{"appState":{"pageLoadApiCallsStatus":true},"categoryState":{"relatedCategories":{"headers":{"timestamp":"2022-08-15T12:31:18+00:00"},"categoryId":34226,"data":{"title":"Accounting","slug":"accounting","image":{"src":null,"width":0,"height":0},"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226}],"parentCategory":{"categoryId":34225,"title":"Business","slug":"business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"}},"childCategories":[{"categoryId":34227,"title":"Audits","slug":"audits","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34227"},"image":{"src":"/img/background-image-2.fabfbd5c.png","width":0,"height":0}},{"categoryId":34228,"title":"Bookkeeping","slug":"bookkeeping","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34228"},"image":{"src":"/img/background-image-1.daf74cf0.png","width":0,"height":0}},{"categoryId":34229,"title":"Calculation & Analysis","slug":"calculation-analysis","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34229"},"image":{"src":"/img/background-image-2.fabfbd5c.png","width":0,"height":0}},{"categoryId":34230,"title":"General Accounting","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"image":{"src":"/img/background-image-1.daf74cf0.png","width":0,"height":0}}],"description":"Accounting is the language of business. With help from Dummies, you can be fluent in no time.","relatedArticles":{"self":"https://dummies-api.dummies.com/v2/articles?category=34226&offset=0&size=5"},"hasArticle":true,"hasBook":true},"_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"}},"relatedCategoriesLoadedStatus":"success"},"listState":{"list":{"count":10,"total":1139,"items":[{"headers":{"creationTime":"2016-03-26T14:45:15+00:00","modifiedTime":"2022-08-11T17:10:57+00:00","timestamp":"2022-08-11T18:01:08+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Separable Cost Reduction in Cost Accounting","strippedTitle":"separable cost reduction in cost accounting","slug":"separable-cost-reduction-in-cost-accounting","canonicalUrl":"","seo":{"metaDescription":"In cost accounting, you want to reduce separable costs, when possible. Learn how to figure joint costs and separable cost reduction.","noIndex":0,"noFollow":0},"content":"In cost accounting, the cost of goods available for sale represents the product’s total costs. Total costs have two components — joint costs and separable costs. When possible, you want to reduce separable costs, but first take a look at your company’s joint costs.\r\n\r\nAssume you manufacture leaf blowers. Your two products are heavy-duty blowers and yardwork blowers. The separable costs are $1,200,000 for the heavy-duty blower and $912,000 for the yardwork blower. If you know the separable costs and the cost of goods available for sale, you can compute the joint cost allocation. This table shows the process.\r\n<table><caption>Joint Cost Allocation</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Cost of goods available for sale</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td>Less separable costs</td>\r\n<td>$1,200,000</td>\r\n<td>$912,000</td>\r\n<td>$2,112,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Equals joint cost allocation</b></td>\r\n<td><b>$551,163</b></td>\r\n<td><b>$348,837</b></td>\r\n<td><b>$900,000</b></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nEach company division provides the separable costs. So altogether, this table gives you a joint cost allocation.\r\n\r\nNow assume that the heavy-duty blower division is able to sharply reduce its separable costs to an amazingly low $500,000. The first table listed heavy-duty separable costs of $1,200,000. Consider what now happens to heavy-duty’s joint cost allocation. Take a look at the next table.\r\n<table><caption>Cost Allocation — Less Heavy Duty Separable Costs</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Cost of goods available for sale</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td>Less separable costs</td>\r\n<td>$500,000</td>\r\n<td>$912,000</td>\r\n<td>$1,412,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Equals joint cost allocation</b></td>\r\n<td><b>$1,251,163</b></td>\r\n<td><b>$348,837</b></td>\r\n<td><b>$1,600,000</b></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nHeavy-duty’s joint cost allocation increases to $1,251,163 (from $551,163). That doesn’t seem right. The goal is to analyze costs to reduce or eliminate them. If you do, supposedly you increase your profits.\r\n\r\nIn this case, the heavy-duty division’s reducing separable costs <i>increased</i> its joint cost allocation. There doesn’t seem to be a benefit to operating more efficiently.\r\n\r\nHere’s an explanation: The gross margin percentage method (calculated as gross margin ÷ total sales value x 100) <i>locks</i> in total costs as a percentage of sales value. If the gross margin is about 12.5 percent of sales value, it means that costs must be about 87.5 percent of sales value. For heavy-duty, that 87.5 percent total cost number is $1,751,163. Those costs are either separable or joint costs. If one increases, the other decreases.\r\n\r\nThe heavy-duty manager may have a problem with this process. The manager works hard (using good old cost accounting) to lower the separable costs. The manager’s “reward” is a higher joint cost allocation. The heavy-duty division has lowered costs but doesn’t get any savings in total costs.\r\n\r\nThe constant gross margin percentage method clarifies the revenue and profit calculations company-wide. This method eliminates some of the variation between company divisions. Although some managers may complain, each division has the same gross margin percentage. The process makes managing company profit easier.\r\n<p class=\"Tip\">This is one of those “Here’s why the chief financial officer (CFO) makes the big bucks” moments. As CFO, you explain the gross margin percentage method to the heavy-duty division manager. The goal is to allocate joint costs so that each product maintains the same gross margin percentage of about 12.5 percent. If a division reduces separable costs, it must get a bigger joint cost allocation — <i>otherwise, the gross margin percentage would increase</i>.</p>\r\nNow heavy-duty’s manager should be evaluated based on the successful cost reduction. The manager had a success, and you want to encourage more cost savings. Although the gross margin percentage process requires a bigger joint cost allocation, that must not take away from the manager’s good performance.","description":"In cost accounting, the cost of goods available for sale represents the product’s total costs. Total costs have two components — joint costs and separable costs. When possible, you want to reduce separable costs, but first take a look at your company’s joint costs.\r\n\r\nAssume you manufacture leaf blowers. Your two products are heavy-duty blowers and yardwork blowers. The separable costs are $1,200,000 for the heavy-duty blower and $912,000 for the yardwork blower. If you know the separable costs and the cost of goods available for sale, you can compute the joint cost allocation. This table shows the process.\r\n<table><caption>Joint Cost Allocation</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Cost of goods available for sale</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td>Less separable costs</td>\r\n<td>$1,200,000</td>\r\n<td>$912,000</td>\r\n<td>$2,112,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Equals joint cost allocation</b></td>\r\n<td><b>$551,163</b></td>\r\n<td><b>$348,837</b></td>\r\n<td><b>$900,000</b></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nEach company division provides the separable costs. So altogether, this table gives you a joint cost allocation.\r\n\r\nNow assume that the heavy-duty blower division is able to sharply reduce its separable costs to an amazingly low $500,000. The first table listed heavy-duty separable costs of $1,200,000. Consider what now happens to heavy-duty’s joint cost allocation. Take a look at the next table.\r\n<table><caption>Cost Allocation — Less Heavy Duty Separable Costs</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Cost of goods available for sale</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td>Less separable costs</td>\r\n<td>$500,000</td>\r\n<td>$912,000</td>\r\n<td>$1,412,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Equals joint cost allocation</b></td>\r\n<td><b>$1,251,163</b></td>\r\n<td><b>$348,837</b></td>\r\n<td><b>$1,600,000</b></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nHeavy-duty’s joint cost allocation increases to $1,251,163 (from $551,163). That doesn’t seem right. The goal is to analyze costs to reduce or eliminate them. If you do, supposedly you increase your profits.\r\n\r\nIn this case, the heavy-duty division’s reducing separable costs <i>increased</i> its joint cost allocation. There doesn’t seem to be a benefit to operating more efficiently.\r\n\r\nHere’s an explanation: The gross margin percentage method (calculated as gross margin ÷ total sales value x 100) <i>locks</i> in total costs as a percentage of sales value. If the gross margin is about 12.5 percent of sales value, it means that costs must be about 87.5 percent of sales value. For heavy-duty, that 87.5 percent total cost number is $1,751,163. Those costs are either separable or joint costs. If one increases, the other decreases.\r\n\r\nThe heavy-duty manager may have a problem with this process. The manager works hard (using good old cost accounting) to lower the separable costs. The manager’s “reward” is a higher joint cost allocation. The heavy-duty division has lowered costs but doesn’t get any savings in total costs.\r\n\r\nThe constant gross margin percentage method clarifies the revenue and profit calculations company-wide. This method eliminates some of the variation between company divisions. Although some managers may complain, each division has the same gross margin percentage. The process makes managing company profit easier.\r\n<p class=\"Tip\">This is one of those “Here’s why the chief financial officer (CFO) makes the big bucks” moments. As CFO, you explain the gross margin percentage method to the heavy-duty division manager. The goal is to allocate joint costs so that each product maintains the same gross margin percentage of about 12.5 percent. If a division reduces separable costs, it must get a bigger joint cost allocation — <i>otherwise, the gross margin percentage would increase</i>.</p>\r\nNow heavy-duty’s manager should be evaluated based on the successful cost reduction. The manager had a success, and you want to encourage more cost savings. Although the gross margin percentage process requires a bigger joint cost allocation, that must not take away from the manager’s good performance.","blurb":"","authors":[{"authorId":9050,"name":"Kenneth Boyd","slug":"kenneth-boyd","description":"Ken Boyd, a former CPA, has more than 37 years of experience in accounting, education, and financial services. He is the owner of Accounting Accidentally (<a href=\"https://www.accountingaccidentally.com/\" target=\"_blank\" rel=\"noopener\">www.accountingaccidentally.com</a>), which provides written and video content on accounting, personal finance, and entrepreneurship topics. His YouTube channel (<a href=\"https://www.youtube.com/user/kenboydstl\" target=\"_blank\" rel=\"noopener\">kenboydstl</a>) has hundreds of videos on accounting and finance.\r\n\r\nIn recent years, Boyd has served as an adjunct professor of accounting at the Cook School of Business at St. Louis University. He has written hundreds of articles for QuickBooks, Investopedia, and a number of other publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9050"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General Accounting","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208104,"title":"Cost Accounting For Dummies Cheat Sheet","slug":"cost-accounting-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208104"}},{"articleId":171024,"title":"Must Know Formulas for Cost Accounting","slug":"must-know-formulas-for-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171024"}},{"articleId":171020,"title":"Important Terms and Principles Cost Accountants Should Know","slug":"important-terms-and-principles-cost-accountants-should-know","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171020"}},{"articleId":171019,"title":"Avoiding Pitfalls on Cost Accounting Exams","slug":"avoiding-pitfalls-on-cost-accounting-exams","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171019"}},{"articleId":166828,"title":"Accrual Accounting in Cost Accounting","slug":"accrual-accounting-in-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/166828"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282119,"slug":"cost-accounting-for-dummies","isbn":"9781119856023","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119856027-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/9781119856023-203x255.jpg","width":203,"height":255},"title":"Cost Accounting For Dummies, 2nd Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"34810\">Kenneth W. Boyd</b></b> has 30 years of experience in accounting and financial services. He is a four&#45;time Dummies book author, a blogger, and a video host on accounting and finance topics.</p>","authors":[{"authorId":34810,"name":"Kenneth W. Boyd","slug":"kenneth-w-boyd","description":" <p><b>Kenneth W. Boyd</b> has 30 years of experience in accounting and financial services. He is a four&#45;time Dummies book author, a blogger, and a video host on accounting and finance topics. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34810"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119856023&quot;]}]\" id=\"du-slot-62f543e45387a\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119856023&quot;]}]\" id=\"du-slot-62f543e454193\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-08-11T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":164989},{"headers":{"creationTime":"2016-03-26T14:45:17+00:00","modifiedTime":"2022-08-11T17:07:36+00:00","timestamp":"2022-08-11T18:01:08+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Cost Accounting: Joint Cost Allocation and Gross Margin Percentage","strippedTitle":"cost accounting: joint cost allocation and gross margin percentage","slug":"cost-accounting-joint-cost-allocation-and-gross-margin-percentage","canonicalUrl":"","seo":{"metaDescription":"In cost accounting, if you know the separable costs and costs of goods for sale, you can calculate joint cost allocation. Here's how.","noIndex":0,"noFollow":0},"content":"In cost accounting, the cost of goods available for sale represents the product’s total costs. Total costs have two components — joint costs and separable costs.\r\n\r\nAssume the <i>cost of goods</i><i> available for sale</i> are $1,751,163 and $1,260,837 for the heavy-duty blower and the yardwork blower. Say the <i>separable costs</i> are $1,200,000 and $912,000. If you know the separable costs and the cost of goods available for sale, you can compute the joint cost allocation. The first table shows the process.\r\n<table><caption>Joint Cost Allocation</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Cost of goods available for sale</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td>Less separable costs</td>\r\n<td>$1,200,000</td>\r\n<td>$912,000</td>\r\n<td>$2,112,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Equals joint cost allocation</b></td>\r\n<td><b>$551,163</b></td>\r\n<td><b>$348,837</b></td>\r\n<td><b>$900,000</b></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nEach company division provides the separable costs. So altogether, the table gives you a joint cost allocation.\r\n\r\nNow calculate the <i>gross margin percentage</i>. Say your <i>sales values</i> are $2,000,00 and $1,440,000 for heavy-duty and yardwork blowers. The total cost is the cost of goods available for sale from the first table. The gross margin percentage is the gross margin divided by the sales value. For each product, the gross margin percentage is the same (12.442 percent) as the company’s overall gross margin.\r\n<table><caption>Verifying Gross Margin Percentage</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Sales value (<i>A</i>)</td>\r\n<td>$2,000,000</td>\r\n<td>$1,440,000</td>\r\n<td>$3,440,000</td>\r\n</tr>\r\n<tr>\r\n<td>Total cost (<i>B</i>)</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Gross margin (</b><b><i>A</i></b> <b>–</b>\r\n<b><i>B</i></b><b>)</b></td>\r\n<td><b>$248,837</b></td>\r\n<td><b>$179,163</b></td>\r\n<td><b>$428,000</b></td>\r\n</tr>\r\n<tr>\r\n<td>Gross margin percentage</td>\r\n<td>12.442</td>\r\n<td>12.442</td>\r\n<td></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nHere’s the point of this table: it uses the traditional formula to compute gross margin and gross margin percentage. The table verifies that the calculations are correct.\r\n\r\nIf the heavy-duty product has the higher sales value, it ends up with a higher gross margin in dollars than the yardwork product. However, both sale values are multiplied by the same gross margin percentage. Both products have a gross margin of about 12.5 percent (rounded). That means that about 87.5 percent of sales value represents cost of goods available for sale.","description":"In cost accounting, the cost of goods available for sale represents the product’s total costs. Total costs have two components — joint costs and separable costs.\r\n\r\nAssume the <i>cost of goods</i><i> available for sale</i> are $1,751,163 and $1,260,837 for the heavy-duty blower and the yardwork blower. Say the <i>separable costs</i> are $1,200,000 and $912,000. If you know the separable costs and the cost of goods available for sale, you can compute the joint cost allocation. The first table shows the process.\r\n<table><caption>Joint Cost Allocation</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Cost of goods available for sale</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td>Less separable costs</td>\r\n<td>$1,200,000</td>\r\n<td>$912,000</td>\r\n<td>$2,112,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Equals joint cost allocation</b></td>\r\n<td><b>$551,163</b></td>\r\n<td><b>$348,837</b></td>\r\n<td><b>$900,000</b></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nEach company division provides the separable costs. So altogether, the table gives you a joint cost allocation.\r\n\r\nNow calculate the <i>gross margin percentage</i>. Say your <i>sales values</i> are $2,000,00 and $1,440,000 for heavy-duty and yardwork blowers. The total cost is the cost of goods available for sale from the first table. The gross margin percentage is the gross margin divided by the sales value. For each product, the gross margin percentage is the same (12.442 percent) as the company’s overall gross margin.\r\n<table><caption>Verifying Gross Margin Percentage</caption>\r\n<tbody>\r\n<tr>\r\n<th></th>\r\n<th>Heavy-Duty</th>\r\n<th>Yardwork</th>\r\n<th>Total</th>\r\n</tr>\r\n<tr>\r\n<td>Sales value (<i>A</i>)</td>\r\n<td>$2,000,000</td>\r\n<td>$1,440,000</td>\r\n<td>$3,440,000</td>\r\n</tr>\r\n<tr>\r\n<td>Total cost (<i>B</i>)</td>\r\n<td>$1,751,163</td>\r\n<td>$1,260,837</td>\r\n<td>$3,012,000</td>\r\n</tr>\r\n<tr>\r\n<td><b>Gross margin (</b><b><i>A</i></b> <b>–</b>\r\n<b><i>B</i></b><b>)</b></td>\r\n<td><b>$248,837</b></td>\r\n<td><b>$179,163</b></td>\r\n<td><b>$428,000</b></td>\r\n</tr>\r\n<tr>\r\n<td>Gross margin percentage</td>\r\n<td>12.442</td>\r\n<td>12.442</td>\r\n<td></td>\r\n</tr>\r\n</tbody>\r\n</table>\r\nHere’s the point of this table: it uses the traditional formula to compute gross margin and gross margin percentage. The table verifies that the calculations are correct.\r\n\r\nIf the heavy-duty product has the higher sales value, it ends up with a higher gross margin in dollars than the yardwork product. However, both sale values are multiplied by the same gross margin percentage. Both products have a gross margin of about 12.5 percent (rounded). That means that about 87.5 percent of sales value represents cost of goods available for sale.","blurb":"","authors":[{"authorId":9050,"name":"Kenneth Boyd","slug":"kenneth-boyd","description":"Ken Boyd, a former CPA, has more than 37 years of experience in accounting, education, and financial services. He is the owner of Accounting Accidentally (<a href=\"https://www.accountingaccidentally.com/\" target=\"_blank\" rel=\"noopener\">www.accountingaccidentally.com</a>), which provides written and video content on accounting, personal finance, and entrepreneurship topics. His YouTube channel (<a href=\"https://www.youtube.com/user/kenboydstl\" target=\"_blank\" rel=\"noopener\">kenboydstl</a>) has hundreds of videos on accounting and finance.\r\n\r\nIn recent years, Boyd has served as an adjunct professor of accounting at the Cook School of Business at St. Louis University. He has written hundreds of articles for QuickBooks, Investopedia, and a number of other publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9050"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General Accounting","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208104,"title":"Cost Accounting For Dummies Cheat Sheet","slug":"cost-accounting-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208104"}},{"articleId":171024,"title":"Must Know Formulas for Cost Accounting","slug":"must-know-formulas-for-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171024"}},{"articleId":171020,"title":"Important Terms and Principles Cost Accountants Should Know","slug":"important-terms-and-principles-cost-accountants-should-know","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171020"}},{"articleId":171019,"title":"Avoiding Pitfalls on Cost Accounting Exams","slug":"avoiding-pitfalls-on-cost-accounting-exams","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171019"}},{"articleId":166828,"title":"Accrual Accounting in Cost Accounting","slug":"accrual-accounting-in-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/166828"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282119,"slug":"cost-accounting-for-dummies","isbn":"9781119856023","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119856027-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/9781119856023-203x255.jpg","width":203,"height":255},"title":"Cost Accounting For Dummies, 2nd Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"34810\">Kenneth W. Boyd</b></b> has 30 years of experience in accounting and financial services. He is a four&#45;time Dummies book author, a blogger, and a video host on accounting and finance topics.</p>","authors":[{"authorId":34810,"name":"Kenneth W. Boyd","slug":"kenneth-w-boyd","description":" <p><b>Kenneth W. Boyd</b> has 30 years of experience in accounting and financial services. He is a four&#45;time Dummies book author, a blogger, and a video host on accounting and finance topics. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34810"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119856023&quot;]}]\" id=\"du-slot-62f543e44984b\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119856023&quot;]}]\" id=\"du-slot-62f543e44a0cd\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-08-11T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":164995},{"headers":{"creationTime":"2016-03-26T15:35:26+00:00","modifiedTime":"2022-08-02T18:46:54+00:00","timestamp":"2022-08-02T20:19:04+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"What Capital Is in Corporate Finance","strippedTitle":"what capital is in corporate finance","slug":"what-capital-is-in-corporate-finance","canonicalUrl":"","seo":{"metaDescription":"Learn about the types of assets and capital within a corporation, including the cash used to launch the venture.","noIndex":0,"noFollow":0},"content":"Everything that makes up a corporation and everything a corporation owns, including the building, equipment, office supplies, brand value, research, land, trademarks, and everything else, are considered <i>assets.</i> Believe it or not, when you start a corporation, that company’s assets aren’t just included in a Welcome Letter; you have to go out and acquire them. Generally speaking, you start off with cash, which you then use to purchase other assets.\r\n\r\nFor most new companies, this cash consists of a combination of the following:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>The owner’s own money:</b> This money is considered <i>equity</i> because the owner can still claim full possession over it.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Small loans, such as business and personal loans from banks, business and personal lines of credit, and government loans:</b> The money obtained through loans is considered a <i>liability</i> because the corporation has to pay it back at some point. In other words, these loans are a form of debt.</p>\r\n</li>\r\n</ul>\r\nThe combination of these two funding sources leads to the explanation of the most fundamental equation in corporate finance:\r\n<blockquote>Assets = Liabilities + Equity</blockquote>\r\nThe total value of assets held by a company is equal to the total liabilities and total equity held by the company. Because the total amount of debt a company incurs goes into purchasing equipment and supplies, increasing debt through loans increases a company’s liabilities and total assets.\r\n\r\nAs an owner contributes his own funding to the company’s usage, the total amount of company equity increases along with the assets. <b><i>Note:</i></b> <i>Capital, assets, money,</i> and <i>cash</i> are basically all the same thing at this point; after a company raises the original capital, or cash, it exchanges that cash for more useful forms of capital, such as erasable markers.\r\n\r\nUnlike liabilities,<i> </i>equity represents ownership in the company. So if a company owns $100,000 in assets and $50,000 was funded by loans, then the owner still holds claim over $50,000 in assets, even if the company goes out of business, requiring the owner to give the other $50,000 in assets back to the bank.\r\n\r\nFor corporations, the equity funding varies a bit, however, because the owners of a corporation are the stockholders. The equity funding of corporations comes from the initial sale of stock, which exchanges shares of ownership for cash to be used in the company.","description":"Everything that makes up a corporation and everything a corporation owns, including the building, equipment, office supplies, brand value, research, land, trademarks, and everything else, are considered <i>assets.</i> Believe it or not, when you start a corporation, that company’s assets aren’t just included in a Welcome Letter; you have to go out and acquire them. Generally speaking, you start off with cash, which you then use to purchase other assets.\r\n\r\nFor most new companies, this cash consists of a combination of the following:\r\n<ul class=\"level-one\">\r\n \t<li>\r\n<p class=\"first-para\"><b>The owner’s own money:</b> This money is considered <i>equity</i> because the owner can still claim full possession over it.</p>\r\n</li>\r\n \t<li>\r\n<p class=\"first-para\"><b>Small loans, such as business and personal loans from banks, business and personal lines of credit, and government loans:</b> The money obtained through loans is considered a <i>liability</i> because the corporation has to pay it back at some point. In other words, these loans are a form of debt.</p>\r\n</li>\r\n</ul>\r\nThe combination of these two funding sources leads to the explanation of the most fundamental equation in corporate finance:\r\n<blockquote>Assets = Liabilities + Equity</blockquote>\r\nThe total value of assets held by a company is equal to the total liabilities and total equity held by the company. Because the total amount of debt a company incurs goes into purchasing equipment and supplies, increasing debt through loans increases a company’s liabilities and total assets.\r\n\r\nAs an owner contributes his own funding to the company’s usage, the total amount of company equity increases along with the assets. <b><i>Note:</i></b> <i>Capital, assets, money,</i> and <i>cash</i> are basically all the same thing at this point; after a company raises the original capital, or cash, it exchanges that cash for more useful forms of capital, such as erasable markers.\r\n\r\nUnlike liabilities,<i> </i>equity represents ownership in the company. So if a company owns $100,000 in assets and $50,000 was funded by loans, then the owner still holds claim over $50,000 in assets, even if the company goes out of business, requiring the owner to give the other $50,000 in assets back to the bank.\r\n\r\nFor corporations, the equity funding varies a bit, however, because the owners of a corporation are the stockholders. The equity funding of corporations comes from the initial sale of stock, which exchanges shares of ownership for cash to be used in the company.","blurb":"","authors":[{"authorId":9764,"name":"Michael Taillard","slug":"michael-taillard","description":" <p><b>Michael Taillard, PhD, MBA,</b> owns and operates OPII Schools, an award-winning national private school and tutoring company designed as a philanthropic experiment in macroeconomic cash flows as a form of urban renewal.</p>","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9764"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General Accounting","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208127,"title":"Corporate Finance For Dummies Cheat Sheet","slug":"corporate-finance-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208127"}},{"articleId":171478,"title":"Pursuing Corporate Finance Professionally","slug":"pursuing-corporate-finance-professionally-2","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171478"}},{"articleId":171477,"title":"Understanding How Behavior Affects Corporate Finance","slug":"understanding-how-behavior-affects-corporate-finance","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171477"}},{"articleId":169321,"title":"The Gross Profit Portion of the Corporate Income Statement","slug":"the-gross-profit-portion-of-the-corporate-income-statement","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/169321"}},{"articleId":169320,"title":"How Corporate Finance Rules Your Life","slug":"how-corporate-finance-rules-your-life","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/169320"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282117,"slug":"corporate-finance-for-dummies","isbn":"9781119850311","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119850312-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119850312/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/9781119850311-1-203x255.jpg","width":203,"height":255},"title":"Corporate Finance For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b><b data-author-id=\"9764\">Michael Taillard</b>, PhD, MBA,</b> owns and operates OPII Schools, an award-winning national private school and tutoring company designed as a philanthropic experiment in macroeconomic cash flows as a form of urban renewal.</p>","authors":[{"authorId":9764,"name":"Michael Taillard","slug":"michael-taillard","description":" <p><b>Michael Taillard, PhD, MBA,</b> owns and operates OPII Schools, an award-winning national private school and tutoring company designed as a philanthropic experiment in macroeconomic cash flows as a form of urban renewal.</p>","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9764"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119850311&quot;]}]\" id=\"du-slot-62e986b8d0cd7\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119850311&quot;]}]\" id=\"du-slot-62e986b8d1f03\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-08-02T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":169309},{"headers":{"creationTime":"2016-03-26T14:50:25+00:00","modifiedTime":"2022-08-01T16:38:29+00:00","timestamp":"2022-08-01T18:01:10+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Theoretical and Practical Capacity in Cost Accounting","strippedTitle":"theoretical and practical capacity in cost accounting","slug":"theoretical-and-practical-capacity-in-cost-accounting","canonicalUrl":"","seo":{"metaDescription":"Learn about theoretical and practical capacity in cost accounting, including factors to consider and how to calculate them.","noIndex":0,"noFollow":0},"content":"In cost accounting, two types of capacity focus on production<i>: theoretical capacity</i> and <i>practical capacity</i>. Consider how much you could produce if customer demand was unlimited. Select a capacity method that makes sense to you, and use that as a tool to plan production and spending.\r\n\r\n<i>Theoretical capacity</i> assumes that nothing in your production ever goes wrong. Accountants describe this capacity as working at full efficiency all the time.\r\n\r\nConsider what your pie-in-the-sky or perfect-world capacity would be. It’s a world in which everything runs perfectly and no machines or equipment ever break down. It’s utopia where no worker ever makes a mistake. That would be great, wouldn’t it? That’s theoretical capacity, and you can’t reach it. It seems silly, but you need to see this level of capacity to understand the others.\r\n\r\nSay you own a business that makes athletic running shorts and other clothing. At maximum capacity, you can make 200 pairs of shorts per shift. You run three 8-hour shifts per day, 365 days a year. Based on those numbers, here is your theoretical capacity:\r\n<blockquote>Theoretical capacity = shorts x shifts x 365 days</blockquote>\r\n<blockquote>Theoretical capacity = 200 x 3 x 365 days</blockquote>\r\n<blockquote>Theoretical capacity = 219,000</blockquote>\r\nUnfortunately, this level of capacity isn’t attainable. You need to take into account the unavoidable. That gets you to practical capacity.\r\n\r\n<i>Practical capacity</i> is the level of capacity that includes unavoidable operating interruptions. Another description is unavoidable losses of operating time. Consider maintenance on equipment, employee vacations, and holidays. You’re willing to accept a good, rather than perfect, capacity level.\r\n\r\nThe people in your company can help you determine your practical capacity. Your production and engineering staff can answer questions about machine capacity and repair time. Your human resources staff can forecast employee availability, based on vacations and holidays.\r\n\r\nYou determine that 250 days is a more realistic number of production days, given unavoidable operating interruptions. Also, you decide that two shifts per day are realistic. Here’s the practical capacity calculation:\r\n<blockquote>Practical capacity = shorts x shifts x days</blockquote>\r\n<blockquote>Practical capacity = 200 x 2 x 250</blockquote>\r\n<blockquote>Practical capacity = 100,000</blockquote>\r\nThe practical capacity is 100,000 units (pairs of shorts) per year.","description":"In cost accounting, two types of capacity focus on production<i>: theoretical capacity</i> and <i>practical capacity</i>. Consider how much you could produce if customer demand was unlimited. Select a capacity method that makes sense to you, and use that as a tool to plan production and spending.\r\n\r\n<i>Theoretical capacity</i> assumes that nothing in your production ever goes wrong. Accountants describe this capacity as working at full efficiency all the time.\r\n\r\nConsider what your pie-in-the-sky or perfect-world capacity would be. It’s a world in which everything runs perfectly and no machines or equipment ever break down. It’s utopia where no worker ever makes a mistake. That would be great, wouldn’t it? That’s theoretical capacity, and you can’t reach it. It seems silly, but you need to see this level of capacity to understand the others.\r\n\r\nSay you own a business that makes athletic running shorts and other clothing. At maximum capacity, you can make 200 pairs of shorts per shift. You run three 8-hour shifts per day, 365 days a year. Based on those numbers, here is your theoretical capacity:\r\n<blockquote>Theoretical capacity = shorts x shifts x 365 days</blockquote>\r\n<blockquote>Theoretical capacity = 200 x 3 x 365 days</blockquote>\r\n<blockquote>Theoretical capacity = 219,000</blockquote>\r\nUnfortunately, this level of capacity isn’t attainable. You need to take into account the unavoidable. That gets you to practical capacity.\r\n\r\n<i>Practical capacity</i> is the level of capacity that includes unavoidable operating interruptions. Another description is unavoidable losses of operating time. Consider maintenance on equipment, employee vacations, and holidays. You’re willing to accept a good, rather than perfect, capacity level.\r\n\r\nThe people in your company can help you determine your practical capacity. Your production and engineering staff can answer questions about machine capacity and repair time. Your human resources staff can forecast employee availability, based on vacations and holidays.\r\n\r\nYou determine that 250 days is a more realistic number of production days, given unavoidable operating interruptions. Also, you decide that two shifts per day are realistic. Here’s the practical capacity calculation:\r\n<blockquote>Practical capacity = shorts x shifts x days</blockquote>\r\n<blockquote>Practical capacity = 200 x 2 x 250</blockquote>\r\n<blockquote>Practical capacity = 100,000</blockquote>\r\nThe practical capacity is 100,000 units (pairs of shorts) per year.","blurb":"","authors":[{"authorId":9050,"name":"Kenneth Boyd","slug":"kenneth-boyd","description":"Ken Boyd, a former CPA, has more than 37 years of experience in accounting, education, and financial services. He is the owner of Accounting Accidentally (<a href=\"https://www.accountingaccidentally.com/\" target=\"_blank\" rel=\"noopener\">www.accountingaccidentally.com</a>), which provides written and video content on accounting, personal finance, and entrepreneurship topics. His YouTube channel (<a href=\"https://www.youtube.com/user/kenboydstl\" target=\"_blank\" rel=\"noopener\">kenboydstl</a>) has hundreds of videos on accounting and finance.\r\n\r\nIn recent years, Boyd has served as an adjunct professor of accounting at the Cook School of Business at St. Louis University. He has written hundreds of articles for QuickBooks, Investopedia, and a number of other publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9050"}}],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General Accounting","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":208104,"title":"Cost Accounting For Dummies Cheat Sheet","slug":"cost-accounting-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208104"}},{"articleId":171024,"title":"Must Know Formulas for Cost Accounting","slug":"must-know-formulas-for-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171024"}},{"articleId":171020,"title":"Important Terms and Principles Cost Accountants Should Know","slug":"important-terms-and-principles-cost-accountants-should-know","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171020"}},{"articleId":171019,"title":"Avoiding Pitfalls on Cost Accounting Exams","slug":"avoiding-pitfalls-on-cost-accounting-exams","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/171019"}},{"articleId":166828,"title":"Accrual Accounting in Cost Accounting","slug":"accrual-accounting-in-cost-accounting","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/166828"}}],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282119,"slug":"cost-accounting-for-dummies","isbn":"9781119856023","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119856027-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119856027/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/9781119856023-203x255.jpg","width":203,"height":255},"title":"Cost Accounting For Dummies, 2nd Edition","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><p><b><b data-author-id=\"34810\">Kenneth W. Boyd</b></b> has 30 years of experience in accounting and financial services. He is a four&#45;time Dummies book author, a blogger, and a video host on accounting and finance topics.</p>","authors":[{"authorId":34810,"name":"Kenneth W. Boyd","slug":"kenneth-w-boyd","description":" <p><b>Kenneth W. Boyd</b> has 30 years of experience in accounting and financial services. He is a four&#45;time Dummies book author, a blogger, and a video host on accounting and finance topics. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34810"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119856023&quot;]}]\" id=\"du-slot-62e814e62beec\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119856023&quot;]}]\" id=\"du-slot-62e814e62c5c6\"></div></div>"},"articleType":{"articleType":"Articles","articleList":null,"content":null,"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":"","sponsorEbookTitle":"","sponsorEbookLink":"","sponsorEbookImage":{"src":null,"width":0,"height":0}},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-08-01T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":165633},{"headers":{"creationTime":"2016-03-27T16:47:48+00:00","modifiedTime":"2022-04-07T20:25:15+00:00","timestamp":"2022-06-22T19:37:34+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"Bookkeeping","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34228"},"slug":"bookkeeping","categoryId":34228}],"title":"Bookkeeping For Dummies Cheat Sheet (Australia/New Zealand Edition)","strippedTitle":"bookkeeping for dummies cheat sheet (australia/new zealand edition)","slug":"bookkeeping-for-dummies-cheat-sheet-australianew-zealand-edition","canonicalUrl":"","seo":{"metaDescription":"This Cheat Sheet is a quick reference to the things you should know if you want to be an excellent bookkeeper.","noIndex":0,"noFollow":0},"content":"A great bookkeeper cares that the financial statements make sense and gets upset when something doesn’t balance or stuff goes missing. They also feel responsible when it comes to getting customers to pay on time. A good bookkeeper, in other words, is worth their weight in gold.\r\n\r\nThis Cheat Sheet summarizes what you need to know to be an excellent bookkeeper.","description":"A great bookkeeper cares that the financial statements make sense and gets upset when something doesn’t balance or stuff goes missing. They also feel responsible when it comes to getting customers to pay on time. A good bookkeeper, in other words, is worth their weight in gold.\r\n\r\nThis Cheat Sheet summarizes what you need to know to be an excellent bookkeeper.","blurb":"","authors":[{"authorId":9372,"name":"Veechi Curtis","slug":"veechi-curtis","description":" <p><b>Veechi Curtis</b> dis a qualified accountant and consultant who specialises in teaching small businesses about technology and finance. She is the author of <i>Creating a Business Plan For Dummies,</i> Second Edition, <i>Small Business For Dummies,</i> Fourth Edition, and <i>Bookkeeping For Dummies,</i> Australian Edition. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9372"}},{"authorId":9373,"name":"Lynley Averis","slug":"lynley-averis","description":"","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9373"}}],"primaryCategoryTaxonomy":{"categoryId":34228,"title":"Bookkeeping","slug":"bookkeeping","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34228"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":275290,"title":"Break-Even Point Formula for Businesses","slug":"break-even-point-formula-for-businesses","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275290"}},{"articleId":265567,"title":"Accounting and Financial Reporting Standards","slug":"accounting-and-financial-reporting-standards","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265567"}},{"articleId":265558,"title":"Internal Profit Reporting","slug":"internal-profit-reporting","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265558"}},{"articleId":209083,"title":"Nonprofit Bookkeeping & Accounting For Dummies Cheat Sheet","slug":"nonprofit-bookkeeping-accounting-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/209083"}},{"articleId":208436,"title":"Bookkeeping For Dummies Cheat Sheet","slug":"bookkeeping-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208436"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":0,"slug":null,"isbn":null,"categoryList":null,"amazon":null,"image":null,"title":null,"testBankPinActivationLink":null,"bookOutOfPrint":false,"authorsInfo":null,"authors":null,"_links":null},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;bookkeeping&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-62b36f7eca90d\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;bookkeeping&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[null]}]\" id=\"du-slot-62b36f7ecb035\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":148413,"title":"Bookkeeping Checklist","slug":"bookkeeping-checklist","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148413"}},{"articleId":148406,"title":"Bookkeeping Basic: Understanding Account Types","slug":"bookkeeping-basic-understanding-account-types","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148406"}},{"articleId":148398,"title":"Stay Up-to-Date with Bookkeeping to Meet Tax Deadlines","slug":"stay-up-to-date-with-bookkeeping-to-meet-tax-deadlines","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148398"}},{"articleId":148411,"title":"Know Your Debits from Your Credits for Bookkeeping Success","slug":"know-your-debits-from-your-credits-for-bookkeeping-success","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148411"}},{"articleId":148397,"title":"What's Included in a Financial Statement?","slug":"whats-included-in-a-financial-statement","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148397"}},{"articleId":148400,"title":"Prevent Employee Fraud with Smart Business Practices","slug":"prevent-employee-fraud-with-smart-business-practices","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148400"}},{"articleId":148412,"title":"Calculate GST in the Blink of an Eye","slug":"calculate-gst-in-the-blink-of-an-eye","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148412"}},{"articleId":148399,"title":"Register as a BAS Agent in Australia","slug":"register-as-a-bas-agent-in-australia","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148399"}}],"content":[{"title":"Bookkeeping checklist","thumb":null,"image":null,"content":"<p>This step-by-step bookkeeping checklist should help you sleep easy at night knowing that you have done what you needed to do to get your books in tip-top shape.</p>\n<ol class=\"level-one\">\n<li>\n<p class=\"first-para\">Ensure you set up bank feeds for every account.</p>\n</li>\n<li>\n<p class=\"first-para\">At least once a month, reconcile every bank account against bank statements.</p>\n</li>\n<li>\n<p class=\"first-para\">Look for pre-dated or future-dated transactions.</p>\n</li>\n<li>\n<p class=\"first-para\">Eat a family bar of chocolate in one sitting (oh yes, and clean up the debtors list).</p>\n</li>\n<li>\n<p class=\"first-para\">Sweep through the creditors list.</p>\n</li>\n<li>\n<p class=\"first-para\">Check tax codes on all transactions.</p>\n</li>\n<li>\n<p class=\"first-para\">Reconcile your GST liability accounts.</p>\n</li>\n<li>\n<p class=\"first-para\">Give inventory the once over.</p>\n</li>\n<li>\n<p class=\"first-para\">Reconcile all payroll liability accounts.</p>\n</li>\n<li>\n<p class=\"first-para\">Scan transaction reports for weird stuff or mistakes.</p>\n</li>\n<li>\n<p class=\"first-para\">Read through the financials and check they make sense.</p>\n</li>\n</ol>\n"},{"title":"Understanding account types","thumb":null,"image":null,"content":"<p>Understanding the difference between account types is the secret to coding transactions correctly. Here’s the cheat’s guide to understanding the difference between assets and liabilities, equity and income, bananas and apples.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Current asset</b>: Anything that a business owns that can realistically be converted into cash within the next 12 months.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Non-current asset:</b>A physical asset such as office equipment, land, buildings, computers or motor vehicles, that isn’t expected to be converted into cash within the next 12 months.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Current liability:</b>An amount owed by the business that is due within the next 12 months, including scary stuff such as credit cards.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Non-current liability:</b> Anything you owe that isn’t due to be paid out within the next 12 months, such as hire purchase debts or bank loans.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Equity:</b>The ‘interest’ that shareholders or an owner has in the business, including both capital contributed and the profit or loss built up over time.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Income:</b>Money generated from sales to customers or returns on investments.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cost of sales:</b>What it costs in raw materials, supplies or production labour to make the goods that you sell (also called <i>cost of goods sold</i> or <i>variable expenses</i>).</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Expenses:</b>The day-to-day running costs of your business, including things like advertising, bank charges, computer consumables, diamond rings, electricity, motor vehicle expenses, rent, telephone expenses and wages. (Just kidding about the diamonds.) Expenses are sometimes also called <i>fixed expenses</i> or <i>overheads</i>.</p>\n</li>\n</ul>\n"},{"title":"Stay up to date to meet tax deadlines","thumb":null,"image":null,"content":"<p>Forget birthdays, anniversaries and Christmas and instead, punctuate your diary with a list of tax deadlines. Here’s a summary of the deadlines that every Australian bookkeeper needs to know about in order to stay out of trouble.</p>\n<table>\n<caption>Australian Bookkeeping Deadlines</caption>\n<tbody>\n<tr>\n<td>Business Activity Statements</td>\n<td>Monthly payments: 21 days after the end of each month.<br />\nQuarterly payments: 28 days after the end of each quarter, except<br />\nfor the December quarter, where the deadline is February 28</td>\n</tr>\n<tr>\n<td>Payment ummaries</td>\n<td>July 14</td>\n</tr>\n<tr>\n<td>Annual withholding declaration</td>\n<td>August 14</td>\n</tr>\n<tr>\n<td>Superannuation</td>\n<td>28 days after the end of each month or quarter, depending on<br />\nthe fund</td>\n</tr>\n<tr>\n<td>PAYG withholding tax</td>\n<td>21 days after the end of the month for monthly payments, or 28<br />\ndays after the end of the quarter for quarterly payments</td>\n</tr>\n<tr>\n<td>Valentine’s Day</td>\n<td>February 14. Remember chocolates, red wine and roses or<br />\nterrible consequences may ensue</td>\n</tr>\n</tbody>\n</table>\n<table>\n<caption>New Zealand Bookkeeping Deadlines</caption>\n<tbody>\n<tr>\n<td>GST return</td>\n<td>28 days after the end of each reporting period, with the<br />\nexception of the November period, when the deadline is 15 January,<br />\nand the March period, when the deadline is 7 May</td>\n</tr>\n<tr>\n<td>PAYE tax and KiwiSaver</td>\n<td>20 days after the end of each month</td>\n</tr>\n</tbody>\n</table>\n"},{"title":"Know your debits from your credits","thumb":null,"image":null,"content":"<p>Understanding debits and credits is a tricky business. (How did accountants get to be so warped, you may wonder?) Don’t sweat, with this table you can get your debits and credits spot on, every time.</p>\n<table>\n<tbody>\n<tr>\n<th>Account Type</th>\n<th>To increase this account</th>\n<th>To decrease this account</th>\n</tr>\n<tr>\n<td>Asset</td>\n<td>Debit</td>\n<td>Credit</td>\n</tr>\n<tr>\n<td>Liability</td>\n<td>Credit</td>\n<td>Debit</td>\n</tr>\n<tr>\n<td>Equity</td>\n<td>Credit</td>\n<td>Debit</td>\n</tr>\n<tr>\n<td>Income</td>\n<td>Debit</td>\n<td>Credit</td>\n</tr>\n<tr>\n<td>Expenses</td>\n<td>Debit</td>\n<td>Credit</td>\n</tr>\n</tbody>\n</table>\n"},{"title":"What's included in a financial statement","thumb":null,"image":null,"content":"<p>With a bit of practice, understanding financial statements is easy. Think of your Balance Sheet reports as a set of before-and-after photos, with your Profit &amp; Loss report telling the story of what happened in between.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Balance Sheet report:</b> Provides a snapshot of the value of assets, liabilities and equity at any point in time</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Profit &amp; Loss report:</b> Summarises income, expense and net profit over a specified period of time</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Statement of Cash Flow</b>: Examines the cash flows in and out of a business</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Trial Balance report:</b> Lists the debit and credit balances of all general ledger accounts at any point in time</p>\n</li>\n</ul>\n"},{"title":"Prevent employee fraud with smart business practices","thumb":null,"image":null,"content":"<p>How do you prevent employee fraud in the workplace, and how can you be sure that nobody has their hand in the till? Like double cream and crash diets, keep bookkeeping tasks and the handling of cash or business assets completely separate. This includes</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Authorising online transactions via internet banking</p>\n</li>\n<li>\n<p class=\"first-para\">Working on a cash register and taking cash</p>\n</li>\n<li>\n<p class=\"first-para\">Receiving payments from customers</p>\n</li>\n<li>\n<p class=\"first-para\">Balancing cash registers at the end of the day</p>\n</li>\n<li>\n<p class=\"first-para\">Accessing assets, such as business inventory</p>\n</li>\n</ul>\n"},{"title":"Calculate GST in the blink of an eye","thumb":null,"image":null,"content":"<p>Even with a calculator close to hand, a few shortcuts to help you calculate Goods and Services Tax (GST) are real handy. The whole business of dividing by 11 or multiplying by 0.15 can get very ugly indeed.</p>\n<table>\n<tbody>\n<tr>\n<td></td>\n<th>Australia</th>\n<th>New Zealand</th>\n</tr>\n<tr>\n<td>To calculate how much GST to add</td>\n<td>Multiply by 0.1</td>\n<td>Multiply by 0.15</td>\n</tr>\n<tr>\n<td>To add GST to arrive at a total price</td>\n<td>Multiply by 1.1</td>\n<td>Multiply by 1.15</td>\n</tr>\n<tr>\n<td>To calculate how much GST is included in a price</td>\n<td>Divide by 11</td>\n<td>Multiply by 3 and then divide by 23</td>\n</tr>\n<tr>\n<td>To calculate how much the price was before GST</td>\n<td>Divide by 1.1</td>\n<td>Divide by 1.15</td>\n</tr>\n</tbody>\n</table>\n"},{"title":"Register as a BAS agent in Australia","thumb":null,"image":null,"content":"<p>In Australia, if you’re a contract bookkeeper providing BAS services, then you must register as a BAS agent. The penalty for providing BAS services without registering ranges from a not insignificant $43,000 for an individual to a whopping $212,500 for a body corporate.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">A BAS service includes any bookkeeping activity related to GST or PAYG, including configuring tax codes in accounting software, coding tax invoices, generating employee payment summaries or preparing Business Activity Statements</p>\n</li>\n<li>\n<p class=\"first-para\">You don’t have to register as a BAS Agent if you’re an employee receiving wages or you only do basic bookkeeping data entry based on explicit instructions provided by the client or by their tax agent.</p>\n</li>\n<li>\n<p class=\"first-para\">For details about registering as a BAS Agent page, visit the <a href=\"http://www.tpb.gov.au/\">Tax Practitioners Board website.</a></p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":null,"sponsorEbookTitle":null,"sponsorEbookLink":null,"sponsorEbookImage":null},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-04-07T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207627},{"headers":{"creationTime":"2016-03-27T16:47:48+00:00","modifiedTime":"2022-03-25T20:03:40+00:00","timestamp":"2022-06-22T19:37:31+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Accounting For Canadians For Dummies Cheat Sheet","strippedTitle":"accounting for canadians for dummies cheat sheet","slug":"accounting-for-canadians-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Read an easy introduction into the key functions and responsibilities of the accounting department in any organization.","noIndex":0,"noFollow":0},"content":"Every business and not-for-profit entity needs a reliable accounting system to facilitate day-to-day operations and to prepare financial statements, tax returns, and internal reports to managers. The <a href=\"https://www.wiley.com/en-ca/Accounting+For+Canadians+For+Dummies%2C+3rd+Edition-p-9781119575863\" target=\"_blank\" rel=\"noopener\"><em>Accounting For Canadians For Dummies</em></a> Cheat Sheet provides a quick and easy introduction into the key functions and responsibilities of the accounting department in any organization.","description":"Every business and not-for-profit entity needs a reliable accounting system to facilitate day-to-day operations and to prepare financial statements, tax returns, and internal reports to managers. The <a href=\"https://www.wiley.com/en-ca/Accounting+For+Canadians+For+Dummies%2C+3rd+Edition-p-9781119575863\" target=\"_blank\" rel=\"noopener\"><em>Accounting For Canadians For Dummies</em></a> Cheat Sheet provides a quick and easy introduction into the key functions and responsibilities of the accounting department in any organization.","blurb":"","authors":[],"primaryCategoryTaxonomy":{"categoryId":34230,"title":"General Accounting","slug":"general-accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[],"fromCategory":[{"articleId":277438,"title":"Financial Accounting: The Effect of Business Transactions","slug":"financial-accounting-the-effect-of-business-transactions","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277438"}},{"articleId":277429,"title":"What Are Accounting Journals?","slug":"what-are-accounting-journals","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277429"}},{"articleId":277423,"title":"How to Read Corporate Annual Reports","slug":"how-to-read-corporate-annual-reports","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277423"}},{"articleId":277418,"title":"Showing the Money: The Statement of Cash Flows","slug":"showing-the-money-the-statement-of-cash-flows","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277418"}},{"articleId":277410,"title":"10 Accounting Career Opportunities","slug":"10-accounting-career-opportunities","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/277410"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":281921,"slug":"accounting-for-canadians-for-dummies-3rd-edition","isbn":"9781119575832","categoryList":["business-careers-money","business","accounting","general-accounting"],"amazon":{"default":"https://www.amazon.com/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119575834-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119575834/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/accounting-for-canadians-for-dummies-3rd-edition-cover-9781119575832-203x255.jpg","width":203,"height":255},"title":"Accounting For Canadians For Dummies","testBankPinActivationLink":"","bookOutOfPrint":true,"authorsInfo":"<p><b><b data-author-id=\"34814\">John A. Tracy</b>, CPA,</b> is professor of accounting, emeritus, at the University of Colorado in Boulder. Earlier in his career, he was a staff accountant with Ernst &amp; Young.</p> <p><b>C&eacute;cile Laurin, CPA, CA,</b> is a professor of accounting at Algonquin College of Applied Arts and Technology in Ottawa. She has been chief financial officer for three engineering firms and a law firm.</p> <p><b>Lita Epstein, MBA</b> designs and teaches online courses on investing for retirement, getting ready for tax time, and finance and investing for women.</p> <p><b>C&eacute;cile Laurin, CPA, CA</b> is a Chartered Professional Accountant and teacher based in Ottawa.</p>","authors":[{"authorId":34814,"name":"John A. Tracy","slug":"john-a.-tracy","description":" <p><b>John A. Tracy, CPA,</b> is professor of accounting, emeritus, at the University of Colorado in Boulder. Earlier in his career, he was a staff accountant with Ernst &amp; Young.</p> <p><b>C&eacute;cile Laurin, CPA, CA,</b> is a professor of accounting at Algonquin College of Applied Arts and Technology in Ottawa. She has been chief financial officer for three engineering firms and a law firm.</p>","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34814"}},{"authorId":34419,"name":"Cecile Laurin","slug":"cecile-laurin","description":" <p><b>Lita Epstein, MBA</b> designs and teaches online courses on investing for retirement, getting ready for tax time, and finance and investing for women.</p> <p><b>C&eacute;cile Laurin, CPA, CA</b> is a Chartered Professional Accountant and teacher based in Ottawa.</p>","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34419"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119575832&quot;]}]\" id=\"du-slot-62b36f7be6e9f\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119575832&quot;]}]\" id=\"du-slot-62b36f7be75ca\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":183461,"title":"What Does an Accountant Do?","slug":"what-does-an-accountant-do","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183461"}},{"articleId":183460,"title":"<b>Transactions and Balance Sheets in Accounting</b>","slug":"transactions-and-balance-sheets-in-accounting","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/183460"}},{"articleId":148396,"title":"<b>The Basic Steps of Bookkeeping</b>","slug":"the-basic-steps-of-bookkeeping","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/148396"}}],"content":[{"title":"What does an accountant do?","thumb":null,"image":null,"content":"<p>Most people don’t realize the importance of the accounting department in keeping a business operating without hitches and delays. That’s probably because accountants oversee many of the back-office functions in a business — as opposed to sales, for example, which is front-line activity, out in the open and in the line of fire. Go into any retail store, and you’re in the thick of sales activities. But have you ever seen a company’s accounting department in action?</p>\n<p>The following list gives you a pretty clear idea of the back-office functions that accountants perform:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Payroll:</b> The total wages and salaries earned by every employee every pay period, which are called gross wages or gross earnings, have to be calculated. Based on detailed private information in personnel files and earnings-to-date information, the correct amounts for income taxes and several other deductions from gross wages have to be determined.</p>\n<p class=\"child-para\">Stubs, which report various information are produced each pay period and given to the employee. The total amounts of withheld income taxes, Canada or Quebec Pension Plans, and Employment Insurance premiums imposed on the employee and employer have to be paid to the federal or provincial government on time. Retirement, vacation, sick pay, and other benefits that employees earn have to be updated every pay period.</p>\n<p class=\"child-para\">Payroll is a complex and critical function that the accounting department performs. Many businesses outsource payroll functions to companies or banks that specialize in this area.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cash collections:</b> All cash received from sales and from all other sources has to be carefully identified and recorded, not only in the cash account but also in the appropriate account for the source of the cash received. The accounting department makes sure that the cash is deposited in the appropriate business chequing accounts and that the business keeps an adequate amount of coin and currency on hand for making change for customers.</p>\n<p class=\"child-para\">Accountants balance the business’s chequebook and control access to incoming cash receipts. In larger organizations, the treasurer may be responsible for some of these cash flow and cash-handling functions.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Cash payments (disbursements):</b> A business writes many cheques during the course of a year. The accounting department prepares all these cheques for the signatures of the business officers who are authorized to sign cheques. The accounting department keeps all the supporting business documents and files to know when the cheques should be paid, makes sure that the amount to be paid is correct, and forwards the cheques for signature.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Procurement and inventory:</b> Accountants usually are responsible for keeping track of all purchase orders that have been placed for inventory (products to be sold by the business) and all other assets and services that the business buys. A typical business makes many purchases during the course of a year, many of them on credit. This area of responsibility includes keeping files on all liabilities that arise from purchases on credit so that cash payments are processed on time.</p>\n<p class=\"child-para\">The accounting department also keeps detailed records on all products that the business holds for sale and, when the products are sold, records the cost of the goods sold.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Property accounting:</b> A typical business owns many different substantial long-term assets called property, plant, and equipment — including office furniture and equipment, retail display cabinets, computers, machinery and tools, vehicles (autos and trucks), buildings, and land.</p>\n<p class=\"child-para\">Except for relatively small-cost items, a business maintains detailed records of its property, both for controlling the use of the assets and for determining the appropriate amount of depreciation for accounting and tax calculations. The accounting department keeps these property records.</p>\n</li>\n</ul>\n"},{"title":"Transactions and balance sheets in accounting","thumb":null,"image":null,"content":"<p>A balance sheet is a snapshot of the financial condition of a business at an instant in time — the most important moment in time being at the end of the last day of the income statement period. The balance sheet is unlike the income and cash flow statements, which report flows over a period of time. The balance sheet presents the balances (amounts) of a company’s assets, liabilities, and owners’ equity at an instant in time.</p>\n<p class=\"TechnicalStuff\">Notice the two quite different meanings of the term balance. As used in balance sheet, the term refers to the equality of the two opposing sides of a business — total assets on the one side and total liabilities and owners’ equity on the other side, like a scale with equal weights on both sides. In contrast, the balance of an account (asset, liability, owners’ equity, revenue, and expense) refers to the amount in the account after recording increases and decreases in the account — the net amount after all additions and subtractions have been entered.</p>\n<p>The activities, or transactions, of a business fall into three basic types:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Operating activities:</b> This category refers to making sales and incurring expenses, and also includes the allied transactions that are part and parcel of making sales and incurring expenses. For example, a business records sales revenue when sales are made on credit, and then, later, records cash collections from customers. Keep in mind that the term operating activities includes the allied transactions that precede or are subsequent to the recording of sales and expense transactions.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Investing activities:</b> This term refers to making investments in long-term assets and (eventually) disposing of the assets when the business no longer needs them. The primary examples of investing activities for businesses that sell products and services are capital expenditures, which are the amounts spent to modernize, expand, and replace the long-term operating assets of a business.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Financing activities:</b> These activities include securing money from debt and equity sources of capital, returning capital to these sources, and making distributions from profit to owners. Note that distributing profit to owners is treated as a financing transaction, not as a separate category.</p>\n</li>\n</ul>\n<p>An accountant can prepare a balance sheet at any time that a manager wants to know how things stand financially. Some businesses — particularly financial institutions such as banks, mutual funds, and securities brokers — need balance sheets at the end of each day, in order to track their day-to-day financial situation.</p>\n<p>For most businesses, however, balance sheets are prepared only at the end of each month, quarter, and year. A balance sheet is always prepared at the close of business on the last day of the profit period. In other words, the balance sheet should be in sync with the income statement.</p>\n"},{"title":"The basic steps of bookkeeping","thumb":null,"image":null,"content":"<p>Bookkeeping can be made simpler if you follow a logical set of steps. Here are three fundamental concepts that can help keep things in order when handling the books for a business.</p>\n<ol class=\"level-one\">\n<li>\n<p class=\"first-para\">Prepare source documents for all transactions, operations, and other business events; source documents are the starting point in the bookkeeping process.</p>\n<p class=\"child-para\">When buying products, a business gets a purchase invoice from the supplier. When borrowing money from the bank, a business signs a promissory note payable, a copy of which the business keeps. When a customer uses a credit card to buy the business’s product, the business gets the credit card slip as evidence of the transaction. When preparing payroll cheques, a business depends on salary rosters and time cards.</p>\n<p class=\"child-para\">All of these key business forms serve as sources of information into the bookkeeping system — in other words, information the bookkeeper uses in recording the financial effects of the business’s activities.</p>\n</li>\n<li>\n<p class=\"first-para\">Determine and enter in source documents the financial effects of the transactions and other business events.</p>\n<p class=\"child-para\">Transactions have financial effects that must be recorded — the business is better off, worse off, or at least “different off” as the result of its transactions. Examples of typical business transactions include paying employees, making sales to customers, borrowing money from the bank, and buying products to sell to customers.</p>\n<p class=\"child-para\">The bookkeeping process begins by determining the relevant information about each transaction. The business’s chief accountant establishes the rules and methods for measuring the financial effects of transactions. Of course, the bookkeeper should comply with these rules and methods.</p>\n</li>\n<li>\n<p class=\"first-para\">Make original entries of financial effects into journals and accounts, with appropriate references to source documents.</p>\n<p class=\"child-para\">Using the source document(s) for every transaction, the bookkeeper makes the first, or original, entry into a journal and then into the business’s accounts. Only the official, established chart of accounts should be used in recording transactions.</p>\n<p class=\"child-para\">A journal is a chronological record of transactions in the order in which they occur — like a very detailed personal diary. In contrast, an account is a separate record, or page as it were, for each asset, each liability, and so on. One transaction affects two or more accounts. The journal entry records the whole transaction in one place; then each piece is recorded in the two or more accounts that are affected by the transaction.</p>\n<p class=\"child-para\">Entering transaction data correctly and in a timely manner is critically important. The prevalence of data entry errors was one important reason why most retailers started to use cash registers that read barcode information on products, which more accurately captures the necessary information and speeds up the data entry.</p>\n</li>\n<li>\n<p class=\"first-para\"><b></b>Perform end-of-period procedures — the critical steps for getting the accounting records up-to-date and ready for the preparation of management accounting reports, tax returns, and financial statements.</p>\n<p class=\"child-para\">A period is a stretch of time — from one day to one month to one quarter (three months) to one year — that is determined by the business’s needs. A year is the longest period of time that a business would wait to prepare its financial statements. Most businesses need accounting reports and financial statements at the end of each quarter, and many need monthly financial statements.</p>\n</li>\n<li>\n<p class=\"first-para\">Compile the adjusted trial balance for the accountant, which is the basis for preparing reports, tax returns, and financial statements.</p>\n<p class=\"child-para\">After all the end-of-period procedures have been completed, the bookkeeper compiles a complete listing of all accounts, which is called the adjusted trial balance. Modest-sized businesses maintain hundreds of accounts for their various assets, liabilities, owners’ equity, revenue, and expenses.</p>\n<p class=\"child-para\">Larger businesses keep thousands of accounts, and very large businesses may keep more than 10,000 accounts. In contrast, external financial statements, tax returns, and internal accounting reports to managers contain a relatively small number of accounts. For example, a typical external balance sheet reports only 25 to 30 accounts (maybe even fewer), and a typical income tax return contains a relatively small number of accounts.</p>\n<p class=\"child-para\">The accountant takes the adjusted trial balance and groups similar accounts into one summary amount that is reported in a financial report or tax return. For example, a business may keep hundreds of separate inventory accounts, every one of which is listed in the adjusted trial balance. The accountant collapses all these accounts into one summary inventory account that is presented in the business’s external balance sheet. In grouping the accounts, the accountant should comply with established financial reporting standards and income tax requirements.</p>\n</li>\n<li>\n<p class=\"first-para\">Close the books — bring the bookkeeping for the fiscal year just ended to a close and get things ready to begin the bookkeeping process for the coming fiscal year.</p>\n<p class=\"child-para\">Books is the common term for a business’s complete set of accounts. A business’s transactions are a constant stream of activities that don’t end tidily on the last day of the year, which can make preparing financial statements and tax returns challenging. The business has to draw a clear line of demarcation between activities for the year (the 12-month accounting period) ended and the year yet to come by closing the books for one year and starting with fresh books for the next year.</p>\n</li>\n</ol>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":null,"sponsorEbookTitle":null,"sponsorEbookLink":null,"sponsorEbookImage":null},"primaryLearningPath":"Advance","lifeExpectancy":"One year","lifeExpectancySetFrom":"2022-03-25T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":207626},{"headers":{"creationTime":"2018-06-02T03:01:41+00:00","modifiedTime":"2022-03-08T15:34:59+00:00","timestamp":"2022-06-22T19:37:24+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"Calculation & Analysis","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34229"},"slug":"calculation-analysis","categoryId":34229}],"title":"Finite Math For Dummies Cheat Sheet","strippedTitle":"finite math for dummies cheat sheet","slug":"finite-math-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Keep these numbers, notations, distributions, and listings right at hand when performing computations found in Finite Math topics.","noIndex":0,"noFollow":0},"content":"When performing the many types of computations found in Finite Math topics, it’s helpful to have some numbers, notations, distributions, and listings right at hand.","description":"When performing the many types of computations found in Finite Math topics, it’s helpful to have some numbers, notations, distributions, and listings right at hand.","blurb":"","authors":[{"authorId":8985,"name":"Mary Jane Sterling","slug":"mary-jane-sterling","description":" \t <p><b>Mary Jane Sterling</b> is the author of numerous <i>For Dummies</i> books. She has been teaching at Bradley University in Peoria, Illinois, for more than 25 years. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8985"}}],"primaryCategoryTaxonomy":{"categoryId":34229,"title":"Calculation & Analysis","slug":"calculation-analysis","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34229"}},"secondaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":254831,"title":"Important Terms in Game Theory","slug":"important-terms-game-theory","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254831"}},{"articleId":254827,"title":"How to Create a Matrix from a Transition Diagram","slug":"create-matrix-transition-diagram","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254827"}},{"articleId":254821,"title":"How to Use Transition Matrices","slug":"use-transition-matrices","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254821"}},{"articleId":254814,"title":"How to Analyze Arguments with Euler Diagrams","slug":"analyze-arguments-euler-diagrams","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254814"}},{"articleId":254811,"title":"How to Analyze Compound Statements","slug":"analyze-compound-statements","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254811"}}],"fromCategory":[{"articleId":254831,"title":"Important Terms in Game Theory","slug":"important-terms-game-theory","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254831"}},{"articleId":254827,"title":"How to Create a Matrix from a Transition Diagram","slug":"create-matrix-transition-diagram","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254827"}},{"articleId":254821,"title":"How to Use Transition Matrices","slug":"use-transition-matrices","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254821"}},{"articleId":254814,"title":"How to Analyze Arguments with Euler Diagrams","slug":"analyze-arguments-euler-diagrams","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254814"}},{"articleId":254811,"title":"How to Analyze Compound Statements","slug":"analyze-compound-statements","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/254811"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282200,"slug":"finite-math-for-dummies","isbn":"9781119476368","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"amazon":{"default":"https://www.amazon.com/gp/product/1119476364/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/1119476364/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/1119476364-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/1119476364/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/1119476364/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/finite-math-for-dummies-cover-9781119476368-203x255.jpg","width":203,"height":255},"title":"Finite Math For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"<p><b data-author-id=\"8985\">Mary Jane Sterling</b> is the author of <i>Algebra I For Dummies, Algebra Workbook For Dummies,</i> and many other <i>For Dummies</i> books. She taught at Bradley University in Peoria, Illinois for more than 30 years, teaching algebra, business calculus, geometry, and finite mathematics. </p>","authors":[{"authorId":8985,"name":"Mary Jane Sterling","slug":"mary-jane-sterling","description":" \t <p><b>Mary Jane Sterling</b> is the author of numerous <i>For Dummies</i> books. She has been teaching at Bradley University in Peoria, Illinois, for more than 25 years. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/8985"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;calculation-analysis&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119476368&quot;]}]\" id=\"du-slot-62b36f740c956\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;calculation-analysis&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781119476368&quot;]}]\" id=\"du-slot-62b36f740d0a8\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":252743,"title":"Pascal’s Triangle","slug":"pascals-triangle","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/252743"}},{"articleId":252748,"title":"Binomial Distributions","slug":"finite-math-binomial-distributions","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/252748"}},{"articleId":252753,"title":"Matrix Notation","slug":"matrix-notation","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/252753"}},{"articleId":252758,"title":"Factorial","slug":"factorial","categoryList":["business-careers-money","business","accounting","calculation-analysis"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/252758"}}],"content":[{"title":"Pascal's triangle","thumb":null,"image":null,"content":"<p>When performing computations in problems involving probability and statistics, it’s often helpful to have the binomial coefficients found in Pascal’s triangle. These numbers are the results of finding combinations of <em>n</em> things taken <em>k</em> at a time. For quick reference, the first ten rows of the triangle are shown.</p>\n<p><img loading=\"lazy\" class=\"alignnone size-full wp-image-252745\" src=\"https://www.dummies.com/wp-content/uploads/finitemath-pascals.jpg\" alt=\"finitemath-pascals\" width=\"433\" height=\"200\" /></p>\n"},{"title":"Binomial distributions","thumb":null,"image":null,"content":"<p>A common situation when doing probability problems is having to determine the patterns of heads-and-tails, boys-and-girls, true-or-false arrangements. When there are two choices, there are 2<em><sup>n</sup></em> ways that they can occur. The following refer to Heads-or-Tails in a coin-flipping situation but can be adapted to any binomial arrangement.</p>\n<p><img loading=\"lazy\" class=\"alignnone size-full wp-image-252749\" src=\"https://www.dummies.com/wp-content/uploads/finitemath-one-toss.jpg\" alt=\"finitemath-one-toss\" width=\"535\" height=\"989\" /></p>\n"},{"title":"Matrix notation","thumb":null,"image":null,"content":"<p>Matrices are rectangular arrangements of elements. The dimension of a matrix is given with <em>m</em> × <em>n</em> where <em>m</em> is the number of rows and <em>n </em>is the number of columns. The elements are identified with subscripts giving the row, <em>j</em>, and column,<em> k</em>, shown as <em>a<sub>jk</sub></em> for the elements of a matrix A.</p>\n<p><img loading=\"lazy\" class=\"alignnone size-full wp-image-252754\" src=\"https://www.dummies.com/wp-content/uploads/Matrix-A.jpg\" alt=\"Matrix-A\" width=\"535\" height=\"335\" /></p>\n<p>When multiplying the matrices, the number of rows in the first matrix has to equal the number of columns in the second. Given matrices A and B where A has dimension 2 × 3 and B has the dimension3 × 2, the resulting matrices are found as follows:</p>\n<p><img loading=\"lazy\" class=\"alignnone size-full wp-image-252755\" src=\"https://www.dummies.com/wp-content/uploads/Matrix-B.jpg\" alt=\"Matrix-B\" width=\"535\" height=\"191\" /></p>\n"},{"title":"Factorial","thumb":null,"image":null,"content":"<p>The factorial operation says to multiply the designated number by every positive integer smaller than that number.</p>\n<p><em>n</em>! = <em>n</em> (<em>n</em> – 1) (<em>n</em> – 2)   3 2 1</p>\n<p>When using the operation in the formulas for the number of permutations or combinations of <em>n</em> things taken <em>k</em> at a time, factorial values need to be inserted into the numerator and denominator of the fraction. The first sixteen factorial values are given here. And, by definition, 0! = 1.</p>\n<table>\n<tbody>\n<tr>\n<td width=\"53\"><em>n</em></td>\n<td width=\"108\"><em>n</em>!</td>\n<td width=\"60\"><em>n</em></td>\n<td width=\"168\"><em>n</em>!</td>\n</tr>\n<tr>\n<td width=\"53\">1</td>\n<td width=\"108\">1</td>\n<td width=\"60\">9</td>\n<td width=\"168\">362,880</td>\n</tr>\n<tr>\n<td width=\"53\">2</td>\n<td width=\"108\">2</td>\n<td width=\"60\">10</td>\n<td width=\"168\">3,628,800</td>\n</tr>\n<tr>\n<td width=\"53\">3</td>\n<td width=\"108\">6</td>\n<td width=\"60\">11</td>\n<td width=\"168\">39,916,800</td>\n</tr>\n<tr>\n<td width=\"53\">4</td>\n<td width=\"108\">24</td>\n<td width=\"60\">12</td>\n<td width=\"168\">479,001,600</td>\n</tr>\n<tr>\n<td width=\"53\">5</td>\n<td width=\"108\">120</td>\n<td width=\"60\">13</td>\n<td width=\"168\">6,227,020,800</td>\n</tr>\n<tr>\n<td width=\"53\">6</td>\n<td width=\"108\">720</td>\n<td width=\"60\">14</td>\n<td width=\"168\">87,178,291,200</td>\n</tr>\n<tr>\n<td width=\"53\">7</td>\n<td width=\"108\">5,040</td>\n<td width=\"60\">15</td>\n<td width=\"168\">1,307,674,368,000</td>\n</tr>\n<tr>\n<td width=\"53\">8</td>\n<td width=\"108\">40,320</td>\n<td width=\"60\">16</td>\n<td width=\"168\">20,922,789,888,000</td>\n</tr>\n</tbody>\n</table>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":null,"sponsorEbookTitle":null,"sponsorEbookLink":null,"sponsorEbookImage":null},"primaryLearningPath":"Advance","lifeExpectancy":"Five years","lifeExpectancySetFrom":"2022-03-08T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":252761},{"headers":{"creationTime":"2016-03-27T16:56:32+00:00","modifiedTime":"2022-03-03T21:43:13+00:00","timestamp":"2022-06-22T19:37:22+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"Bookkeeping","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34228"},"slug":"bookkeeping","categoryId":34228}],"title":"Nonprofit Bookkeeping & Accounting For Dummies Cheat Sheet","strippedTitle":"nonprofit bookkeeping & accounting for dummies cheat sheet","slug":"nonprofit-bookkeeping-accounting-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Keep your finger on the pulse of your nonprofit's budget and expenses with these handy reminders and tasks.","noIndex":0,"noFollow":0},"content":"To stay organized and on top of your nonprofit’s bookkeeping and accounting responsibilities, complete tasks that need to be done daily, weekly, quarterly, and yearly. Keep necessary financial information up-to-date so you’re prepared to submit paperwork to the government and to the people involved in your nonprofit organization who plan your budget.","description":"To stay organized and on top of your nonprofit’s bookkeeping and accounting responsibilities, complete tasks that need to be done daily, weekly, quarterly, and yearly. Keep necessary financial information up-to-date so you’re prepared to submit paperwork to the government and to the people involved in your nonprofit organization who plan your budget.","blurb":"","authors":[{"authorId":10392,"name":"Sharon Farris","slug":"sharon-farris","description":" <p><b>Sharon Farris</b> has been involved in the grants industry for more than ten years. She is the president of Farris Accounting & Consulting Training Services (FACT$) as well as the former president of the American Association of Grant Professionals (AAGP) Montgomery.</p> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/10392"}}],"primaryCategoryTaxonomy":{"categoryId":34228,"title":"Bookkeeping","slug":"bookkeeping","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34228"}},"secondaryCategoryTaxonomy":{"categoryId":34246,"title":"Nonprofits","slug":"nonprofits","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34246"}},"tertiaryCategoryTaxonomy":{"categoryId":0,"title":null,"slug":null,"_links":null},"trendingArticles":null,"inThisArticle":[],"relatedArticles":{"fromBook":[{"articleId":192926,"title":"Annual Reminders for Your Nonprofit Business","slug":"annual-reminders-for-your-nonprofit-business","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192926"}},{"articleId":192924,"title":"Weekly Reminders for Your Nonprofit Organization","slug":"weekly-reminders-for-your-nonprofit-organization","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192924"}},{"articleId":192917,"title":"Quarterly Accounting Reminders for Your Nonprofit Organization","slug":"quarterly-accounting-reminders-for-your-nonprofit-organization","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192917"}},{"articleId":192918,"title":"Monthly Budgeting Tasks for Your Nonprofit Organization","slug":"monthly-budgeting-tasks-for-your-nonprofit-organization","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192918"}}],"fromCategory":[{"articleId":275290,"title":"Break-Even Point Formula for Businesses","slug":"break-even-point-formula-for-businesses","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/275290"}},{"articleId":265567,"title":"Accounting and Financial Reporting Standards","slug":"accounting-and-financial-reporting-standards","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265567"}},{"articleId":265558,"title":"Internal Profit Reporting","slug":"internal-profit-reporting","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/265558"}},{"articleId":208436,"title":"Bookkeeping For Dummies Cheat Sheet","slug":"bookkeeping-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208436"}},{"articleId":208256,"title":"Bookkeeping for Canadians For Dummies Cheat Sheet","slug":"bookkeeping-for-canadians-for-dummies-cheat-sheet","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/208256"}}]},"hasRelatedBookFromSearch":false,"relatedBook":{"bookId":282422,"slug":"nonprofit-bookkeeping-and-accounting-for-dummies","isbn":"9780470432365","categoryList":["business-careers-money","business","accounting","bookkeeping"],"amazon":{"default":"https://www.amazon.com/gp/product/0470432365/ref=as_li_tl?ie=UTF8&tag=wiley01-20","ca":"https://www.amazon.ca/gp/product/0470432365/ref=as_li_tl?ie=UTF8&tag=wiley01-20","indigo_ca":"http://www.tkqlhce.com/click-9208661-13710633?url=https://www.chapters.indigo.ca/en-ca/books/product/0470432365-item.html&cjsku=978111945484","gb":"https://www.amazon.co.uk/gp/product/0470432365/ref=as_li_tl?ie=UTF8&tag=wiley01-20","de":"https://www.amazon.de/gp/product/0470432365/ref=as_li_tl?ie=UTF8&tag=wiley01-20"},"image":{"src":"https://www.dummies.com/wp-content/uploads/nonprofit-bookkeeping-and-accounting-for-dummies-cover-9780470432365-203x255.jpg","width":203,"height":255},"title":"Nonprofit Bookkeeping and Accounting For Dummies","testBankPinActivationLink":"","bookOutOfPrint":false,"authorsInfo":"<p>Sharon Farris has been involved in the grants industry for more than ten years. She is the president of Farris Accounting &amp; Consulting Training Services (FACT$) as well as the former president of the American Association of Grant Professionals (AAGP) Montgomery.</p>","authors":[{"authorId":10392,"name":"Sharon Farris","slug":"sharon-farris","description":" <p><b>Sharon Farris</b> has been involved in the grants industry for more than ten years. She is the president of Farris Accounting & Consulting Training Services (FACT$) as well as the former president of the American Association of Grant Professionals (AAGP) Montgomery.</p> ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/10392"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;bookkeeping&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780470432365&quot;]}]\" id=\"du-slot-62b36f72f4038\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;bookkeeping&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780470432365&quot;]}]\" id=\"du-slot-62b36f730059e\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":192924,"title":"Weekly Reminders for Your Nonprofit Organization","slug":"weekly-reminders-for-your-nonprofit-organization","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192924"}},{"articleId":192918,"title":"Monthly Budgeting Tasks for Your Nonprofit Organization","slug":"monthly-budgeting-tasks-for-your-nonprofit-organization","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192918"}},{"articleId":192917,"title":"Quarterly Accounting Reminders for Your Nonprofit Organization","slug":"quarterly-accounting-reminders-for-your-nonprofit-organization","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192917"}},{"articleId":192926,"title":"Annual Reminders for Your Nonprofit Business","slug":"annual-reminders-for-your-nonprofit-business","categoryList":["business-careers-money","business","accounting","bookkeeping"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192926"}}],"content":[{"title":"Weekly reminders for your nonprofit organization","thumb":null,"image":null,"content":"<p>To ensure your nonprofit’s daily activities are completed, organize a weekly to-do list and prioritize the tasks so the important ones are done first and other jobs are scheduled around them. Managing your nonprofit means sticking to your plan to stay organized and run efficiently. Apply these guidelines to your nonprofit’s weekly plan:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Set up daily priorities.</b> Knowing what you need to accomplish each day allows you to take care of the most pressing matters.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Surround yourself with professional staff.</b> Surrounding yourself with professionals eliminates the pettiness of daily office drama! Professionals are self-motivated and focused on doing their jobs, and they require minimum supervision.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Keep your goals before you.</b> To maintain a clear vision, keep your eyes on the prize. Post your vision or your goals in a place where they’re visible to you every day.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Manage your time by planning and scheduling your daily activities.</b> Be mindful of distractions that pull you away from completing your tasks.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Stay out of politics.</b> Avoiding politics at work protects your nonprofit’s status.</p>\n</li>\n</ul>\n"},{"title":"Monthly budgeting tasks for your nonprofit organization","thumb":null,"image":null,"content":"<p>As a director or manager of a nonprofit, you require monthly budget assessments to track and manage your nonprofit’s finances. Monthly meetings, which should happen after a cost-benefit analysis, should involve your finance committee, budget staff, and/or budget task force. These meetings should go over management efficiency and include these items:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Review budget projections and compare the projected budget to actual results.</b> To ensure that you have revenues to take care of expenses, evaluate what happened the previous month and what the impact will be on future months. Make adjustments to future planned actions based on your actual results to date.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Trim the fat from your budget.</b> Analyze every line item and look for ways to cut costs.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Seek ways to cut variable costs.</b> To do so, change them to fixed costs or eliminate them altogether.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Meet with your budget task group to analyze every cost and get rid of unnecessary ones.</b> Consider everything that will keep you efficient without compromising program quality.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Submit grant proposals and contracts to stabilize your funding streams.</b> Be aggressive in seizing funding opportunities to sustain and expand your organization’s existing programs while adding new ones.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Search your local newspaper for new businesses in your area that may support your cause.</b> Find out what their areas of interest are and talk to them about working together.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Look for ways to collaborate with other nonprofits in your community.</b> Form partnerships with larger nonprofits for fundraising activities.</p>\n</li>\n</ul>\n"},{"title":"Quarterly accounting reminders for your nonprofit organization","thumb":null,"image":null,"content":"<p>To analyze the financial health of your nonprofit organization, the board of directors needs quarterly financial statements, which monitor the flow of revenue. Likewise, for taxes, grants, and contracts, quarterly reports are required by federal and state government organizations. Make sure to take care of the following nonprofit accounting tasks:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Report payroll taxes to the IRS at the end of the quarter by submitting Form 941.</b> The Federal Insurance Contributions Act (FICA) taxes are funds for the payment of old-age, survivors, and medical benefits. Employers must pay 7.65 percent of an employee’s gross salary to the IRS.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Prepare quarterly financial statements for your board of directors.</b> Your board needs to know your financial status to plan future activities and to offset potential financial problems.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Complete quarterly financial status reports for government grants and contracts.</b> The government expects you to track all expenditures and submit a report of what you have spent and how much you have left according to your records.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Complete quarterly progress reports for government grants and contracts.</b> Quarterly progress reports indicate performance results in terms of numbers. They evaluate your progress by comparing what you expected to accomplish with what actually happened.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Meet with your board of directors.</b> Your board must meet at least four times a year to fulfill federal and state requirements.</p>\n</li>\n</ul>\n"},{"title":"Annual reminders for your nonprofit business","thumb":null,"image":null,"content":"<p>Running a nonprofit requires that you annually prepare and submit paperwork to your employees, the Board of Directors, the Social Security Administration, and the IRS. Each year, you should evaluate your nonprofit’s progress, go over your strategic plan, and celebrate the year’s successes. This list represents tasks you should complete yearly:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\"><b>Submit Form 990, Annual Information Report, to the IRS.</b> This form is where you report all financial activities to the IRS. It reveals your financial strengths and weaknesses, sources of income, and how you’re spending your funds. This information helps the government determine whether you’re engaging in activities that could cause you to jeopardize your tax-exempt status.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Submit annual payroll reports to the Social Security Administration, IRS, and your employees.</b> Form 941 is due no later than January 31. W-2s, W-3s, and 1099s must be handled properly.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Contact a CPA to audit your financial statements.</b> Having audited records is like getting a professional second opinion about the validity of your financial health. It adds credibility to your record-keeping and accounting practices.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Celebrate your success and hard work with your staff and board members by having an annual office party.</b> Reward everyone for a job well done.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Organize your budget task force for the next year.</b> Single out the analytical minds or penny-pinchers on your staff and board. These folks will make up your budget task force, which assesses all budget costs and does a benefit analysis of each line item.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Organize a proposal development team for the next year.</b> Find three people who are organized, enjoy reading technical stuff, and are willing to write. Then organize them into your proposal development team to research, develop, and submit grant applications and contracts for your organization.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Prepare for your annual board meeting by re-evaluating your organization’s goals.</b> Cross out goals you’ve met and develop new goals for the upcoming year.</p>\n</li>\n<li>\n<p class=\"first-para\"><b>Declutter your office files and prepare for the next year.</b> Getting rid of the clutter frees your mind and saves time. It’s important that you know where things are and can put your hands on them when needed.</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":null,"sponsorEbookTitle":null,"sponsorEbookLink":null,"sponsorEbookImage":null},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-03-03T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":209083},{"headers":{"creationTime":"2016-03-27T16:56:22+00:00","modifiedTime":"2022-02-28T17:17:34+00:00","timestamp":"2022-06-22T19:37:21+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"Accounting Workbook For Dummies Cheat Sheet","strippedTitle":"accounting workbook for dummies cheat sheet","slug":"accounting-workbook-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Keep track of these formulas and ways to present information as you're preparing financial statements while handling accounting.","noIndex":0,"noFollow":0},"content":"As a business manager, taking care of your company’s accounting needs is top priority. Correctly preparing a financial statement involves knowing all the information that needs to appear on the statement. Making a profit keeps you in business, so follow the financial statements closely, make adjustments if needed, and follow some basic rules for presenting accounting information to your business’s managers.","description":"As a business manager, taking care of your company’s accounting needs is top priority. Correctly preparing a financial statement involves knowing all the information that needs to appear on the statement. Making a profit keeps you in business, so follow the financial statements closely, make adjustments if needed, and follow some basic rules for presenting accounting information to your business’s managers.","blurb":"","authors":[{"authorId":9472,"name":"John A. Tracy","slug":"john-a-tracy","description":"John A. 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She has been chief financial officer for three engineering firms and a law firm.</p>","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34814"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780471791454&quot;]}]\" id=\"du-slot-62b36f716572b\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9780471791454&quot;]}]\" id=\"du-slot-62b36f7165e64\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":192701,"title":"Formulas and Functions for Financial Statements","slug":"formulas-and-functions-for-financial-statements","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192701"}},{"articleId":192700,"title":"Making Accounting Adjustments to Reach Profit Potential","slug":"making-accounting-adjustments-to-reach-profit-potential","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/192700"}}],"content":[{"title":"Formulas and functions for financial statements","thumb":null,"image":null,"content":"<p>As the business manager, you’re in control of your business’s accounting needs, so you need a strong understanding of the ins and outs of financial statements, including what goes on them and in what order. If you don’t prepare them correctly, they won’t reflect a true picture of your business’s financial status. Keep the following important rules and points in mind as you prepare and use your business’s financial statements.</p>\n<h2>Accounting equation</h2>\n<p>Assets = Liabilities + Owners’ Equity</p>\n<p>Liabilities and owners’ equity are the two basic types of claims on the assets of an entity. The two-sided nature of the accounting equation is the basis for double entry accounting that records both sides of the entity’s transactions — what is received and what is given in the economic exchange.</p>\n<h2>Rules for debits and credits</h2>\n<p>Use the following figure for credit and debit basics:</p>\n<p><img loading=\"lazy\" src=\"https://www.dummies.com/wp-content/uploads/194324.image0.jpg\" alt=\"image0.jpg\" width=\"535\" height=\"212\" /></p>\n<h2>Financial effects of revenues and expenses</h2>\n<p>Revenue = Asset increase (debit) or Liability decrease (debit)<br />\nExpense = Asset decrease (credit) or Liability increase (credit)</p>\n<h2>Connections between income statement and balance sheet accounts</h2>\n<p>Sales revenue → Cash and Accounts receivable</p>\n<p>Cost of goods sold expense ← Inventory</p>\n<p>Operating expenses → Cash</p>\n<p>Operating expenses ← Prepaid expenses</p>\n<p>Operating expenses → Accounts payable</p>\n<p>Operating expenses → Accrued expenses payable</p>\n<p>Depreciation expense ← Fixed assets</p>\n<p>Interest expense → Accrued expenses payable</p>\n<p>Income tax expense → Accrued expenses payable</p>\n<h2>Bookkeeping cycle</h2>\n<p>Transactions (and certain other events) → Original Entries in Journals → Postings in General Ledger Chart of Accounts → End-of-Period Adjusting Entries → Preparation of Financial Statements, Tax Returns, and Internal Accounting Reports → Closing Entries at End of Year</p>\n"},{"title":"Making accounting adjustments to reach profit potential","thumb":null,"image":null,"content":"<p>Having your business reach a profit is important; if it doesn’t, sooner or later the business will fail. As a business manager, you want to keep a close eye on the financial statements and make the necessary (and legal) accounting adjustments to your financial records as needed. These helpful tips can help you make the necessary adjustments to your business’s net income, eye two different profit analysis models, and communicate the reports to your managers.</p>\n<h2>Adjustments to net income for determining sash flow from operating activities</h2>\n<p>Accounts receivable, inventory, and prepaid expenses are operating assets used in the profit-making process.</p>\n<p>Accounts payable and accrued expenses payable are operating liabilities used in the profit-making process.</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Operating asset increases and operating liability decreases are negative adjustments (decrease cash flow from operating activities)</p>\n</li>\n<li>\n<p class=\"first-para\">Operating asset decreases and operating liability increases are positive adjustments (increase cash flow from operating activities)</p>\n</li>\n<li>\n<p class=\"first-para\">Depreciation and amortization expenses are positive adjustments (increase cash flow from operating activities)</p>\n</li>\n</ul>\n<p><b>Cardinal Rule:</b> Make all cash flow adjustments to net income; do not simply add back depreciation and amortization, which could be seriously misleading.</p>\n<h2>Two profit analysis models for management decision making</h2>\n<p><b>Contribution margin minus fixed expenses model</b><b>:</b></p>\n<table>\n<tbody>\n<tr>\n<td>Sales price</td>\n<td>$100</td>\n</tr>\n<tr>\n<td>Less variable costs per unit</td>\n<td><u>$60</u></td>\n</tr>\n<tr>\n<td>Equals contribution margin per unit</td>\n<td>$40</td>\n</tr>\n<tr>\n<td>Times annual sales volume, in units</td>\n<td><u>120,000</u></td>\n</tr>\n<tr>\n<td>Equals total contribution margin</td>\n<td>$4,800,000</td>\n</tr>\n<tr>\n<td>Less fixed operating expenses</td>\n<td><u>$3,000,000</u></td>\n</tr>\n<tr>\n<td>Equals operating profit</td>\n<td>$1,800,000</td>\n</tr>\n</tbody>\n</table>\n<p><b>Excess of sales over breakeven model:</b></p>\n<p>$3,000,000 annual fixed operating expenses ÷ $40 contribution margin per unit = 75,000 units breakeven point (volume)</p>\n<table>\n<tbody>\n<tr>\n<td>Annual sales volume for year, in units</td>\n<td>120,000</td>\n</tr>\n<tr>\n<td>Less annual breakeven volume, in units</td>\n<td><u>75,000</u></td>\n</tr>\n<tr>\n<td>Equals excess over breakeven, in units</td>\n<td>45,000</td>\n</tr>\n<tr>\n<td>Times contribution margin per unit</td>\n<td><u>$40</u></td>\n</tr>\n<tr>\n<td>Equals operating profit</td>\n<td>$1,800,000</td>\n</tr>\n</tbody>\n</table>\n<h2>Guidelines for internal accounting reports to managers</h2>\n<p>When you’re preparing financial information for your business’s managers, follow these tips:</p>\n<ul class=\"level-one\">\n<li>\n<p class=\"first-para\">Follow the organizational structure (responsibility accounting)</p>\n</li>\n<li>\n<p class=\"first-para\">Orient your report based on whether organization unit is a profit center or a cost center</p>\n</li>\n<li>\n<p class=\"first-para\">Know the mind of the manager</p>\n</li>\n<li>\n<p class=\"first-para\">Highlight significant factors and deemphasize non-significant factors</p>\n</li>\n</ul>\n"}],"videoInfo":{"videoId":null,"name":null,"accountId":null,"playerId":null,"thumbnailUrl":null,"description":null,"uploadDate":null}},"sponsorship":{"sponsorshipPage":false,"backgroundImage":{"src":null,"width":0,"height":0},"brandingLine":"","brandingLink":"","brandingLogo":{"src":null,"width":0,"height":0},"sponsorAd":null,"sponsorEbookTitle":null,"sponsorEbookLink":null,"sponsorEbookImage":null},"primaryLearningPath":"Advance","lifeExpectancy":"Two years","lifeExpectancySetFrom":"2022-02-28T00:00:00+00:00","dummiesForKids":"no","sponsoredContent":"no","adInfo":"","adPairKey":[]},"status":"publish","visibility":"public","articleId":209042},{"headers":{"creationTime":"2016-03-27T16:47:33+00:00","modifiedTime":"2022-02-28T16:44:23+00:00","timestamp":"2022-06-22T19:37:21+00:00"},"data":{"breadcrumbs":[{"name":"Business, Careers, & Money","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34224"},"slug":"business-careers-money","categoryId":34224},{"name":"Business","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34225"},"slug":"business","categoryId":34225},{"name":"Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34226"},"slug":"accounting","categoryId":34226},{"name":"General Accounting","_links":{"self":"https://dummies-api.dummies.com/v2/categories/34230"},"slug":"general-accounting","categoryId":34230}],"title":"1,001 Accounting Practice Problems For Dummies Cheat Sheet","strippedTitle":"1,001 accounting practice problems for dummies cheat sheet","slug":"1001-accounting-practice-problems-for-dummies-cheat-sheet","canonicalUrl":"","seo":{"metaDescription":"Sharpen your math skills and study up on some of the most important formulas you'll need for accounting practice.","noIndex":0,"noFollow":0},"content":"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.","description":"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.","blurb":"","authors":[{"authorId":9050,"name":"Kenneth Boyd","slug":"kenneth-boyd","description":"Ken Boyd, a former CPA, has more than 37 years of experience in accounting, education, and financial services. He is the owner of Accounting Accidentally (<a href=\"https://www.accountingaccidentally.com/\" target=\"_blank\" rel=\"noopener\">www.accountingaccidentally.com</a>), which provides written and video content on accounting, personal finance, and entrepreneurship topics. His YouTube channel (<a href=\"https://www.youtube.com/user/kenboydstl\" target=\"_blank\" rel=\"noopener\">kenboydstl</a>) has hundreds of videos on accounting and finance.\r\n\r\nIn recent years, Boyd has served as an adjunct professor of accounting at the Cook School of Business at St. Louis University. He has written hundreds of articles for QuickBooks, Investopedia, and a number of other publications.","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9050"}},{"authorId":9051,"name":"Kate Mooney","slug":"kate-mooney","description":" <p><b>Kenneth Boyd</b> is the owner of St. Louis Test Preparation &#40;www.stltest.net&#41;. He provides online tutoring in accounting and finance. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. He is the author of <i>CPA Exam For Dummies</i>. <b>Kate Mooney</b> has been teaching accounting to both undergraduates and MBA students at St. Cloud State University since 1986, after earning her PhD from Texas A &#38; M University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy. 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He provides online tutoring in accounting and finance. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. He is the author of <i>CPA Exam For Dummies</i>. <b data-author-id=\"9051\">Kate Mooney</b> has been teaching accounting to both undergraduates and MBA students at St. Cloud State University since 1986, after earning her PhD from Texas A &amp; M University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy. </p>","authors":[{"authorId":34810,"name":"Kenneth W. Boyd","slug":"kenneth-w.-boyd","description":" <p><b>Kenneth W. Boyd</b> has 30 years of experience in accounting and financial services. He is a four&#45;time Dummies book author, a blogger, and a video host on accounting and finance topics. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/34810"}},{"authorId":9051,"name":"Kate Mooney","slug":"kate-mooney","description":" <p><b>Kenneth Boyd</b> is the owner of St. Louis Test Preparation &#40;www.stltest.net&#41;. He provides online tutoring in accounting and finance. Kenneth has worked as a CPA, Auditor, Tax Preparer, and College Professor. He is the author of <i>CPA Exam For Dummies</i>. <b>Kate Mooney</b> has been teaching accounting to both undergraduates and MBA students at St. Cloud State University since 1986, after earning her PhD from Texas A &#38; M University. She is a licensed CPA in Minnesota and is a member of the State Board of Accountancy. ","_links":{"self":"https://dummies-api.dummies.com/v2/authors/9051"}}],"_links":{"self":"https://dummies-api.dummies.com/v2/books/"}},"collections":[],"articleAds":{"footerAd":"<div class=\"du-ad-region row\" id=\"article_page_adhesion_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_adhesion_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118853283&quot;]}]\" id=\"du-slot-62b36f71344c2\"></div></div>","rightAd":"<div class=\"du-ad-region row\" id=\"article_page_right_ad\"><div class=\"du-ad-unit col-md-12\" data-slot-id=\"article_page_right_ad\" data-refreshed=\"false\" \r\n data-target = \"[{&quot;key&quot;:&quot;cat&quot;,&quot;values&quot;:[&quot;business-careers-money&quot;,&quot;business&quot;,&quot;accounting&quot;,&quot;general-accounting&quot;]},{&quot;key&quot;:&quot;isbn&quot;,&quot;values&quot;:[&quot;9781118853283&quot;]}]\" id=\"du-slot-62b36f7134c0d\"></div></div>"},"articleType":{"articleType":"Cheat Sheet","articleList":[{"articleId":145405,"title":"10 Useful Accounting Formulas","slug":"10-useful-accounting-formulas","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/145405"}},{"articleId":145404,"title":"Financial Statement Formulas","slug":"financial-statement-formulas","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/145404"}},{"articleId":145398,"title":"More Financial Analysis Formulas","slug":"more-financial-analysis-formulas","categoryList":["business-careers-money","business","accounting","general-accounting"],"_links":{"self":"https://dummies-api.dummies.com/v2/articles/145398"}}],"content":[{"title":"10 useful accounting formulas","thumb":null,"image":null,"content":"<p>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.</p>\n<h2>Balance sheet formula</h2>\n<p>Assets – liabilities = equity (or assets = liabilities + equity)</p>\n<p>This basic formula must stay in balance to generate an accurate balance sheet. This means that all accounting transactions must keep the formula in balance. If not, the accountant has made an error.</p>\n<h2>Retained earnings formula</h2>\n<p>Beginning balance + net income – net losses – dividends = ending balance</p>\n<h2>Income statement formula</h2>\n<p>Revenue (sales) – expenses = profit (or net income)</p>\n<p>Keep in mind that revenue and sales may be used interchangeably. Profit and net income may also be used interchangeably. The income statement is also referred to as a <i>profit and loss statement.</i></p>\n<h2>Gross margin</h2>\n<p>Sales – cost of sales</p>\n<p>Gross margin is not a company’s net income or profit. Other expenses, such as selling, general, and administrative (SG and A) expenses, are subtracted to arrive at net income.</p>\n<h2>Operating income (earnings)</h2>\n<p>Gross profit – selling, general, and administrative (SG and A) expenses</p>\n<h2>Statement of cash flows formula</h2>\n<p>Beginning cash balance + cash flow sources (uses) from operations + cash flow sources (uses) from financing + cash flow sources (uses) from investing = ending cash balance</p>\n<p>This formula adds cash sources and subtracts cash uses.</p>\n<h2>Inventory formula</h2>\n<p>Beginning inventory + purchases – cost of sales = ending inventory (or beginning inventory + purchases – ending inventory = cost of sales)</p>\n<h2>Net sales formula</h2>\n<p>Gross sales – sales discounts – sales returns and allowances</p>\n<h2>Book value of fixed (depreciable) assets</h2>\n<p>Original cost – accumulated depreciation</p>\n<h2>Straight line depreciation</h2>\n<p>(Original cost – salvage value) / number of years in useful life</p>\n<p><i>Salvage </i><i>value </i>is the dollar amount that the owner can receive for selling the asset at the end of its useful life.</p>\n"},{"title":"Financial statement formulas","thumb":null,"image":null,"content":"<p>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.</p>\n<h2>Components of work-in-process</h2>\n<p>Direct materials + direct labor + factory overhead applied</p>\n<p>Work-in-process (WIP) represents cost incurred in production for partially completed goods. WIP is a subaccount within inventory. When goods are completed, they are moved to finished goods (another inventory account).</p>\n<h2>Current ratio</h2>\n<p>Current assets ÷ current liabilities</p>\n<p>The current ratio illustrates how easily a company can cover its current bills.</p>\n<h2>Quick ratio</h2>\n<p>(Current assets less inventory) ÷ current liabilities</p>\n<p>The quick ratio excludes inventory from current assets. The rationale is that inventory is the current asset that will take the longest time to convert into cash. Other current assets, such as collecting accounts receivable, may be converted into cash more quickly.</p>\n<h2>Asset turnover ratio</h2>\n<p>Revenue (or sales) ÷ assets</p>\n<p>This ratio explains how much profit a company generates for every dollar of assets.</p>\n<h2>Return on equity</h2>\n<p>Net income ÷ equity</p>\n<p>This ratio explains how much profit a company generates for every dollar of equity.</p>\n<h2>Debt to equity ratio</h2>\n<p>Debt ÷ equity</p>\n<p>This ratio measures what percentage of a firm’s total capitalization is debt. Capitalization refers to all funds raised by the company to operate the business.</p>\n<h2>Contribution margin</h2>\n<p>Sales less variable costs</p>\n<p>Contribution margin represents the amount that will be used to cover fixed costs. Any dollars remaining after paying fixed costs is considered profit.</p>\n<h2>Return on capital</h2>\n<p>Operating profit ÷ capital</p>\n<p>Capital is similar to equity. It represents funds raised to operate a business. Operating profit refers to profit generated from normal business activity.</p>\n<h2>Break-even formula</h2>\n<p>Sales – variable costs – fixed costs = $0 profit</p>\n<p>The break-even formula calculates the level of sales that will generate a profit of $0.</p>\n<h2>Formula to assign overhead costs</h2>\n<p>Total overhead costs incurred ÷ activity level</p>\n<p>Overhead costs, such as a factory’s utility costs, can’t be directly traced to a product. Instead, overhead costs are allocated based on an activity level. The activity level chosen should impact the amount of overhead costs incurred. For example, the number of machine hours used drives machinery repair costs. Machine hours should be the activity level for machine repair costs.</p>\n"},{"title":"More financial analysis formulas","thumb":null,"image":null,"content":"<p>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.</p>\n<h2>Burden rate</h2>\n<p>Fixed manufacturing costs ÷ units produced</p>\n<p>Fixed costs can’t be directly traced to a unit produced. For example, a $50,000 monthly factory lease must be paid, regardless of the number of units produced in a given month. To assign fixed cost to each unit of product, companies used the burden rate.</p>\n<h2>Cost of idle capacity</h2>\n<p>Percentage of available capacity unused × fixed manufacturing overhead costs</p>\n<p><i>Idle capacity</i> refers to unused capacity. Assume you could produce 20% more baseball gloves this month, using your existing factory costs (materials, labor, and overhead). Say that the factory pays a foreman $50,000 in salary and benefits to supervise production. The cost of idle capacity is 20% multiplied by $50,000, or $10,000. The firm is paying an extra $10,000 for production capacity it’s not using.</p>\n<h2>Calculating loan interest</h2>\n<p>Interest rate for period × principal amount of loan</p>\n<p>Interest can be compounded (computed) annually, monthly, or even daily. Pay attention to the stated annual interest rate on the loan and how often interest is compounded. If a 12% loan is compounded monthly, the monthly interest rate is 12% ÷ 12 months, or 1%.</p>\n<h2>Effective interest rate</h2>\n<p>Interest paid ÷ principal amount owed</p>\n<p>Because of the effects of compounding, the actual interest paid on a loan may be different from the stated interest rate on the note multiplied by the principal.</p>\n<h2>Present value and future value factors</h2>\n<p>Present value factor less than 1; future value factor more than 1</p>\n<p>A present value factor discounts a cash flow to its present value. To calculate the present value, you multiply the factor times the cash flow amount. A present value factor will be less than 1. The future value of a cash flow adjusts the cash flow to its future value, given an interest rate. A future value factor will always be more than 1.</p>\n<h2>Return on investment (ROI)</h2>\n<p>Profit (net income) from investment ÷ cost of investment</p>\n<p>A more complex version of the formula is operating income divided by operating assets. Operating assets represent an investment in a project or business. The purpose of this formula is to determine the profitability of a given project.</p>\n<h2>Return on investment (DuPont model)</h2>\n<p>Profit margin × asset turnover</p>\n<p>This is a more complex formula that’s used for ROI. Profit margin is operating profit divided by sales. Asset turnover is calculated as sales divided by average assets. Average assets refers to assets at beginning of period + assets balance at end of period ÷ 2.</p>\n<h2>Return of investment to shareholders</h2>\n<p>Retained earnings balance – payments to shareholders</p>\n<p>A <i>dividend</i> is a payment of retained earnings to shareholders (investors). If a company makes payments to shareholders that are greater than the balance of retained earnings, those payments are a return of the investors’ original investment.</p>\n<h2>Rule of 72</h2>\n<p>72 ÷ rate of return on investment</p>\n<p>The <i>rule of 72</i> states how many years it will take for a sum of money to double, given a rate of return that is compounded each year. If, for example, the rate of return is 8%, a sum of money will double in 72÷8, or 9 years.</p>\n<h2>Weighted average cost of capital (WACC)</h2>\n<p>Annual cost to obtain financing ÷ capital balance</p>\n<p>Companies can raise funds by issuing debt or equity. Outstanding debt requires annual interest payments. Shareholders who purchase equity may also insist on required annual dividend payments. Interest payments on debt and dividend payments to shareholders are both considered financing costs. 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1,139 results
1,139 results
General Accounting Separable Cost Reduction in Cost Accounting

Article / Updated 08-11-2022

In cost accounting, the cost of goods available for sale represents the product’s total costs. Total costs have two components — joint costs and separable costs. When possible, you want to reduce separable costs, but first take a look at your company’s joint costs. Assume you manufacture leaf blowers. Your two products are heavy-duty blowers and yardwork blowers. The separable costs are $1,200,000 for the heavy-duty blower and $912,000 for the yardwork blower. If you know the separable costs and the cost of goods available for sale, you can compute the joint cost allocation. This table shows the process. Joint Cost Allocation Heavy-Duty Yardwork Total Cost of goods available for sale $1,751,163 $1,260,837 $3,012,000 Less separable costs $1,200,000 $912,000 $2,112,000 Equals joint cost allocation $551,163 $348,837 $900,000 Each company division provides the separable costs. So altogether, this table gives you a joint cost allocation. Now assume that the heavy-duty blower division is able to sharply reduce its separable costs to an amazingly low $500,000. The first table listed heavy-duty separable costs of $1,200,000. Consider what now happens to heavy-duty’s joint cost allocation. Take a look at the next table. Cost Allocation — Less Heavy Duty Separable Costs Heavy-Duty Yardwork Total Cost of goods available for sale $1,751,163 $1,260,837 $3,012,000 Less separable costs $500,000 $912,000 $1,412,000 Equals joint cost allocation $1,251,163 $348,837 $1,600,000 Heavy-duty’s joint cost allocation increases to $1,251,163 (from $551,163). That doesn’t seem right. The goal is to analyze costs to reduce or eliminate them. If you do, supposedly you increase your profits. In this case, the heavy-duty division’s reducing separable costs increased its joint cost allocation. There doesn’t seem to be a benefit to operating more efficiently. Here’s an explanation: The gross margin percentage method (calculated as gross margin ÷ total sales value x 100) locks in total costs as a percentage of sales value. If the gross margin is about 12.5 percent of sales value, it means that costs must be about 87.5 percent of sales value. For heavy-duty, that 87.5 percent total cost number is $1,751,163. Those costs are either separable or joint costs. If one increases, the other decreases. The heavy-duty manager may have a problem with this process. The manager works hard (using good old cost accounting) to lower the separable costs. The manager’s “reward” is a higher joint cost allocation. The heavy-duty division has lowered costs but doesn’t get any savings in total costs. The constant gross margin percentage method clarifies the revenue and profit calculations company-wide. This method eliminates some of the variation between company divisions. Although some managers may complain, each division has the same gross margin percentage. The process makes managing company profit easier. This is one of those “Here’s why the chief financial officer (CFO) makes the big bucks” moments. As CFO, you explain the gross margin percentage method to the heavy-duty division manager. The goal is to allocate joint costs so that each product maintains the same gross margin percentage of about 12.5 percent. If a division reduces separable costs, it must get a bigger joint cost allocation — otherwise, the gross margin percentage would increase. Now heavy-duty’s manager should be evaluated based on the successful cost reduction. The manager had a success, and you want to encourage more cost savings. Although the gross margin percentage process requires a bigger joint cost allocation, that must not take away from the manager’s good performance.

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General Accounting Cost Accounting: Joint Cost Allocation and Gross Margin Percentage

Article / Updated 08-11-2022

In cost accounting, the cost of goods available for sale represents the product’s total costs. Total costs have two components — joint costs and separable costs. Assume the cost of goods available for sale are $1,751,163 and $1,260,837 for the heavy-duty blower and the yardwork blower. Say the separable costs are $1,200,000 and $912,000. If you know the separable costs and the cost of goods available for sale, you can compute the joint cost allocation. The first table shows the process. Joint Cost Allocation Heavy-Duty Yardwork Total Cost of goods available for sale $1,751,163 $1,260,837 $3,012,000 Less separable costs $1,200,000 $912,000 $2,112,000 Equals joint cost allocation $551,163 $348,837 $900,000 Each company division provides the separable costs. So altogether, the table gives you a joint cost allocation. Now calculate the gross margin percentage. Say your sales values are $2,000,00 and $1,440,000 for heavy-duty and yardwork blowers. The total cost is the cost of goods available for sale from the first table. The gross margin percentage is the gross margin divided by the sales value. For each product, the gross margin percentage is the same (12.442 percent) as the company’s overall gross margin. Verifying Gross Margin Percentage Heavy-Duty Yardwork Total Sales value (A) $2,000,000 $1,440,000 $3,440,000 Total cost (B) $1,751,163 $1,260,837 $3,012,000 Gross margin (A – B) $248,837 $179,163 $428,000 Gross margin percentage 12.442 12.442 Here’s the point of this table: it uses the traditional formula to compute gross margin and gross margin percentage. The table verifies that the calculations are correct. If the heavy-duty product has the higher sales value, it ends up with a higher gross margin in dollars than the yardwork product. However, both sale values are multiplied by the same gross margin percentage. Both products have a gross margin of about 12.5 percent (rounded). That means that about 87.5 percent of sales value represents cost of goods available for sale.

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General Accounting What Capital Is in Corporate Finance

Article / Updated 08-02-2022

Everything that makes up a corporation and everything a corporation owns, including the building, equipment, office supplies, brand value, research, land, trademarks, and everything else, are considered assets. Believe it or not, when you start a corporation, that company’s assets aren’t just included in a Welcome Letter; you have to go out and acquire them. Generally speaking, you start off with cash, which you then use to purchase other assets. For most new companies, this cash consists of a combination of the following: The owner’s own money: This money is considered equity because the owner can still claim full possession over it. Small loans, such as business and personal loans from banks, business and personal lines of credit, and government loans: The money obtained through loans is considered a liability because the corporation has to pay it back at some point. In other words, these loans are a form of debt. The combination of these two funding sources leads to the explanation of the most fundamental equation in corporate finance: Assets = Liabilities + Equity The total value of assets held by a company is equal to the total liabilities and total equity held by the company. Because the total amount of debt a company incurs goes into purchasing equipment and supplies, increasing debt through loans increases a company’s liabilities and total assets. As an owner contributes his own funding to the company’s usage, the total amount of company equity increases along with the assets. Note: Capital, assets, money, and cash are basically all the same thing at this point; after a company raises the original capital, or cash, it exchanges that cash for more useful forms of capital, such as erasable markers. Unlike liabilities, equity represents ownership in the company. So if a company owns $100,000 in assets and $50,000 was funded by loans, then the owner still holds claim over $50,000 in assets, even if the company goes out of business, requiring the owner to give the other $50,000 in assets back to the bank. For corporations, the equity funding varies a bit, however, because the owners of a corporation are the stockholders. The equity funding of corporations comes from the initial sale of stock, which exchanges shares of ownership for cash to be used in the company.

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General Accounting Theoretical and Practical Capacity in Cost Accounting

Article / Updated 08-01-2022

In cost accounting, two types of capacity focus on production: theoretical capacity and practical capacity. Consider how much you could produce if customer demand was unlimited. Select a capacity method that makes sense to you, and use that as a tool to plan production and spending. Theoretical capacity assumes that nothing in your production ever goes wrong. Accountants describe this capacity as working at full efficiency all the time. Consider what your pie-in-the-sky or perfect-world capacity would be. It’s a world in which everything runs perfectly and no machines or equipment ever break down. It’s utopia where no worker ever makes a mistake. That would be great, wouldn’t it? That’s theoretical capacity, and you can’t reach it. It seems silly, but you need to see this level of capacity to understand the others. Say you own a business that makes athletic running shorts and other clothing. At maximum capacity, you can make 200 pairs of shorts per shift. You run three 8-hour shifts per day, 365 days a year. Based on those numbers, here is your theoretical capacity: Theoretical capacity = shorts x shifts x 365 days Theoretical capacity = 200 x 3 x 365 days Theoretical capacity = 219,000 Unfortunately, this level of capacity isn’t attainable. You need to take into account the unavoidable. That gets you to practical capacity. Practical capacity is the level of capacity that includes unavoidable operating interruptions. Another description is unavoidable losses of operating time. Consider maintenance on equipment, employee vacations, and holidays. You’re willing to accept a good, rather than perfect, capacity level. The people in your company can help you determine your practical capacity. Your production and engineering staff can answer questions about machine capacity and repair time. Your human resources staff can forecast employee availability, based on vacations and holidays. You determine that 250 days is a more realistic number of production days, given unavoidable operating interruptions. Also, you decide that two shifts per day are realistic. Here’s the practical capacity calculation: Practical capacity = shorts x shifts x days Practical capacity = 200 x 2 x 250 Practical capacity = 100,000 The practical capacity is 100,000 units (pairs of shorts) per year.

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Bookkeeping Bookkeeping For Dummies Cheat Sheet (Australia/New Zealand Edition)

Cheat Sheet / Updated 04-07-2022

A great bookkeeper cares that the financial statements make sense and gets upset when something doesn’t balance or stuff goes missing. They also feel responsible when it comes to getting customers to pay on time. A good bookkeeper, in other words, is worth their weight in gold. This Cheat Sheet summarizes what you need to know to be an excellent bookkeeper.

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General Accounting Accounting For Canadians For Dummies Cheat Sheet

Cheat Sheet / Updated 03-25-2022

Every business and not-for-profit entity needs a reliable accounting system to facilitate day-to-day operations and to prepare financial statements, tax returns, and internal reports to managers. The Accounting For Canadians For Dummies Cheat Sheet provides a quick and easy introduction into the key functions and responsibilities of the accounting department in any organization.

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Calculation & Analysis Finite Math For Dummies Cheat Sheet

Cheat Sheet / Updated 03-08-2022

When performing the many types of computations found in Finite Math topics, it’s helpful to have some numbers, notations, distributions, and listings right at hand.

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Bookkeeping Nonprofit Bookkeeping & Accounting For Dummies Cheat Sheet

Cheat Sheet / Updated 03-03-2022

To stay organized and on top of your nonprofit’s bookkeeping and accounting responsibilities, complete tasks that need to be done daily, weekly, quarterly, and yearly. Keep necessary financial information up-to-date so you’re prepared to submit paperwork to the government and to the people involved in your nonprofit organization who plan your budget.

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General Accounting Accounting Workbook For Dummies Cheat Sheet

Cheat Sheet / Updated 02-28-2022

As a business manager, taking care of your company’s accounting needs is top priority. Correctly preparing a financial statement involves knowing all the information that needs to appear on the statement. Making a profit keeps you in business, so follow the financial statements closely, make adjustments if needed, and follow some basic rules for presenting accounting information to your business’s managers.

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General Accounting 1,001 Accounting Practice Problems For Dummies Cheat Sheet

Cheat Sheet / Updated 02-28-2022

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.

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