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The percentage of completion method is used when: Collections are assured; The accounting system can: Estimate profitability; Measure progress toward completion. Losses are recognized in the year when they are discovered, the same way as for the completed contract method. The balance sheet presentation is the same as in the completed contract ...
The accounting equation plays a significant role as the foundation of the double-entry bookkeeping system. The primary aim of the double-entry system is to keep track of debits and credits and ensure that the sum of these always matches up to the company assets, a calculation carried out by the accounting equation.
The method used for determining revenue of a long-term contract can be complex. Usually two methods are employed to calculate the percentage of completion: (i) by calculating the percentage of accumulated cost incurred to the total budgeted cost; (ii) by determining the percentage of deliverable completed as a percentage of total deliverable.
An asset's initial book value is its actual cash value or its acquisition cost. Cash assets are recorded or "booked" at actual cash value. Assets such as buildings, land and equipment are valued based on their acquisition cost, which includes the actual cash cost of the asset plus certain costs tied to the purchase of the asset, such as broker fees.
In energy, the break-even point is the point where usable energy gotten from a process equals the input energy. In computer science, the term (used infrequently) refers to a point in the life cycle of a programming language where the language can be used to code its own compiler or interpreter. This is also called self-hosting.
A consolidated financial statement (CFS) is the "financial statement of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent company and its subsidiaries are presented as those of a single economic entity", according to the definitions stated in International Accounting Standard 27, "Consolidated and separate financial statements", and International ...
Calculating the contribution margin is an excellent tool for managers to help determine whether to keep or drop certain aspects of the business. For example, a production line with positive contribution margin should be kept even if it causes negative total profit, when the contribution margin offsets part of the fixed cost.
Previously, companies could structure many acquisition transactions to determine the choice between two accounting methods to record a business combination: purchase accounting or pooling-of-interests accounting. Pooling-of-interests method combined the book value of assets and liabilities of the two companies to create the new balance sheet of ...