLOCATION Unlike direct method, the step method (also known as step down method) allocates the cost of a service department to other service departments as well as to operating departments.The cost allocation under step method is a sequential process. It begins with the allocation of cost of the service department that provides the greatest amount of service to other service departments and ends with REORDER LEVEL OF STOCK Reorder level of stock (also known as reorder point or ordering point) in a business is a preset level of stock or inventory at which the business places a new order with its suppliers to obtain the delivery of raw materials or finished goods inventory.. Every business has to maintain a certain level of raw materials or finished goods in its store. This is done in order to sustain the EXERCISE-18 (TAX SAVINGS FROM DEPRECIATION TAX SHIELD The annual depreciation would be computed first and then multiplied by 30% or 0.30 to find the annual tax savings from depreciation tax shield. Annual depreciation = $420,000 / 6 years. = $70,000. Annual tax savings from depreciation tax shield = $70,000 × 0.30. = $21,000. TRIPLE/THREE COLUMN CASH BOOK The triple column cash book (also referred to as three column cash book) is the most exhaustive form of cash book which has three money columns on both receipt (Dr) and payment (Cr) sides to record transactions involving cash, bank and discounts. A triple column cash book is usually maintained by large firms which make and receive payments in cash as well as by bank and which frequently ACCOUNTING FOR MANAGEMENT Explanations, Exercises, Problems and Calculators. Welcome to accounting for management This website teaches you financial and managerial accounting for free EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
ADVANTAGES AND DISADVANTAGES OF ABSORPTION COSTING Advantages: The main advantages of using absorption costing system are as follows: Absorption costing takes account of the fixed overheads that are involved in the manufacturing process and includes them into the cost of the product, which presents a more realistic cost of a product. Absorption Costing is the most suitable method for thepurposes
STANDARD COSTING AND VARIANCE ANALYSIS Problem-1 (Materials, labor and variable overhead variances) Problem-2 (Variance analysis; journal entries) Problem-3 (Computation of actual hours worked by working backward) Problem-4 (Materials and labor variances; computations from incomplete or missing data) Problem-5 (Comprehensive variance analysis, complex computations) ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & EXERCISE-1 (UNIT PRODUCT COST UNDER VARIABLE AND Hi, Your explanations are very organized. I have one confusion here, hope you could help solve it: While calculating the “Variable Cost of Good Manufactured”, (either under Absorption or Variable) the “per unit price” is sometimes being multiplied by the “Produced”, while at other times by the units “Sold”.QUALITY COSTS
ISSUING STOCK FOR NON-CASH ASSETS Companies need long term fixed assets (land, building and vehicles etc.) to carry out various business activities. One way to acquire these assets is to purchase them for cash and another way is to acquire them in exchange of company’s stock. Issuing stock for non-cash tangible and intangible assets is common among companies butvaluation
PRESENT VALUE OF A SINGLE PAYMENT IN FUTURE The value of money changes over time. The value of a dollar in hand today is more than the value of a dollar to be received a year from now because if you have a dollar in hand today you can invest it elsewhere and earn some interest on it. The present value of an GROSS PROFIT RATIO (GP RATIO) Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross profit and total net sales revenue. It is a popular tool to evaluate the operational performance of the business . The ratio is computed by dividing the gross profit figure by netsales.
ACCOUNTING FOR MANAGEMENT Explanations, Exercises, Problems and Calculators. Welcome to accounting for management This website teaches you financial and managerial accounting for free EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT Periodic-FIFO: (14,000 units × $60) + (2,000 units × $50) = $840,000 + $100,000. = $940,000. ii. Periodic-LIFO: (12,000 units × $40) + (4,000 units × $44) = $480,000 + $176,000. = $656,000. Notice that the gross profit and net operating income under FIFO is higher than LIFO. When prices of the goods rise, FIFO usually produces highergross
ADVANTAGES AND DISADVANTAGES OF ABSORPTION COSTING Advantages: The main advantages of using absorption costing system are as follows: Absorption costing takes account of the fixed overheads that are involved in the manufacturing process and includes them into the cost of the product, which presents a more realistic cost of a product. Absorption Costing is the most suitable method for thepurposes
STANDARD COSTING AND VARIANCE ANALYSIS Problem-1 (Materials, labor and variable overhead variances) Problem-2 (Variance analysis; journal entries) Problem-3 (Computation of actual hours worked by working backward) Problem-4 (Materials and labor variances; computations from incomplete or missing data) Problem-5 (Comprehensive variance analysis, complex computations) ACCOUNTING FOR CONSIGNMENT The correct answer is “the consignor and is sent to the consignee” (option 1). Question 10 of 30. 10. Question. Which of the following is a correct journal entry to record the loss incurred by a consignment: Profit and loss on consignment Dr. & Consignment Cr. Consignment Dr. & EXERCISE-1 (UNIT PRODUCT COST UNDER VARIABLE AND Hi, Your explanations are very organized. I have one confusion here, hope you could help solve it: While calculating the “Variable Cost of Good Manufactured”, (either under Absorption or Variable) the “per unit price” is sometimes being multiplied by the “Produced”, while at other times by the units “Sold”.QUALITY COSTS
ISSUING STOCK FOR NON-CASH ASSETS Companies need long term fixed assets (land, building and vehicles etc.) to carry out various business activities. One way to acquire these assets is to purchase them for cash and another way is to acquire them in exchange of company’s stock. Issuing stock for non-cash tangible and intangible assets is common among companies butvaluation
PRESENT VALUE OF A SINGLE PAYMENT IN FUTURE The value of money changes over time. The value of a dollar in hand today is more than the value of a dollar to be received a year from now because if you have a dollar in hand today you can invest it elsewhere and earn some interest on it. The present value of an GROSS PROFIT RATIO (GP RATIO) Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross profit and total net sales revenue. It is a popular tool to evaluate the operational performance of the business . The ratio is computed by dividing the gross profit figure by netsales.
ACCOUNTING FOR MANAGEMENT Explanations, Exercises, Problems and Calculators. Welcome to accounting for management This website teaches you financial and managerial accounting for free EXERCISE-1 (TARGET PROFIT ANALYSIS, BREAK-EVEN POINT Break even point in units can be computed by using either equation method or contribution margin method. Both the methods are given below: Equation method: Sales = Variable expenses + Fixed expenses. $180Q = $126Q + 270,000. $180Q – $126Q = $270,000. $54Q =GENERAL JOURNAL
A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts. Other names used for general EXERCISE-1 (UNIT PRODUCT COST UNDER VARIABLE AND Hi, Your explanations are very organized. I have one confusion here, hope you could help solve it: While calculating the “Variable Cost of Good Manufactured”, (either under Absorption or Variable) the “per unit price” is sometimes being multiplied by the “Produced”, while at other times by the units “Sold”.EXPENSE RATIO
Expense ratio (expense to sales ratio) is computed to show the relationship between an individual expense or group of expenses and sales. It is computed by dividing a particular expense or group of expenses by net sales. Expense ratio is expressed in percentage. Formula: The numerator may be an individual expense or a group of NET PRESENT VALUE (NPV) METHOD Net present value method (also known as discounted cash flow method) is a popular capital budgeting technique that takes into account the time value of money.It uses net present value of the investment project as the base to accept or reject a proposed investment in projects like purchase of new equipment, purchase of inventory, expansion or addition of existing plant assets and the NET PROFIT (NP) RATIO Net profit ratio (NP ratio) is a popular profitability ratio that shows relationship between net profit after tax and net sales. It is computed by dividing the net profit (after tax) by net sales. Formula: For the purpose of this ratio, net profit is equal to gross profit minus operating expenses and income tax. MINIMUM LEVEL OF STOCK The minimum level of stock is a certain predetermined minimum quantity of raw materials or merchandise inventory which should always be available in stock in the normal course of business.. The minimum level of inventory is a kind of a precautionary level of inventory which indicates that the delivery of raw materials or merchandise may take more than the normal lead time. EXERCISE-2 (MATERIALS AND LABOR VARIANCE, CAUSES OF Exercise-2 (Materials and labor variance, causes of variances) Alpha Sports Company manufactures high quality sports products. Products are sold in the local as well as international markets. The company uses a well established standard costing system to control costs. One of the products of Alpha Supports Company is a cricket bat. DECLINING BALANCE METHOD OF DEPRECIATION The declining balance method is a widely used form of accelerated depreciation in which some percentage of straight line depreciation rate is used. A usual practice is to apply a 200% or 150% of the straight line rate to calculate depreciation expense for the period. The depreciation rate that is determined in this way is known as declining balance rate or accelerated depreciation rate. ACCOUNTING FOR MANAGEMENT Explanations, Exercises, Problems and Calculators. Welcome to accounting for management This website teaches you financial and managerial accounting for freeADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
KANBAN - DEFINITION, EXPLANATION, ADVANTAGES ANDSEE MORE ON ACCOUNTINGFORMANAGEMENT.ORG OVER OR UNDER-APPLIED MANUFACTURING OVERHEAD The over or under-applied manufacturing overhead is defined as the difference between manufacturing overhead cost applied to work in process and manufacturing overhead cost actually incurred during a period. If the manufacturing overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during a period, the difference is knownNOTES PAYABLE
ADVANTAGES AND DISADVANTAGES OF ABSORPTION COSTING Advantages: The main advantages of using absorption costing system are as follows: Absorption costing takes account of the fixed overheads that are involved in the manufacturing process and includes them into the cost of the product, which presents a more realistic cost of a product. Absorption Costing is the most suitable method for thepurposes
PAYBACK METHOD
Under payback method, an investment project is accepted or rejected on the basis of payback period. Payback period means the period of time that a project requires to recover the money invested in it. It is mostly expressed in years. Unlike net present value and internal rate of return method, payback method does not take into REORDER LEVEL OF STOCK PROBLEM-2 (NET PRESENT VALUE ANALYSIS Problem-2 (Net present value analysis – handling working capital) The Universal Trading Company has obtained a license to introduce a new product for 6 years. The product would be purchased from manufacturing company for $10 per unit and sold to customers for $20 per unit. The estimated annual cash expenses to sell the new productwould be
ACCOUNTING FOR MANAGEMENT Explanations, Exercises, Problems and Calculators. Welcome to accounting for management This website teaches you financial and managerial accounting for freeADJUSTING ENTRIES
Adjusting entries can be divided into the following four types. (1). Adjusting entries that convert assets to expenses: Some cash expenditures are made to obtain benefits for more than one accounting period. Examples of such expenditures include advance payment of rent or insurance, purchase of office supplies, purchase of an officeequipment
ADVANTAGES AND DISADVANTAGES OF FIRST-IN, FIRST-OUT (FIFO Advantages of FIFO method. The first in first out (FIFO) method of inventory valuation has the following advantages for business organization: FIFO method saves money and time in calculating the exact cost of the inventory being sold because the cost will dependupon
KANBAN - DEFINITION, EXPLANATION, ADVANTAGES ANDSEE MORE ON ACCOUNTINGFORMANAGEMENT.ORG OVER OR UNDER-APPLIED MANUFACTURING OVERHEAD The over or under-applied manufacturing overhead is defined as the difference between manufacturing overhead cost applied to work in process and manufacturing overhead cost actually incurred during a period. If the manufacturing overhead cost applied to work in process is more than the manufacturing overhead cost actually incurred during a period, the difference is knownNOTES PAYABLE
ADVANTAGES AND DISADVANTAGES OF ABSORPTION COSTING Advantages: The main advantages of using absorption costing system are as follows: Absorption costing takes account of the fixed overheads that are involved in the manufacturing process and includes them into the cost of the product, which presents a more realistic cost of a product. Absorption Costing is the most suitable method for thepurposes
PAYBACK METHOD
Under payback method, an investment project is accepted or rejected on the basis of payback period. Payback period means the period of time that a project requires to recover the money invested in it. It is mostly expressed in years. Unlike net present value and internal rate of return method, payback method does not take into REORDER LEVEL OF STOCK PROBLEM-2 (NET PRESENT VALUE ANALYSIS Problem-2 (Net present value analysis – handling working capital) The Universal Trading Company has obtained a license to introduce a new product for 6 years. The product would be purchased from manufacturing company for $10 per unit and sold to customers for $20 per unit. The estimated annual cash expenses to sell the new productwould be
ACCOUNTING FOR MANAGEMENT Explanations, Exercises, Problems and Calculators. Welcome to accounting for management This website teaches you financial and managerial accounting for freeNOTES PAYABLE
Definition and explanation Format of note payable Classifications of notes payable Example 1 – journal entries of interest-bearing note Example 2 – journal entries of zero-interest-bearing note Definition and explanation The note payable is a written promissory note in which the maker of the note makes an unconditional promise to pay a certainamount of
KANBAN - DEFINITION, EXPLANATION, ADVANTAGES AND Definition and explanation Kanban is a Japanese manufacturing regulation system which makes use of an instruction manual to control the flow of work, usually the production line in a business. It is also sometimes called as lean manufacturing system. Kanban is a Japanese term which translates to ‘billboard’ or ‘signboard’. It is a management toolPURCHASES JOURNAL
Definition and explanation. Purchases journal (also known as purchases book and purchases day book) is a special journal used by businesses to record all credit purchases. All cash purchases are recorded in another special journal known as cash payment journal or cash disbursements journal.. When merchandise and their invoice are received from supplier, a responsible personnel from receiving NET PRESENT VALUE (NPV) METHOD Net present value method (also known as discounted cash flow method) is a popular capital budgeting technique that takes into account the time value of money.It uses net present value of the investment project as the base to accept or reject a proposed investment in projects like purchase of new equipment, purchase of inventory, expansion or addition of existing plant assets and the QUALITATIVE CHARACTERISTICS OF FINANCIAL STATEMENTS Qualitative characteristics of financial statements. There are mainly five types of financial statements; statement of financial position, income statement, statement of changes in equity, statement of cash flows and disclosure notes. The former four mainly show the relevant financial data to a business but the last one mostly includes the non PERIODIC INVENTORY SYSTEM Explanation Under periodic inventory system inventory account is not updated for each purchase and each sale. All purchases are debited to purchases account. At the end of the period, the total in purchases account is added to the beginning balance of the inventory to compute cost of goods available for sale. The ending inventory is EXERCISE-10 (FIFO AND LIFO BASED INCOME STATEMENT The Washington Corporation is currently using first-in, first-out (FIFO) method of inventory valuation. The president wants to know the effect of a change in inventory valuation method from first-in, first-out (FIFO) to last-in, first-out (LIFO) method. ECONOMIC ORDER QUANTITY Definition and explanation. Economic order quantity (EOQ) is the order size that minimizes the sum of ordering and holding costs related to raw materials or merchandise inventories.In other words, it is the optimal inventory size that should be ordered with the supplier to minimize the total annual inventory cost of RETIREMENT OF TREASURY STOCK The companies buyback their own shares (treasury stock) with the intention to either retire them permanently or reissue them at a future date. This article explains the retirement of treasury stock under cost method and par value method. If you want to understand how shares from treasury stock are reissued, please read the followingarticles: Purchase
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