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
Accounting
What is Paid-in capital?
Definition Paid-in capital refers to capital raised by the company against the sale of its equity. There are two components of paid-in capital. These components … Read more
Why is true up an important accounting concept?
True up in accounting is important to present fair and transparent financial information. It’s about tracking, reconciling, and correcting account balances to ensure fair and … 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 fictitious liabilities (Detailed explanation)
Definition Fictitious liabilities are the ones that are not real or true and are just imaginary or fabricated figures that appear in accounting records. The … Read more
Scrap inventory accounting
Scrap inventory accounting can be done by following three methods. Recording as income Deduction from the cost of production Deduction from the cost of the … 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
Monetary Unit Principle
The monetary unit principle states that all the transactions and business events should be recorded in currency form. It means that a business can record … Read more
Why Is Cash Flow Forecast Important For Business?
Overview A cash flow forecast helps to understand the business’s cash position in the coming accounting period. It acts as an intelligent tool to predict … Read more
Accretion Expense (all you need to know)
Accretion Expense A company has to pay an accretion expense for the fixed assets acquired under Asset Retirement Obligation (ARO) when the asset’s useful life … Read more
Capital Leases (Definition, Explanation, And Example)
Definition A capital lease can also be referred to as a finance lease. It’s is an agreement in which the lessor agrees to transfer the … Read more
Journal entries for recording inventory
Inventory is an important asset for businesses, especially for the trading business as they purchase the finished products from the market and resell them by … Read more
WHAT ARE DEFERRED SHARES?
Deferred shares are mostly issued to founders of a company as compensation. And these shares do not possess any rights to a company’s assets unless … Read more
Accounting Entries for value added tax -VAT
What is value added tax-VAT? Value-added tax (VAT) is a tax that is charged at each level or point of sale where value addition is … Read more
Return on net assets (definition, explanation, example, formula, calculation, and more)
Definition Return on net assets helps to understand how the business uses its assets base to generate the return. A higher return on net assets … Read more
Importance of Financial Analysis
Financial analysis is a process of examining the financial data of an entity to assess its performance. The financial analysis of a company is used … Read more
List of account titles in accounting
Accounts titles are the building blocks for accounting, and it’s the place where accounting transactions are posted. In a double accounting system, the transactions impact … Read more