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
General Accounting
What is substance over form in accounting?
Substance over form principle states that transaction should be recorded based on realism (substance). If there is a conflict between realism and form (legal aspects), … Read more
Trading Account in Accounting
The name trading account is given to a ledger account used by trading business firms to aid in the formation of income statement and balance … Read more
Accounting conventions (Definition, Importance, Examples)
Definition Accounting conventions are the set of guidelines that companies use to record financial transactions. These conventions play a vital role in the entire accounting … Read more
What are accumulated losses?
Definition Accumulated losses are losses incurred by the business in the past. These losses are adjusted against shareholders’ equity. These losses lead to a decrease … Read more
What is a period cost?
Definition Period cost is the cost that is not based on the one-time transactional event rather it is incurred over specific time. These costs are … Read more
Why is investment portfoilo diversification important?
Investment Portfolio Diversification Meaning Investment portfolio diversification is a finance term used frequently by investors and businesses. The portfolio is a combination of financial investments. … Read more
What is forensic accounting?
Definition Forensic accounting is about investigating financial fraud/crime. It involves detailed understanding of the business processes, operations, working dynamics, background checks, and many more things … Read more
What is throughput accounting?
Definition Businesses uses throughput accounting as an intelligent mechanism to plan production. The purpose of using this accounting approach is profit maximization. This concept is … Read more
Gross margin vs contribution margin – what is the difference?
Gross margin vs contribution margin can be an excellent metric to understand business profitability potential. What is Gross margin? Gross margin is about profit strength … Read more
Source documents (detailed understanding)
Original documents containing details about a business transaction are referred to as source documents. The source document contains vital information such as the date and … Read more
What are Drawings in Accounting?
Definition Drawings in accounting refer to the withdrawal from a business by its owner in the form of cash or any other asset aimed to … Read more
What is an unpresented cheque/outstanding cheque?
Unpresented cheque is the cheque that has not been presented to the bank. Although the business has written and accounted for the cheque in their … Read more
What is an uncredited cheque/outstanding lodgment?
Uncredited cheques are the cheques that have been collected by the business and recorded as the receipt of cash in the business books. However, the … Read more
What is price level accounting?
Definition and explanation Price level accounting seeks to adjust financial statements due to fluctuation in the value of the currency. The currency fluctuation may be … Read more
Analyzing business transactions
Analyzing business transactions is the basis of a strong financial reporting framework. The posting of accounting transactions in the accounting record leads to changes in … Read more
What are the profitability ratios?
Profitability ratios help understand the profitability of a business at different stages of the income statement. For instance, the gross profit ratio helps to understand … Read more
What is service rendered?
Businesses generate revenue from rendering services and the sale of tangible products. Income generated from service rendered is referred to as service revenue. The transaction … Read more
Consolidation, mergers, and joint ventures
Consolidation, mergers, and joint ventures are the concepts of the business when a business acquires another business. The arrangements may be different from company to … Read more
GAAP and principles
GAAP refers to generally accepted accounting principles. It’s a set of procedures, accounting principles, and accounting standards related to business reporting and financial accounting. The … Read more