Businesses large and small employ depreciation, as do individual investors in assets such as rental real estate. A financial advisor is a good source for help understanding how depreciation affects your financial situation. The property is an asset that helps you generate income, similar to a manufacturer and the equipment or machines they buy ...
Market interest rates are impacted by the central bank’s responses to economic activity. The money market account will, therefore, pay interest either more or less than a savings account, depending on how the market interest rate fluctuates. Traditionally, money market accounts offer a competitive rate to savings accounts. Demand deposit ...
If a company sells on credit to customers and there are no terms for the credit sale, it means that the customers can pay the debt anytime they choose — which may be never. The average collection period is a metric that measures a company’s efficiency in converting sales on credit into cash on hand. […]
As the item is being manufactured, the component piece’s price must be directly traced to the item. Direct costs do not need to be fixed in nature, as their unit cost may change over time or depending on the quantity being utilized. An example is the salary of a supervisor that worked on a single […]
Direct costs are any costs that vary directly with revenues, such as the cost of materials and commissions. For example, if a business has revenues of $1,000 and direct costs of $800, then it has a residual amount of $200 that can be contributed to the payment of fixed costs. This $200 amount is the […]
The percentage of sales method assumes that the company cannot collect payment for a fixed percentage of goods or services that it has sold. The sales returns account contains either an allowance for returned goods, or the actual amount of revenue deduction attributable to returned goods. It is especially important to track sales returns ...