Leaning Online

It is a process of allocating prices of Assets And Liabilities of Acquiree B usiness. It is created by the Acquirer in order to purchase the assets & liabilities of acquiree's compa ny  busi ness. This process is required in case of Mergers and Acquisition. Purchase Price Allocatio n is used to find its useful components such as  Net I dentifiable Assets which is the differe nce  betwee n total values of targeted compa ny's  Identifiable Assets  except  Goodwill   mi nus total values of its lia bilities assumed. Purchase Price  Allocatio n is used by  the acquirer (purchaser) i n order to estimate  Goodwill of the acquiree company’s business as the acquirer will purchase the business of acquiree company if Purchase Price is more than the sum of fair market value of I dentifiable Assets,  that in clude  b oth  Tangible Assets  And  Intangible Assets  Except Goodwill,  a nd  fair market value of Liabilities assumed.

Cost per unit is the cos t per unit of a product, item or service. It is very important to know that how much cost you charge for each unit cost. If the cost per unit of 5 tables is Rs. 100 (Total Cost = 500) and you sell all of these 5 tables at Rs 120 (5 X 120 = 600), you will get a profit of Rs. 100 (600 - 500). By knowing unit cost of each product, the company can find how much each product cost to the production and efficiently the company uses its resources i.e., maximum output at minimum cost. It is calculated by dividing total costs (both Total of Fixed Costs and Total of Variable Costs) of all units products with total number of unit products. Mathematically, we can show it as follows: Cost Per Unit = Total Costs of All Units Products / Total N umber of Unit Products Or Cost Per Unit  =   Fixed Costs + Variable Costs / Total Units Produced For Example, if we purchase a set of 5 Chairs, Costing Rs. 100000, then the unit price of a

Cost is the monetary value of an Asset or goods / merchandise manufactured or Purchased or held for resale purposes. It can be a cash amount or cash equivalent to get or acquire an asset. It includes all the costs incurred to ready an asset to use in the business or brings the products or goods in the place and condition required to get ready it for sale. For Example, when a machinery, which is a Fixed Asset , is acquired, costing Rs. 50000 it also includes the cost of wages Rs. 5000 that are needed to install it. Similarly, for the cost of an Inventory , it includes costing price and all the necessary costs Freight Costs, Handing Costs, Import Duty, etc needed to carry the goods or products to the place of business, so that these are ready to sell. However, the cost of inventory does not include trade discounts, rebates, etc.

Utilities Expenses are related to the specific types of Facilities or Utilities ( B enefits) provided by the company to the business in the form of N atural Gases, Water, Sewerage, Electricity , Telephone & Telecommunications, Cables and Satellite TVs, Multimedia and Internet, etc for the effective running of business operations. Utilities Expenses works under Accrual Basis of Accounting and follows Matching Principle GAAP as the benefits are received by the company but the bill is not paid for the month, so it is the current liability of the company to pay for the Utility bills payable by it to the company provided to the business. Utilities Expenses Journal Entry When a company received a utility bill during the month, then it becomes the liability of the company to pay on due date for the bill against which it already received the facilities or benefits. The Journal Entry can be as shown below:                                  Ut

Electricity Bill Defi nition And Meaning In Accounting It is a n example of Utilities Expenses and it is given by utility companies to customers for using the electricity facilities suc h as lig hts, electrical equipme nt  usi ng electrical power to ge nerate heat or cooling , etc.  for the month. Utility bill is payable for the month if it is not paid (unpaid) by the customer at the end of the accounting period. Electricity Bill Payable Journal Entry / U npaid Electricity Bill Journal Entry When we received Utility B ill from the company, then it is our Current Liability to pay to the company for using the Gas, Electricity, Telephone or other Facilities, so we record the following Entry :check                             Electricity Expe nse a/c / Utilities Expense a/c  XXX                                                               Electricity  B ill Paya ble a/c / Utilities Payable a/c  XXX                                  (Received Utility B i

A cost may be an Expense or Expenditure as when cost is expired we called it as an expense and when it is not expired, then we called it an Asset as in case of Prepaid Expenses whose benefit or cost is not expired eventhough the payment is made by company while an expense is the expired cost whose benefit is enjoyed by the company. I n fact,   A cost becomes an expense when the benefits against it are fully utilized  by the company. Cost is a wider term as it includes both expense and expenditure which is either a Revenue Expenditure (Expense) or a Capital Expenditure (Asset) while An Expense is a narrow term which includes only direct and indirect expenses whose benefits are enjoyed and then payment is made later on. An Example of Cost is Cost of Sales which is used in the production of goods or for selling the products to end customers while for an expense, the example is Salaries Paid by company to employees for the service

Cost of Goods Sold or Cost of Sales is a direct cost associated with the cost of production it doesn’t include indirect cost which is not related to cost of production. As there two inventory accounting systems of recording inventory that are Periodic Inventory System And Perpetual Inventory System , so cost of goods sold journal entry is also recorded accordingly. We can record Cost of Sales Journal Entries with the help of an example. Let say, that we have opening inventory of Rs. 50000. Inventory Purchases (6 Pieces of Sofas at the rate of Rs. 70000 each) during the accounting period is Rs. 420000. 2 Units of Sofas remain unsold during the accounting cycle worth Rs. 140000. Pass Journal Entries to record Cost of Sales of Sofas. (i) To Record Cost of Sales                                     Cost of Sales a/c  470000                                                                Inventory Purchases a/c  420000                  

Opening Inventory is closing inventory of previous accounting period. So, it is the opening balance of the new current accounting period. It is calculated by adding Cost of Sales to Closing Inventory and subtracting  Net Purchases . Mathematically, we ca n use the below Opening Inventory Formula or Equation: Opening Inventory = (Cost of Sales + Closing Inventory) - Net Purchases Ope ning Inventory is shown on Income Statement or Trading Account of the current accounting period.

It is the sum of Opening Accounts Payable and Closing Accounts Payable divided by two (2). Mathematically, we can show as below: Average Accounts Payable = Opening Accounts Payable + Closing Accounts Payable / 2 Average Accounts Payable / Creditors helps us in keeping our Credit Purchases and payments to suppliers in balance during the accounting cycle.

It is the ratio of N et Credit Purchases to Average Accounts Payable divided into 365 days. Accounts Payable Days Formula shows how many days a company takes to pay its bill or debts to suppliers or creditors during the accounting cycle. If a company takes too much time to pay to its suppliers, then Accounts Payable Days Ratio is not good for that company and creditors and suppliers hesitate to give loans or make purchase agreement with that company. The formula to calculate Accounts Payable Days is shown below: 365 / ( N et Credit Purchases / Average Accounts Payable) Here Average Accounts Payable is calculated as shown below: Opening Accounts Payable + Closing Accounts Payable / 2 For Example, if the N et Credit Purchases is Rs. 70000, Average Accounts Payable is Rs. 600000, then what is Accounts Payable Days? Putting the value in the above formula of Payable Days, we get: 365 / (500000 / 600000) = 365 / .833 = 438 Days

Ending Inventory or Closing Inventory shows those goods that remain unsold at the end of accounting cycle. It is calculated by adding Opening Inventory to Inventory Purchases minus Cost of Goods Sold (Cost of Sales) . Mathematically, we can use the following Ending Inventory Formula to calculate ending inventory for the accounting cycle as shown below: Closing Inventory = Opening Inventory + Inventory Purchases - Cost of Sales Ending inventory is recorded on Balance Sheet at the end of the accounting period as a Current Asset .

Cost of Goods Sold or Cost of Sales is the direct cost required to produce and sell a product to end customers. For Manufacturing Concerns, COGS includes all the direct expenses excluding indirect expenses that are not related to the cost of production and selling the products to end customers while for trading concerns, who sold finished goods to customers, it is the sum of opening inventory and inventory purchases minus closing inventory. Mathematically we can say that: Cost of Goods Sold = Opening Inventory + Inventory Purchases - Closing Inventory Cost of Sales is shown on Income Statement or Trading Account as a direct expense and it is deducted from net Sales in order to find out Gross Profit or Gross Margin during the accounting period.

Monetary Assets are those Assets which are expressed in terms of Cash or units of Currency Such Rupees, Dollar, Pond, Euro, etc. Examples are Cash , Investments, Accounts Receivable / Debtors , etc. The value of Monetary Assets never changes over time and keeps constant. For example, the numerical value or digits value in numbers of Cash Rs.300000 in hand or at bank remains the same over accounting cycle whether it is an inflationary period or a boom period.

Average Total Asset is the sum of Opening Total Assets and Closing Total Assets divided by two (2). So, it shows average of Assets acquired during current accounting period and previous accounting period. Mathematically, we can show as follows: Average Total Assets = Opening Total Assets - Closing Total Assets / 2   Average Total Assets is a part of Asset Turnover Ratio and it is used to show how efficient a Management is in using the resources (assets) of business to earn revenue ( Sales ).

Total Assets refers to total amount of Assets owned and controlled by an entity or a sole proprietor. These are shown on the B alance Sheet on asset side. Examples of total assets include Cash , Accounts Receivable , Inventory , Land & buildings, Plant & Machinery, Goodwill , Patents, etc. Total Assets include both Current Assets and N on Current Assets / Fixed Assets . Mathematically we can show it as: Total Assets = Current Assets + N on Current Assets As the sum of assets (Total Assets) are equal to the sum of Liabilities and Equity so these represent a part of Accounting Equation .