Thursday, March 19, 2009

Characteristics of Accounting Assets

The following is by defintion the characteristics of accounting assets
  •          Probable future economics benefits
  •          Obtained or controlled by an entity
  •          Result of past transactions or events.
Assets are controlled by the company with the intent to gain future economic benefit.

Wednesday, March 18, 2009

What is Overhead Cost Controlling?

Many businesses experience an increase in the percentage of indirect costs, which cannot be directly assigned to either goods manufactured, or to the services that they render to customers. Overhead Cost Controlling can be quite important to managers in order to make a company profitable

While cost monitoring and optimization may be quite advanced in production areas, there is often not much of the same in overhead cost areas. In complex accounting systems, the overhead cost controlling subsystem focuses on the monitoring and allocation of these important overheads.

Tuesday, March 17, 2009

Nonoperating Revenues and Gains

The following are some examples of Non- Operating Revenues and Gains:
  • Interest revenue (or interest income
  • Gain on sale of securities
  • Gain on sale of equipment
  • Gain on sale of buildings           
  • Gain on sale of machinery

Auditor Agreed Upon Procedures

What are agreed upon procedures?

In accounting terms "agreed upon procedures" are used when a business client uses an external accounting auditor to perform specific tests and procedures and then report on the results to the client.

Examples of agreed upon procedures include special reviews of a loan portfolio, internal control systems, or capital budgeting analysis. In performing "agreed-upon procedures", the external auditor provides no opinion or assurance that the assertions being made by the company in the financial statements are free from material misstatement.  In fact, the could be wrong but that would implicate auditor ethics.

In conclusion, the users of the financial reports based on agreed-upon procedures must draw their own conclusions on the results of the tests reported and cannot rely on what the auditor discovers.

Sunday, March 15, 2009

Four Significant Dividend Dates

The four following dates are important terms to understand in the distribution of a dividend by a corporation.

  1. Date of Declaration is the day that the dividend is declared by the board of directors of a corporation. At this time, a liability is created on the balance sheet to make the payment come into existence.
  2. Ex- Dividend Date is a date that indicates who is able to receive the dividend. An investor who buys the stock before the ex-dividend date is entitled to receive a dividend from the corporation. On the other hand, an investor who sells their stock before the date will not receive a dividend.
  3. Date of record usually follows the date of declaration by three to four weeks. In order to receive payment of the dividend an investor must be listed as the owner of a stock on this date.
  4. Date of payment is the date on which an investor will be paid a dividend. It usually comes two to three weeks after the date of record
Additional Accounting Examples and Explanations:

Wednesday, March 11, 2009

What are Dead Assets?

In accounting, dead assets are a type of asset that do not have any life beyond their immeadiate use.

Periodic and Perpetual Inventory Differences

What are the main differences that exist between periodic and perpetual inventory accounting? Are periodic accounting systems still relevant to businesses today?

Business that that use periodic inventory accounting have to update their inventory balances periodically as opposed to continually. This inventory accounting method has been used before the introduction of point-of-sales scanners and inventory systems. Now it is easy for retailers to update their inventory balances periodically instead of trying to account for every item sold on a daily basis. 

In contrast, perpetual inventory system accounting, records each sale of merchandise and places an entry in the company's inventory account. The introduction of point-of-sale systems and computers greatly advanced the use of the the perpetual inventory system. This is now the most common way to keep track of an inventory system 

A perpetual inventory system also immediately reduces sold inventory from stock and adds inventory back to stock when a customer returns merchandise to a store. Perpetual inventory accounting systems provide better decision support because of the accuracy. Mainly because every inventory transaction is being recorded and monitored by a computer system. 

Tuesday, March 10, 2009

Multi-Domestic Strategy and Transnational Strategy

What is the difference between at multi-domestic strategy and transnational strategy?

A multi-domestic strategy gives a top priority to quick local responsiveness and commitment. It can be considered a differentiation strategy because the firm attempts to deliver different products and services to different local customers.

On the other hand, a transnational strategy looks at the bigger worldwide picture and tries to take advantage of overall global factors. For example, they will seek location advantage and search to gain economic operating efficiencies worldwide.

Tuesday, March 3, 2009

What is Residual Income?

In accounting and finance, residual income is defined as the net operating income an investment center generates above a company’s minimum required rate of return on its operating assets.

Additional Accounting Links:
Calculate Average Accounting Return

Sunday, March 1, 2009

Calculate Basic Earnings per Share

Earnings per share calculation (EPS) are required by the SEC to be included on the income statements of publicly owned companies. Basic earnings per share is based on the weighted-average number of common shares outstanding for the year.

The number used will ignore dilution caused by the convertible preferred stock.

What is Cost Center Manager?

A cost center manager is an employee who has control over cost, but not revenue or investment funds of a company. For example, a profit center manager will control cost and revenue. On the other hand, an investment center manager has control over cost, revenue, and investment funds of a company.

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.