Relative Fair Value Method

When a business purchases an asset which includes several assets such as land, land improvements, and buildings which have dissimilar depreciation rates, it needs to be able to allocate the total cost of the asset to its component parts. The relative fair market value method is one technique used to carry out this allocation.

Relative Fair Value Method August 9th, 2017Team
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Sales Discount in Accounting

Sales discounts are an expense to a business. They are recorded in the sales discounts account, a contra revenue account offset against the gross revenue of the business.

Sales Discount in Accounting July 28th, 2017Team
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Foreign Currency Transaction Bookkeeping

When a business trades overseas either importing from suppliers or exporting to customers, the transactions are normally conducted in a foreign currency. Since the business reports in a different currency it must reflect any exchange gain or loss when accounting for foreign currency transactions.

Foreign Currency Transaction Bookkeeping July 25th, 2017Team
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Process Costing in Cost Accounting

Process costing is used when a business operates a continuous production line with a sequence of production processes to manufacture indistinguishable units of product.

Process Costing in Cost Accounting July 7th, 2017Team
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Byproduct Accounting

Immaterial waste products arising from a production process are known as byproducts or by-products. The products are usually accounted for in a non-GAAP manner using either the production method or the sales method. The production method recognizes the value of the byproduct when it is produced, and the sales method recognizes the value when the byproduct is sold.

Byproduct Accounting July 5th, 2017Team
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Purchase Commitments Accounting

Accounting for purchase commitments involves accruing for potential losses which arise when a business has contracted to purchase goods at a price which is higher than the current market value of the goods.

Purchase Commitments Accounting June 28th, 2017Team
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Admission of a New Partner

Adding a partner to an existing partnership can result in either goodwill or bonus journal entries depending on which method of accounting is used. The purchase of partnership interest can be undertaken at a valuation equal to, more than, or less than book value.

Admission of a New Partner August 10th, 2017Team
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Capital Improvements After Asset Acquisition

Accounting distinguishes between capital improvements and repairs and maintenance to an asset. A capital improvement is treated as a capital cost and included on the balance sheet of the business, whereas repairs and maintenance are treated as expenses and included in the income statement for the year.

Capital Improvements After Asset Acquisition June 14th, 2017Team
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Deferred Tax Liability Accounting

Deferred tax liabilities are shown as long term liabilities on the balance sheet of a business, and represent obligations to pay income tax at some point in the future arising from temporary timing differences.

Deferred Tax Liability Accounting June 2nd, 2017Team
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Accrual to Cash Conversion

The accruals and cash basis of accounting are two different methods of preparing financial statements. A business can calculate information relating to cash receipts and payments from it’s accrual based accounting system using accrual to cash conversion formulas.

Accrual to Cash Conversion May 16th, 2017Team
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Cash to Accrual Conversion

The cash and accruals basis of accounting are two different methods of preparing financial statements. The conversion from cash basis to accrual basis can be carried out using cash to accrual conversion formulas.

Cash to Accrual Conversion May 9th, 2017Team
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