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Accounting for Revenue and Capital Expenditures

Subsequent expenditures made on property, plant, and equipment can be in the form of either capital or revenue expenditures. As we noted, the distinction between the two is often hazy and depends on the accounting policies developed by management. However, the distinction is important because it affects the determination of current and future periods’ income. …

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Is It Legal to Hire Someone for Writing Essays for Accounting Students?

Many accounting students who write term papers on their own simply do not understand what is the difference between those projects that they wrote themselves and received high marks, and those that are purchased. We are ready to show with a few examples of what the difference is between professionally written works and those that …

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How to measure the acquisition cost of property, plant and equipment?

According to the FASB, “the historical cost of acquiring an asset includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use.” In terms of property, plant, and equipment, this means that all the reasonable and necessary costs required to get the asset to its location and ready …

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Aging method of accounts receivable/Uncollectible accounts

What is the aging method? – Explanation The aging method is based on determining the desired balance in the account Allowance for Uncollectible Accounts. The accountant attempts to estimate what percentage of outstanding receivables at year-end will ultimately not be collected; ‘this amount becomes the desired ending balance in the Allowance for Uncollectible Accounts, and …

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Credit Policy

What are credit policies? – Definition A firm could adopt a very conservative credit policy and extend credit only to customers with excellent credit ratings. Although this type of policy virtually eliminates bad debts or uncollectible accounts, the firm can lose sales and profits by not extending credit to individuals or firms with less-than-perfect credit …

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Prepping for a New Year: How Your Business can Resolve to Improve its Bottom Line

The beginning of a new year is the perfect time for businesses of all kinds to make a few important operational or financial changes. Businesses across the world will resolve to improve cash flow, increase revenues, or find other ways to improve their bottom line. However, while creating resolutions is undeniably a productive step in …

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Goods in transit

What is meant by goods in transit? Definition Goods in transit are goods that have been purchased but have not yet been received by the purchaser. These goods can be easily overlooked when counting the ending inventory because they are not physically located at either the seller’s or the purchaser’s warehouse. Accounting Treatment of goods …

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General Ledger Practical Problems and Solutions

Problem No.1: (Opening a Factory Ledger) The following balance appeared in the books of Marry & Company on December 31, 2018.   Cash $39,000 Accounts Receivable 15,000 Stores 21,000 Work-in-process Materials 10,000 Work-in-process Labour 7,000 Work-in-process factory overhead 8,000 Finished Goods 14,000 Machinery & Equipment 1,36,000 Land & Building 2,40,000 Capital Stock $2,50,000 Retained Earnings …

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Job Order Costing Examples, Practical Problems and Solutions

Problem No. 1: (Job Order Costing Cycle) The Excellent Company had the following inventories on April 1, 2019: $ Raw Material 50,000 Finished Goods 28,000 WIP – Material 2,000 WIP – Labour 30,000 WIP – FOH 12,000 During the month the cost of material purchased was $120,000, direct labor cost incurred was $160,000 and factory …

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Common Dollar Statements Definition

What is meant by the common dollar statement? The financial statement in which the appropriate total figure is set to 100%, and in which other items are expressed as a percentage of that figure.

Operating Changes Definition

What is meant by operating changes? Operating changes are the transactions that result from the production, purchase, and sale of the firm’s goods and services, and that affect net working capital, and ultimately retained earnings (also called income statement transactions).

Financial Changes Definition

What is meant by “Financial Changes”? The changes in the net working capital from other than operating transactions, such as the sale or purchase of noncurrent assets are called financial changes.

All Financial Resources Definition

What is meant by all financial resources? The concept used in the preparation of the statement of changes in financial position when exchange transactions, such as the exchange of land for capital stock, are considered as both a source and a use of net working capital or cash.

Temporal Method Definition

What is Temporal Method? Temporal Method is a method of foreign currency translation by which monetary assets and liabilities are translated at current rates, while nonmonetary assets and liabilities are translated at rates in effect when the particular item was acquired. Income statement items are translated at the average exchange rate for the period.

Specific Price Level Changes

What is meant by Specific Price Level Changes? Those price changes reflect the fluctuation in the value of specific goods or services vis-a-vis other goods or services.

Realized gains or losses

What are realized gains or losses? The difference between expenses on a current cost basis and on a historical cost basis, which represents the holding gains or losses the firm has realized through sales or use in the current period.

Purchasing power gains or losses

What are purchasing power gains or losses? Those gains or losses that result from holding monetary assets (cash and rights to receive cash) and monetary liabilities (all liabilities other than those requiring the performance of service) during periods of inflation or deflation.

International Federation of Accountants (IFAC)

What is the International Federation of Accountants (IFAC)? The international accounting body that is essentially a coordinating body of professional accounting organizations, and does not have the responsibility for setting international accounting standards; instead, the board objective is the development and enhancement of a coordinated worldwide accounting profession with harmonized standards.

Foreign currency transactions definition

What are foreign currency transactions? Transactions that are denominated in foreign currency. For example, a U.S. firm makes a sale to an overseas firm and agrees to accept payment in foreign currency, or a purchase is made from an overseas firm and payment must be made in the foreign currency.

Current method definition

What is the current method? A method of foreign currency translation under which all balance sheet items can be translated at a current exchange rate at the date of the financial statements; income statement items are translated at the average exchange rate for the period.  

Purchase Method Definition

What is the Purchase Method? A method of preparing consolidated financial statements in which the net assets of the purchased company are revalued to their fair market value is called purchase method.

Publicly Held Corporation

What is meant by Publicly Held Corporation? A corporation, the stock of which is owned by outside investors, and which stock and/or bonds are listed on a national and regional exchange.

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