Contribution margin vs. gross margin
Contribution and gross margin help to understand the gap between revenue and expenses of the business. These measures are used to assess the profit that … Read more
Franchising vs. licensing
Licensing and franchising are sometimes confused to be the same. But they are different, in simple words licensing typically deals with the businesses of products … Read more
Horizontal integration vs. vertical integration
Horizontal integration is when a business acquires/merges with another business operating at the same level in a value chain. Generally, such integration aims to grow … Read more
What is the ex-factory price?
The selling cost of goods or merchandise from the seller’s factory is called ex-factory price. Here the term “ex” depicts exports, which means that the … Read more
Interim Dividend (All you need to know)
Definition The interim dividend is a dividend payment made by a corporation to the shareholders during accounting year. The payment for the interim dividend is … Read more
Why is external auditing important?
External auditing is important to assess the fairness of financial statements prepared by the management. As we understand, there is an agency relationship between shareholders … Read more
What is NRV – net realizable value in accounting?
Definition NRV – net realizable value in accounting is a widely used inventory valuation method. It aims to calculate the value realized by selling some … Read more
Accounts Receivables Factoring
Definition Accounts receivables factoring is designed to finance ventures without increasing leverage in the business. It involves selling of invoices to third parties at discount … Read more
Accounting for property plant and equipment (PPE)
Accounting for property, plant, and equipment is one of the technical areas where accountants often face a challenge. In this article, we have discussed different … Read more
What is plowback ratio?
The plowback ratio is used to identify the earnings that are retained for business after paying the dividends. It is used to calculate the profit … Read more
What is the Retention ratio?
Definition The retention ratio reflects proportion of earnings retained by the business. These are the earnings that have not been distributed among shareholders. Instead, these … Read more
What is common stock in balance sheet (all you need to know)
Definition Common stock represents your ownership in the company. These rights/power include an appointment for the board of Directors, formation of the board policies, and … Read more
Interest in Drawings (detailed explanation)
What is Interest on Drawings? We need to calculate interest on drawings when partner withdraws certain goods/assets from the business for a temporary period and … Read more
What is a cut off concept in accounting/audit?
The cut off concept in accounting aims to ensure events and transactions are posted in the correct accounting period. It helps to calculate profit/loss without … Read more
What is the Realization Concept in Accounting?
Definition The realization concept or the revenue recognition principle in accounting is a method used by accountants for recording revenue earned by the business. This … Read more
Corporate Governance
Definition of corporate governance Corporate governance refers to a system of governance. It aims to monitor and control strategic aspects of the board activities, decision … Read more
Dealing with a bad manager: (5 tips for handling a bad boss)
Dealing with a bad manager can be a serious mental hazard. All the time, your boss prefers his favorite subordinate who also exceeds the deadline … Read more
Conversion Cost in Accounting
Definition Conversion cost is the cost required to convert raw material into finished goods. It includes direct labor and manufacturing overheads. Explanation Whatever product you … Read more
What is an audit program?
Definition The audit program is a detailed action plan for the audit team. It sets a direction for an audit team to perform audit procedures. … Read more
Qualities of audit evidence
Auditors collect audit evidence during fieldwork. If audit evidence is sufficient and appropriate, they issue a clean audit report. Sufficiency of audit evidence refers to … Read more