Saturday, January 22, 2011

Accumulating Costs Job-Order Costing System

Accumulating Costs in a Job-Order Costing System

In a typical job-order costing system, the costs of direct material, direct labor, and manufacturing overhead are assigned to each individual production job that is undertaken by the company.

These job order costs usually comprise the inputs of the product costing system.  When the company incurs costs to make a product, they are added to the Work-in-Process Inventory (WIP) account in the accounting general ledger.

To keep track of the manufacturing costs assigned to each job, a subsidiary ledger is maintained by an accountant

Job-cost sheet are used to accumulate the costs of direct material, direct labor, and manufacturing overhead assigned for a specific job. Other sections are used to record the total cost and average unit cost for the job.

Thursday, January 20, 2011

Section 172 Net Operating Loss NOLS

The LOSS CARRYOVER PROVISION of §172, which permit a tax payer with a “net operating loss” in one tax year to use the NOL to offset positive income in the other years. An NOL may be used to offset net income in the two years proceeding the loss year, and in the 20 years following the loss year.

NOLs are deductions from gross income, Long range HORIZONTAL EQUITY

Two year limitation on carrybacks, income AFTER the taxable period
Carryover- maximum of 20 years, income BEFORE the taxable event.

§ 172(d) disallows personal exemptions in calculating NOLS, no negative income for personal exemptions. ONLY BUSINESS LOSSES, NO PERSONAL LOSSES

Monday, January 17, 2011

What business activities entitle a company to be "multinational"?

What kinds of business activities entitle a company to be called "multinational"? 

The label multinational is a broad designation given to companies that engage in business functions beyond their domestic borders. This definition encompasses both companies large and small. A multinational company will engage in certain business activities that distinguish from a purely national company. Yet with the increasing impact of globalization many companies are finding themselves faced with situations that only multinational faced before.

An obvious example of a business activity that a multi-national company would be engaged in is international sales. The largest US companies such as Exxon and Wal Mart are seeing international sales account for a larger percentage of total revenue. A multinational company might also purchase supplies from abroad or have manufacturing facilities located in a foreign country.

This has been a popular option with US garment manufacturers in efforts to reduce labor and supply costs. These are only a few examples of business activities that multinationals are engaged in, in the future it is predicted that more and more domestic companies will face similar situations.

Saturday, January 15, 2011

Imputed Cost Performance Evaluation

An imputed cost is a cost which does not involve actual cash outlay by a company. Imputed cost is considered a hypothetical cost from the point of view of financial accounting. Calculating imputed costs are generally used only for the purpose of decision making and performance evaluation.

For example, interest on capital is common type of imputed cost. This is because an actual payment of interest is made, but the basic concept is that the funds could have been invested elsewhere to earn interest.

Thus, imputed costs are a type of opportunity costs.

Tuesday, January 11, 2011

What is a Greenfield investment?

A Greenfield investment s a type of foreign direct investment when a firm constructs new facilities in a foreign country.  The rapid pace of technological change and liberalization of foreign investment policies are greatly increasing this type of foreign direct investments.  A Greenfield investment is often the most expensive and riskiest type of investment a company can make.

Popular Accounting Problems

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