Accounting Tools

JULY 18, 2023

Obsolete inventory entry. When creating a reserve for obsolete inventory , debit cost of goods sold and credit the reserve for obsolete inventory. When inventory is actually disposed of, debit the reserve and credit inventory. Fixed asset addition entry.

Petty cash 75

Petty cash Accounts Payable Accounts Payable Payroll 75

Accounting Tools

MARCH 8, 2024

What is a Contra Inventory Account? A contra inventory account is a general ledger account that is paired with the inventory account, and which contains a negative balance that represents a reserve for obsolete or damaged goods. It is also useful when inventory is quite old or turnover levels are low.

General Ledger 40

General Ledger Accounting Accounting Financial Statements 40

Accounting Tools

OCTOBER 27, 2023

Obsolete Inventory It can be exceedingly difficult to convert certain inventory items into cash, especially when the inventory is so old that it could be considered obsolete. For example, ABC International has $100,000 of cash, $500,000 of receivables, $1,000,000 of inventory, and $200,000 of accounts payable.

Accounts Payable 40

Accounts Payable Accounts Payable Financial Analysis Accounting 40

Accounting Tools

AUGUST 8, 2023

Related Courses Inventory Management What is Maximum Stock Level? The maximum stock level is a not-to-exceed amount used for inventory planning. This stock level is based on a calculation of the cost of storage, standard order quantities, and the risk of inventory becoming obsolete or spoiling with the passage of time.

Computation 40

Computation 40

Accounting Tools

JANUARY 12, 2024

Related Articles Accounting Career Advice (podcast) The Cost Accountant Position (podcast) The Different Types of Accountants Finally, if the position is in an industry that requires considerable knowledge of operations, require that the person have previous experience within the industry.

Cost Accounting 40

Cost Accounting Accounting Accounting Budgeting 40

Accounting Tools

OCTOBER 20, 2023

Related Courses Accounting for Inventory Inventory Management What are Raw Materials? Since raw materials can be damaged or become obsolete, and require working capital funding to hold, organizations try to keep only a modest amount of raw materials on hand. Related Articles Raw Materials Inventory

Accounting 40

Accounting Accounting 40

Accounting Tools

JUNE 18, 2023

Related Courses Accounting for Inventory How to Audit Inventory There are a number of inventory journal entries that can be used to document inventory transactions. Journal Entry for an Inventory Purchase This is the initial inventory purchase, which is routed through the accounts payable system.

Accounts Payable 40

Accounts Payable Accounts Payable Accounts Receivable Accounts Receivable 40

Accounting Tools

APRIL 17, 2024

First, a firm should only produce as many products as are immediately needed; any additional use of capacity is only going to result in unneeded products that will be stored as inventory , resulting in unnecessary inventory holding costs and the risk of obsolete inventory.

40

40

Accounting Tools

NOVEMBER 3, 2023

However, doing so increases the working capital investment in inventory , since more inventory will be kept on hand. In addition, this extra inventory may become obsolete, which increases the out-of-pocket cost for the business. Related Articles Fixed Overhead Volume Variance Sales Volume Variance Volume Variance

Budgeting 75

Budgeting Cost Accounting Accounting Accounting 75

Accounting Tools

AUGUST 24, 2023

Related Courses Accounting for Inventory Inventory Management What are Holding Costs? Holding costs are the costs incurred to store inventory. Depreciation Cost The company incurs a depreciation charge in each period for all storage space, racks, and equipment that it owns in order to store and handle inventory.

Payroll 40

Payroll Tax Accounting Accounting 40

Accounting Tools

JULY 25, 2023

Or, throwing out obsolete inventory means that the inventory asset will be reduced. Related Articles Accounting Journal Entries Examples of Key Journal Entries How to Write an Accounting Journal Entry Journal Entry Format The Difference Between a Journal and a Ledger This will be a recurring monthly entry.

General Ledger 75

General Ledger Accounts Payable Accounts Payable Bookkeeping 75

Accounting Tools

JUNE 21, 2023

Conversely, a low ratio indicates that a business is investing in too many accounts receivable and inventory assets to support its sales, which could eventually lead to an excessive amount of bad debts and obsolete inventory write-offs.

Accounts Payable 75

Accounts Payable Accounts Payable Accounts Receivable Accounts Receivable 75

Accounting Tools

JANUARY 9, 2024

What is Merchandise Inventory? Merchandise inventory is goods that have been acquired by a distributor, wholesaler, or retailer from suppliers, with the intent of selling the goods to third parties. If the goods are not sold during an accounting period, then they are classified as an inventory asset.

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

JUNE 12, 2023

Examples of subsidiary ledgers are the accounts payable ledger , accounts receivable ledger , fixed assets ledger, inventory ledger , and purchases ledger. Terms Similar to Subsidiary Ledger A subsidiary ledger is also known as a subledger or a subaccount.

General Ledger 75

General Ledger Bookkeeping Financial Statements Accounts Payable 75

Accounting Tools

MARCH 5, 2024

Another common allowance account is the allowance for obsolete inventory. Related AccountingTools Courses Bookkeeper Education Bundle Bookkeeping Guidebook Related Articles Reserve Accounting The Allowance Method

Bookkeeping 40

Bookkeeping Accounts Receivable Accounts Receivable Account Receivables 40

Accounting Tools

AUGUST 6, 2023

Related Courses Accounting for Inventory Business Ratios Guidebook Inventory Management What is Inventory Turnover? Inventory turnover is the average number of times in a year that a business sells and replaces its inventory.

Purchase Order 40

Purchase Order Budgeting Collections Accounting 40

Accounting Tools

AUGUST 23, 2023

Related Courses Inventory Management The Problem With Too Many Product Options The marketing department wants to offer as many variations on a product to customers as possible, in order to fill every conceivable product niche and thereby increase sales.

40

40

Accounting Tools

SEPTEMBER 25, 2023

Related Courses Accounting for Inventory How to Audit Inventory What is Ending Inventory? Ending inventory is the cost of those goods on hand at the end of a reporting period. The aggregate cost of this inventory is used to derive the cost of goods sold of a business that uses the periodic inventory system.

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

NOVEMBER 12, 2023

Related Courses Accounting Controls Guidebook Accounting for Inventory How to Audit Inventory A company's investment in inventory is usually a large one, and it may be comprised of many merchandise items that can be readily stolen and resold. Count the inventory before recording it as received.

Billing 40

Billing Auditing Computation Accounts Payable 40

Accounting Tools

JULY 24, 2023

Examples of valuation reserves are the allowance for doubtful accounts and the allowance for obsolete inventory. Related Articles Reserve Accounting The Difference Between Reserve and Allowance The Distinction Between a Reserve and a Provision Valuation reserves are a key element of accrual basis accounting.

Accruals 40

Accruals Bookkeeping Accounting Accounting 40

Accounting Tools

SEPTEMBER 24, 2023

This cushion is usually created for estimated expenses, such as accrued bonuses, the bad debt reserve , the obsolete inventory reserve, and the warranty reserve. Related Articles Accounting Cushion Cook the Books Cookie Jar Accounting Creative Accounting Earnings Management Secret Reserve

Auditing 40

Auditing Accounting Accounting 40

Accounting Tools

NOVEMBER 2, 2023

This condition is most applicable to inventory , rather than fixed assets. Inefficiency/Obsolescence Some equipment will be rendered obsolete by more efficient equipment, which reduces the usability of the original equipment. Related Articles Is Depreciation a Direct Cost or Indirect Cost? Is Depreciation an Operating Expense?

Auditing 75

Auditing Accounting Accounting 75

Accounting Tools

OCTOBER 1, 2023

Increase Inventory Turnover Review how quickly the company’s inventory is turning over. When inventory is getting stale, consider returning it to the supplier (probably for a restocking fee), and alter the purchasing algorithm to tighten the purchasing criteria for these items.

Collections 40

Collections Accounts Payable Accounts Payable Accounts Receivable 40

Accounting Tools

OCTOBER 22, 2023

Prudence would normally be exercised in setting up, for example, an allowance for doubtful accounts or a reserve for obsolete inventory. Related Articles Accounting Convention Faithful Representation The Characteristics of Useful Accounting Information The prudence concept is only a general guideline.

Financial Statements 75

Financial Statements Bookkeeping Financial Reporting Accounting 75

Accounting Tools

DECEMBER 22, 2023

Examples of Non-Operating Expenses Examples of non-operating expenses are interest expense , derivatives expense, lawsuit settlement expense, loss on disposition of assets, obsolete inventory charges, and restructuring expense.

Financial Analysis 40

Financial Analysis Financial Statements 40

Accounting Tools

JUNE 14, 2023

Related Courses Accounting for Inventory How to Audit Inventory Inventory Management What is Inventory Shrinkage? Inventory shrinkage is the excess amount of inventory listed in the accounting records , but which no longer exists in the actual inventory.

Billing 40

Billing Auditing Invoicing Accounting 40

Accounting Tools

JUNE 14, 2023

Related Courses Accounting for Inventory Business Ratios Guidebook Inventory Management What is Days’ Sales in Inventory? Days' sales in inventory (DSI) indicates the average time required for a company to convert its inventory into sales.

Accounting 40

Accounting Accounting 40

Accounting Tools

JULY 8, 2023

Related Articles Account Analysis Accounting Adjustments Books of Original Entry General Ledger Accounts How to Write an Accounting Journal Entry The Difference Between Nominal Accounts and Real Accounts Thus, when a fixed asset is sold, the accumulated depreciation associated with it is reversed.

Accounting 75

Accounting Accounting General Ledger Accounts Receivable 75

Accounting Tools

OCTOBER 28, 2023

Related Articles Valuation Allowance Valuation Reserve A valuation account is also known as a valuation reserve or contra account.

Accounting 40

Accounting Accounting Accruals Bookkeeping 40

Accounting Tools

OCTOBER 14, 2023

This can be achieved by such techniques as issuing less credit to customers , implementing just-in-time systems to avoid investing in inventory , and lengthening payment terms to suppliers. It is possible to drive for an excessively low proportion of working capital to sales, which can result in inventory stockouts and annoyed customers.

Financial Statements 40

Financial Statements Accounts Payable Accounts Payable Accounts Receivable 40

Accounting Tools

JUNE 14, 2023

Related Courses Accounting for Inventory How to Audit Inventory How to Conduct an Audit Engagement What are Inventory Audit Procedures? If your company records its inventory as an asset and it undergoes an annual audit , then the auditors will be conducting an audit of your inventory.

Auditing 75

Auditing General Ledger Reconciling Invoicing 75

Accounting Tools

JUNE 14, 2023

Another variation is to offer a special commission rate on inventory that management wants to eliminate from stock, usually before the inventory becomes obsolete. Commission Overrides A different commission rate may apply if a certain target is reached.

Payroll 74

Payroll Accruals Collections Accounts Receivable 74

Accounting Tools

JULY 26, 2023

Related Courses Business Ratios Guidebook Inventory Management The Interpretation of Financial Statements What is Days Inventory Outstanding? Days inventory outstanding measures the average number of days required for a business to sell its inventory.

Financial Statements 40

Financial Statements 40

Accounting Tools

OCTOBER 14, 2023

Both accounts receivable and inventory should be included in the calculation. Related Articles Operating Leverage Operating Ratio Return on Operating Assets Sales to Total Assets Ratio Total Asset Turnover Ratio Working Capital Productivity

Accounts Receivable 40

Accounts Receivable Accounts Receivable Account Receivables Financial Statements 40

Accounting Tools

OCTOBER 11, 2023

Examples of adjusting entries include the following: To record depreciation and amortization for the period To record an allowance for doubtful accounts To record a reserve for obsolete inventory To record a reserve for product returns To record the impairment of an asset To record an asset retirement obligation To record a warranty reserve To record (..)

General Ledger 40

General Ledger Bank Reconciliation Reconciling Financial Statements 40

Accounting Tools

OCTOBER 3, 2023

Account Number Description 010 Cash 020 Petty cash 030 Accounts receivable 040 Reserve for bad debts 050 Marketable securities 060 Raw materials inventory 070 Work-in-process inventory 080 Finished goods inventory 090 Reserve for obsolete inventory 100 Fixed assets – Computer equipment 110 Fixed assets – Computer software 120 Fixed assets (..)

Petty cash 40

Petty cash Computation Accounting Accounting 40

Accounting Tools

OCTOBER 7, 2023

Related Courses Effective Customer Service Inventory Management What is a Back Order? Back orders are heavily influenced by the inventory stocking policies of a business. However, this requires a major investment in inventory, and may result in write-offs related to obsolete goods.

Customer Service 40

Customer Service Accounting Accounting 40