Wednesday, August 20, 2008

T Account Debit Balance

An account is said to have a debit balance if:

A. the normal balance is debit without regard to the amount in the account
B. the first entry of the account was a debit
C. there are more entries on the debit side than on the credit side
D. the amount of the debits exceeds the amount of the credits


Answer: A

Sunday, August 17, 2008

Full Disclosure Accounting Principle

The Full Disclosure Accounting principle is very important to external users of accounting information. It is required that information pertinent to investors and lenders be disclosed in financial statements or attached in notes to financial states.

The Full Disclosure Accounting Principle is the reason that footnotes are attached to annual company reports.

Example of Full Disclosure Accounting Principle:

If a company is involved in legal litigation it is necessary that investors and lenders be informed of this information. When preparing annual financial statements the result of the lawsuit is still unknown to the company but can have significant impact on the company's financials.

Therefore, the full disclosure principle requires that the lawsuit be mentioned in notes accompanying the financial statements.

What is Opportunity cost?

Definition of Opportunity cost is the potential future benefit that is sacrificed when one alternative decision is selected over another decision. These opportunity costs are not usually entered into the accounting records of an organization, but must be explicitly considered in all financial decisions.

An example of an opportunity cost would be the amount of wages lost while on vacation.

Saturday, August 16, 2008

Basic Equation Inventory Accounts

Use the following accounting inventory equation to calculate the ending balance of inventory accounts:


Beginning Inventory Balance
+ Additions to Inventory
- Withdrawals from Inventory
=Ending Inventory Balance

This concept can also be applied to raw materials, work in process, and finished goods inventories.

Friday, August 15, 2008

Net Cash Flow Investing Activities

Use the following accounting records to calculate net cash flow from investing activities

A landscaping company sold equipment for $60,000 cash, purchased a building for $80,000 (by signing a note payable for $50,000, and paying the remainder in cash), sold short-term investments for $20,000 cash, and repaid a different note payable for $25,000 plus $1,500 of interest. The net cash flow from investing activities for the year was:


Answer:
$50,000

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Thursday, August 14, 2008

What is Trial Balance?

The trial balance lists all account balances in the general ledger. If the books are in balance, the total debits will equal the total credits. This is required with any trial balance.

Wednesday, August 13, 2008

Journalizing Accounting Transactions

Step 1: Analyze transactions and source documents.
Step 2: Apply double-entry accounting
Step 3: Record journal entry
Step 4: Post entry to ledger

Sunday, August 10, 2008

FIFO LIFO Inventory Problem

1. The main advantage to the last-in, first-out method LIFO method of inventory compared to first-in, first-out FIFO method of inventory costing include:

A. a closer relationship between ending inventory and current cost
B. higher net income with inflation.
C. Lower income tax with inflation.
D. Easier record keeping


Answer:

B

Additional Inventory Accounting Practice Problems:
FIFO Inventory and Increasing Taxes
Inventory Cost Flow Assumptions

Thursday, August 7, 2008

Difference between Discretionary Fixed Cost and Committed fixed cost

What are the main differences between a discretionary fixed cost and a committed fixed cost?

Definition of discretionary fixed cost and committed fixed cost
  • A discretionary fixed cost has a short future planning horizon—under a year. These types of costs arise from annual decisions of management to spend in specific fixed cost areas, such as marketing and research.
  • A committed fixed cost has a long future planning horizon— more than on year. These types of costs relate to a company’s investment in assets such as facilities and equipment. Once such costs have been incurred, the company is required to make future payments

Tuesday, August 5, 2008

Calculate Accounting Variance Method Problem

Which one of the following accounting variances are calculated using the same method?


A) Materials quantity variance and labor efficiency variance.
B) Labor rate variance and labor efficiency variance.
C) Materials price variance, materials quantity variance, and total materials variance.
D) Materials price variance and materials quantity variance.


Answer: A

Additional Accounting Help:

Calculate Material Quantity Variance
Calculate Direct Labor Variance

Monday, August 4, 2008

FIFO Inventory Increasing Taxes Paid Problem

Under FIFO Inventory Methods, taxes paid will only increase when __________.

A. Costs are constant
B. Costs are declining
C. Costs are increasing
D. FIFO Inventory will always yield the highest taxes paid



Answer:
C

Saturday, August 2, 2008

Accounting Example Intangible Assets

Intangible assets are a type of asset class that do physically exist, but provide measurable economic benefits to the company that owns them.

Examples of Intangible Assets Include:

  1. Trademark
  2. Copyright
  3. Patent
  4. Goodwill

Friday, August 1, 2008

Calculate Net Realizable Value (NRV)

How to Calculate NRV?

Net Realizable Value (NRV)
= Estimated Selling Price - Cost of Completion and Disposal

Net Realizable Value (NRV)
is the amount of money a company will receive immediately for the disposal of an asset less a reasonable estimation of the actual costs required to dispose or sell the asset (for example brokers commission)

Popular Accounting Problems

The information on this site is for informational purposes only and should not be used as a substitute for the professional advice of an accountant, tax advisor, attorney, or other professional.