What is audit risk, and how do auditors’ assess the risk of material misstatement?
Audit risk is the risk that auditors may not be able to detect the risk of material misstatement in the accounting record of the business. … Read more
Content of permanent audit file
Permanent audit file contain documents to be used by auditors throughout their professional association with the client. It’s supposed to contain content permanent in nature … Read more
What is bank confirmation?
Getting bank confirmation is one of the most important audit procedures. Auditors tend to confirm the balance directly from the bank. They use a specific … 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
What is the cost element? (Features of product costing)
Definition Cost element refers to the cost incurred on the purchase of resources; these resources are used to run the business’s production. The concept of … Read more
What is a trial balance?
Trial balance is the listing for all the balances obtained from general ledgers; it’s an ending balance obtained from the general ledger and used to … 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
Users of financial statements
There are multiple users of financial statement that range from internal employees to potential investors. Although, the use of financial statements differ for different stakeholders. … Read more
Manufacturing cycle efficiency – (MCE)
Manufacturing cycle efficiency- MCE aims to measure the efficiency of the production function. As we understand, higher production time leads to higher costs of manufacturing … Read more
Goods received a note – GRN
Goods received note is an internal document prepared by the business to control and track receipt of the goods in the business warehouse. This document … Read more
What are the asset management ratios?
Asset management ratios help to understand how effectively the business uses its assets to generate revenue. It’s an essential ratio for the business stakeholders to … Read more
What is the liquidity ratio?
The liquidity ratio helps to assess the cash flow position of the business. It’s a valuable tool in assessing if the business has sufficient liquid … 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 the gearing ratio?
Gearing ratio help to determine financial risk in the financing structure of the business. It helps study the relative volume of the debt and equity … Read more
Predetermined overhead rate (definition, explanation, example, and more)
Definition A predetermined overhead rate is an estimated rate that is used in the absorption of overheads in product costing. It’s calculated by dividing the … Read more
What is suspense account in accounting (definition, explanation, example, and uses)
Definition of suspense account: A suspense account is a temporary account where all the suspicious and unclear transactions of the accounting system are parked. However, … Read more
Bull and bearish market
Bull and bearish are the terms used in the stock market to reflect market conditions. The market is called Bull when the price index of … Read more
What is contra account (Definition, concept, nature, treatment, presentation, and more)
Definition A Contra account is the creation of an opposite account balance in the balance sheet. It helps to reduce the normal account balance without … Read more