Examples of direct materials include bricks, shingles, wooden beams and floorboards for a house. Paper for the manufacture of paper bags is also a direct material. Direct materials are defined as raw materials, parts and subassemblies that go into a finished product.Know More
Direct materials are able to be measured, kept track of and counted. The amount of paper in paper bags is easily determined, but the amount of glue used to keep the bag together is not ascertainable. In this case, paper is a direct material, but glue is not, even though both are raw materials.
Indirect materials include items that are used to make a product but do not go into the final product. Indirect materials include oil consumed in automated machines that produce items, sandpaper consumed to make wooden products and welding rods consumed for large metal objects.Learn more about Accounting
Accumulated depreciation, purchase discounts and purchase returns are examples of contra accounts. Accumulated depreciation is a contra account in the assets portion of the balance sheet. Purchase discounts and returns are contra accounts that debit the cost of goods sold account on the income statement.Full Answer >
Some examples of liquid assets include cash held in a safe deposit box, checking accounts, saving accounts, money market accounts, U.S. Treasury bills and some types of retirement accounts. An asset is liquid if you can quickly turn it into spendable cash without a significant penalty or loss in the underlying value.Full Answer >
A prior year adjustment in accounting is a correction of errors in a company's financial statements for the previous year. For example, if XYZ Limited reported a lower depreciation amount, an adjustment is made by debiting the retained earnings account and crediting the accumulated depreciation account in the current year.Full Answer >
Unethical accounting practices occur when a company does not follow the rules of generally accepted accounting principles or GAAP. The rules of GAAP are established by the federal government. Examples of not following GAAP include recognizing revenue before a customer takes shipment, not recognizing expenses associated with revenue and not writing down bad inventory.Full Answer >