Kate Mooney

Accounting, as you may guess, involves a lot of math. As you practice various types of accounting problems, and when you begin doing accounting work for real, you will need to utilize various formulas to calculate the information you need.10 useful accounting formulasThe following are some of the most frequently used accounting formulas.

A journal entry is a record of transactions that includes the date of each transaction, the account numbers, account names, and amounts to be debited and credited. When an accountant looks at a journal entry, she can decipher what happened in that transaction. Here are a couple of practice questions to test whether you can translate a journal entry into English.

Manufacturing costs are directly associated with production; they include direct materials, direct labor, variable overhead, and fixed overhead. A manufacturer will use this information to determine the cost of their product. In the following practice questions, you are asked to weed out the non-manufacturing costs and then calculate the total manufacturing costs for two different companies.

When you calculate a company's annual net income, you have to consider the company's assets, liabilities, and whether cash dividends or new stock have been issued. The following practice questions ask you to calculate annual net income, with and without cash dividends. Practice questions At the end of its first year, a company estimates its end-of-year balances to be: Total assets: $2,500,000 Total current liabilities: $800,000 Total long-term liabilities: $200,000 If there are no other equity transactions, what is the net income for the year?

When a bookkeeper records sales transactions for a company, the way she records them depends on whether the sales are made on account, with credit cards, or with cash. The following practice questions ask you to combine all three transaction types in order to calculate a company's total sales for a day. Practice questions Use the following information to answer the questions.

The following are some of the most frequently used accounting formulas. This list is not comprehensive, but it should cover the items you’ll use most often as you practice solving various accounting problems. Balance sheet formula Assets – liabilities = equity (or assets = liabilities + equity) This basic formula must stay in balance to generate an accurate balance sheet.

After you create financial statements, you need some tools to analyze a company’s results. Following are the most frequently used formulas to analyze financial statements. Get familiar with them so that you can analyze statements with confidence. Components of work-in-process Direct materials + direct labor + factory overhead applied Work-in-process (WIP) represents cost incurred in production for partially completed goods.

After you create financial statements, you need some tools to analyze the company’s results. Following are some additional formulas accountants use to analyze financial statements. Become familiar with these formulas, and use them as you practice various accounting problems. Burden rate Fixed manufacturing costs ÷ units produced Fixed costs can’t be directly traced to a unit produced.

An accountant uses depreciation is to allocate the cost of a fixed asset over the years of its useful life. The straight-line depreciation method is the most popular type because it allocates the same amount of depreciation to each year the asset is in use. The following practice questions show the straight-line depreciation method in action.