Definition: Days Sales Outstanding basically refer to the average number of days that the entity takes to collect its credit sales over a period of time. The company measures this ratio in order to manage the efficiency and effectiveness of credit policy as well as receivable collection procedure. If the ratio is high that means […]
Overview: Account receivables are the amount owes by other entities or people as the result of purchasing goods or rendering services without making payments at the time goods or services are delivered. This happens when the entity sells its goods or services to the customer. In daily business activities, the customers would love to purchase
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Account Receivable basically refers to the amount that customers owe to an entity once they purchase goods or render services on credit. In most cases, these receivables are expected to be collected in less than one year from the reporting date. Once the entity believes that these account receivables could be collected in less than
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Overview: Accounts Receivable Turnover is the efficiency ratio that directly measures the performance of receivable collecting activities over the year. It uses to analyze the number of times that net credit sales during the period are collected based on the relationship between net credit sales during the period and averaged accounts receivable at the end
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Predetermined Overhead Rate Predetermined Overhead Rate is the overhead rate used to calculate the Total Fixed Production Overhead. It is part of the Absorption Costing calculation. The Predetermined Rate is usually calculated annually and at the beginning of each year. This rate will be recalculated if the predetermined is materially incorrect or different from the
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Definition: Variable Cost is the method that assumes the main cost of products is direct labor, direct material, and variable manufacturing overhead. These costs are fixed in units and variable in total. In other words, it is the cost that is variably attributed to the cost of the product. The variable Cost Concept is that
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Definition: Financial accounting is one of the essential functions of Financial Management in the Financial Department or Financial Division. Because of its usefulness and necessity, we can say that this function is one of the strategic functions of the entity. This function is responsible for preparing financial reports, controlling the financial position and cash flow,
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Definition: Operating expenses are the expenses incurred in the entity for its normal operational purposes and activities that generally include both the cost of products or services and sales & administrative expenses. Operating expenses are generally defined when identifying and assessing the theentity’ss operating profits. Like other income statement items, these expenses are recorded in
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Definition: The contribution margin is basically the sales price less variable cost. The contribution margin in percentages is calculated by sales price less variable cost and then divided by sales price. Mostly we use net sales to calculate the contribution. Variable costs are direct costs, including direct materials, direct labor, and other direct costs. The total
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Definition: Net income is sometimes called Net Profit, Bottom Line, or Net Earning. It is the net earnings from the operating activities and other income for a specific period of time. Net Income results from gross profits for the specific period less than their corresponding expenses of the same period. Those expenses are Cost of
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