التصنيف: Bookkeeping

One of the most well-known financial schemes is that involving the companies Enron Corporation and Arthur Andersen. Enron defrauded thousands by intentionally inflating revenues that did not exist. Arthur Andersen was the auditing firm in charge of independently verifying the accuracy of Enron’s financial statements and disclosures. This meant they would review statements to make…

In Year 1, the current ratio can be calculated by dividing the sum of the liquid assets by the current liabilities. The acid-test ratio and current ratio are two frequently used metrics to measure near-term liquidity risk, or a company’s ability to quickly pay off liabilities coming due in the next twelve months. A cash…

However, you will want to use the quick ratio when analyzing a firm’s liquidity position in order to gain an idea of how quickly they could pay off their short-term debts. Ideally, companies should have a ratio of 1.0 or greater, meaning the firm has enough liquid assets to cover all short-term debt obligations or…

The absorption cost per unit is $7 ($5 labor and materials + $2 fixed overhead costs). As 8,000 widgets were sold, the total cost of goods sold is $56,000 ($7 total cost per unit × 8,000 widgets sold). The ending inventory will include $14,000 worth of widgets ($7 total cost per unit × 2,000 widgets…

This method ensures that all costs of production are captured in the cost of inventory, leading to a more comprehensive understanding of product profitability. However, the allocation of fixed costs can sometimes result in fluctuations in unit costs when production levels vary from the norm, which can affect the comparability of financial results over different…