The 8 Important Steps in the Accounting Cycle
The accounting cycle provides a framework for recording transactions and checking them for accuracy before they make it to the financial statements. The first step in the accounting cycle is identifying business transactions. Companies use internal controls to ensure all transactions are identified and recorded accurately. The process starts with recording individual transactions and ends […]
First-In First-Out Inventory Method Definition, Example
With FIFO, when you calculate the ending inventory value, you’re accounting for the natural flow of inventory throughout your supply chain. This is especially important when inflation is increasing because the most recent inventory would likely cost more than the older inventory. For instance, if a brand’s COGS is higher and profits are lower, businesses […]
Acid-Test Ratio Learn How to Calculate the Acid-Test Ratio
Total current liabilities are often calculated as the sum of various accounts, including accounts payable, wages payable, current portions of long-term debt, and taxes payable. These are subtracted from current assets to arrive at quick assets, which are divided by current liabilities to get the acid-test ratio. Thus, the quick ratio attempts to measure the […]
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