## Monday, January 28, 2008

### What are Current Liabilities

Definition of Current Liabilities:

They are expected to be paid within one year or the company’s operating cycle, whichever is longer. For example, inventory purchased on credit is often a short term liability. These are expected to be paid quickly in the short term.

## Friday, January 25, 2008

### Calculating Direct Labor Variances

Direct Labor (DL) Rate Variance =
(actual hrs used x actual rate per hr) – (actual hrs used x standard rate per hr)

Direct Labor (DL) Efficiency Variance =
(actual hrs used x standard rate per hr) – (standard hrs allowed x standard rate per hr)

Calculate Accounting Variance Problem

## Wednesday, January 23, 2008

### Assumptions of CVP Analysis

Assumptions of CVP Analysis

1. Selling price is constant.
2. Costs are completely linear.
3. In multi-product companies, the sales mix is constant.
4. In manufacturing companies, inventory accounts do not change,units produced = units sold.

## Friday, January 18, 2008

A list of Online Tax Accounting Links for Accountants and Accounting Students:

Education

These links are very useful for accountants and accounting students.

## Thursday, January 17, 2008

### What is Extraordinary Loss?

An extraordinary loss is a loss that is unpredictable, infrequent in occurrence, and completely unforeseen. Extraordinary Losses are reported separately, less applicable taxes, in the company's GAAP requires that these losses be reported to outside parties

Examples of Extraordinary Loss:
• Certain Acts of Terrorism
• A Hurricane on Lake Erie
• An earthquake in New York City
• Monsoon in Chicago
• Pirate Attacks

The predetermined overhead rate used to apply overhead to finished jobs is determined before the period begins. Are any of the accounting records affected at this point in time?

POHR
=

Estimated total manufacturing overhead cost for the coming period
-------------------------------------------------------------------
Estimated total units in the allocation base for the coming period
The next important step is to apply manufacturing overhead to production that has occurred....

Overhead applied = POHR × Actual activity

Extra Accounting Examples and Practice Problems:

## Wednesday, January 16, 2008

### Merchandising Accounting Journal Entry

The follow is an accounting example to show how to record the sale of an item in a merchandising company. An item is sold for \$45 while the actual cost expense is \$25.

Accounting Ledger

Cash
45.00

Sales

45.00

# CREDIT

Cost of Goods Sold
25.00

Inventory

25.00

## Tuesday, January 15, 2008

### Journal Entry for Net Loss

The journal entries to close revenues and expenses for a company which suffers a net loss (opposite of net income) must include a:
A. Debit to retained earnings C. Credit to Retained Earnings
B. Debit to salaries expense D. Credit to sales revenue

Explanation for Journal Entry Accounting Problem:

To close revenues and expenses with a net loss, on must credit the temporary account and debit retained earnings.

## Monday, January 14, 2008

### Financial Statements

Financial statements (or financial reports) are a record of a business' financial flows (revenues/expenses) and levels (assets/liabilities). The big four statements are :

1. Balance sheet which describes a company's assets, liabilities and net equity at both a specific point of time and at the beginning of the period of time.
2. Income statement which describes a company's income, expenses and net income/loss over a period of time.
3. Cash flow statement which describes how much cash was used in corporate operating, investment, and financing activities over a period of time.
4. Statement of changes in shareholder equity which reconciles the difference between the equity at the two different points in time..

## Sunday, January 13, 2008

### Operating Rent Expense Journal Entries

 Accounting Name Debit Credit Operating Rent Expense 6000 Cash 5000 Liability 1000

## Saturday, January 12, 2008

### What are Direct Materials?

Direct Materials (DM) are raw materials that become a specific part of a product and that can be specifically traced directly to it.

Examples of Direct Materials (DM)
• Iron
• Aluminum
• Wood
• Nuts and Bolts
• Glass

## Tuesday, January 1, 2008

### Calculating Job order costing and process costing in a manufacturing company

Differences between Job order and process costing:

Similarities
• Objectives (accumulating production costs, assigning costs to products)
• Flow of costs
• Use of factory overhead accounts (normal costing system)

Differences
• Manufacturing environment
• Cost object used for cost accumulation (departments not jobs as in job order costing)
• Usually have multiple WIP accounts (includes transferred in costs included in product costs)

Example Job Order Costing Practice Problem:

A Business Card company, reported the following operations results for last period:

Direct material purchased \$160,000
Direct material used 79,000
Direct labor charges 170,000

During the year, products costing \$310,000 were completed, and products costing \$316,000 were sold for \$455,000.

1. Prepare separate journal entries for each of the following based on the above information:

a. Purchase of raw materials on account.
b. Use of direct materials in production.
c. Direct labor charges.
d. Application of manufacturing overhead to production.

2. Compute gross profit as reported on the period’s income statement for the company.

1a. RM Inventory Debit 160,000
Accounts Payable Credit 160,000

1b. WIP Debit 79,000
RM Inventory Credit 79,000

1c. WIP Debit 170,000
Wages Payable Credit 170,000

1d. WIP Debit 90,000
MOH Credit 90,000

2. MOH
100,000 90,000

COGS 10,000
MOH 10,000

Sales 455,000