What is Economic Profit (or Loss)? Economic profit (or loss) occurs when a company’s revenue from selling goods or services exceeds the company’s total costs of production. This excess profit is also known as economic rent. What is the economic function of profits and losses? Profits and losses are the lifeblood of any business, and … Read more
Activity cost drivers are those factors that influence the cost of an activity. They can be used to allocate indirect costs to the products or services that consume those resources. The most common activity cost drivers are labor hours, machine hours, and the number of transactions. In order to allocate indirect costs using activity cost … Read more
The average age of inventory is a measure of the average time that inventory items are held by a company. The average age of inventory is calculated by dividing the number of days in a period by the number of inventory turns. The average age of inventory is a useful metric for managing inventory levels … Read more
Unfavorable variance is the difference between the actual results and the budgeted or expected results. A negative variance indicates that the actual results are worse than the budgeted or expected results. Unfavorable variance can be caused by a number of factors, including inefficiency, poor planning, and unfavorable economic conditions. What is RO in accounting? RO, … Read more
The Statement of Financial Accounting Concepts (SFAC) is a publication of the Financial Accounting Standards Board (FASB). The SFAC provides guidance on the objectives, basic assumptions, and fundamental principles of financial accounting and reporting. What are the 5 components of financial statements? 1. The balance sheet: This statement lists a company’s assets, liabilities, and shareholder … Read more
What are administrative expenses, and what are some examples? Is interest expense a general and administrative expense? Yes, interest expense is a general and administrative expense. This is because interest expense is an indirect cost incurred in the course of operating a business. As such, it is classified as a general and administrative expense. Is … Read more
The cost of carry is the cost of holding an asset over a period of time. This cost can be in the form of interest, storage, insurance, or other expenses. The cost of carry is important to investors because it can impact the return on their investment. For example, if an investor buys a stock … Read more
Extraordinary repairs are those necessary to keep an asset in working condition, but which are not part of the asset’s normal maintenance. Extraordinary repairs are not expected to occur on a regular basis, and are not necessary to keep the asset in its normal, everyday operating condition. What account is depreciation expense? Depreciation expense is … Read more
Above-the-line costs are those incurred in the normal course of business, before any income or expenses related to financing are taken into account. These costs include items such as raw materials, labor, and overhead. What is difference between EBIT and EBITDA? EBIT stands for “earnings before interest and taxes.” EBITDA stands for “earnings before interest, … Read more
A leasehold is an interest in land that is held by a lessee, or tenant, for a specified period of time. The leasehold estate is created by a lease, which is a contract between the lessee and the lessor, or landlord. The lease sets forth the terms and conditions of the tenancy, including the length … Read more
