# Accounting Concepts and Calculations: A Comprehensive Guide

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## Accounting Concepts and Calculations

### 1. Income Statement

• Gross Sales: Total sales before any deductions.
• Returns: Deducted from gross sales to calculate net sales.
• Cash Discounts: Deducted from gross sales to calculate net sales.
• Net Sales: Gross sales minus returns and cash discounts.
• Cost of Goods Sold (COGS): The cost of the goods sold during the period.
• Other Expenses: Expenses not related to COGS.
• Profit Before Tax: Net sales minus COGS and other expenses.
• Tax Expense: Taxes owed on profit before tax.
• Net Income: Profit before tax minus tax expense.

### 2. Balance Sheet

• Accounts Receivable: Money owed to the company by customers for goods or services sold on credit.
• Allowance for Doubtful Accounts (ADA): An estimate of the amount of accounts receivable that will not be collected.
• Net Accounts Receivable: Accounts receivable minus ADA.

### 3. Inventory Management

• FIFO (First-In, First-Out): Assumes that the oldest inventory is sold first.
• AV W (Average Weighted): Calculates the average cost of goods sold based on the cost of all inventory purchased during the period.
• Ending Inventory: The value of the inventory on hand at the end of the period.

### 4. Depreciation

• Straight-Line Depreciation: Allocates the cost of an asset evenly over its useful life.
• Accumulated Depreciation: The total amount of depreciation that has been recorded for an asset.
• Book Value: The cost of an asset minus accumulated depreciation.
• Depreciation Expense: The amount of depreciation recorded for an asset during a period.

### 5. Double-Declining Balance Method (DDM)

• Calculates depreciation based on a fixed percentage of the book value of an asset.
• Results in higher depreciation expense in the early years of an asset's life.

### 6. Units of Production Method

• Calculates depreciation based on the number of units produced by an asset.
• Results in more accurate depreciation expense allocation for assets that are used unevenly over their useful life.