Closing entries to pass before preparing a Profit and Loss Account
Closing entries in accounting refer to the many entries that are made after an accounting year to eliminate the balances of all temporary accounts established throughout the accounting period and transfer their balances to the appropriate permanent accounts. The process involves resetting the balances of temporary accounts to zero, ensuring their readiness for usage in […]
Volkswagen Scandal – An Accounting Perspective
Every public organisation must be accountable for its operations from a financial, social, and environmental perspective (Crane & Matten 2010). There are many instances of failures due to non-compliance and non-accountability of the business. The impact of such a dilemma is severe for transnational organisations. This is reflected in Volkswagen’s recent ‘diesel dupe’ scandal (VW). […]
Methods of Preparing a Trial Balance
A trial balance is a listing of all the general ledger accounts in a company’s accounting system at a specific point in time. It shows the ending balances (debit or credit) for each account. The main purpose of a trial balance is to check for mathematical errors in the bookkeeping. Methods of Preparation of Trial […]
Net Present Value (NPV) Calculation With Example
The NPV method is based on the time value of money principle, which states that money is worth more today than it will be in the future. This is because money can earn interest, and the longer you have to wait for the money, the less you will get in return. The Net Present Value […]
What are the Fundamental Accounting Assumptions?
Fundamentals accounting assumptions are the underlying assumptions that are presumed to have been followed while preparing financial statements. There are three fundamental regards to accounting assumptions: If there is nothing mentioned about the fundamental accounting assumptions in the financial statements, then it shall be presumed that these assumptions have been followed in the preparation of […]
Trend Analysis – Meaning and Example
Trend analysis is the process of analyzing the financial statements by the computing trend of a series of information using certain techniques. With the help of the trend analysis tool, we determine the directions upward or downward and compute the percentage relationship that each statement item bears to the same item in the base year. […]
Meaning and Accounting Treatment of Depreciation
Generally, the term ‘depreciation’ denotes a decrease in value, but in accounting, this term denotes a decrease in the book value of a fixed asset. Because fixed assets are used to create periodic income, an appropriate percentage of the cost of fixed assets that are thought to be utilised or expired to generate periodic revenue […]
The Qualitative Characteristics of Financial Information
The qualitative characteristics of financial information refer to the attributes that make it useful for decision-making purposes. These characteristics include relevance, reliability, comparability, consistency, understandability and timeliness. The qualitative characteristic of financial information is to identify the most useful information to investors (existing and potential), lenders and other creditors for making their decision based on […]
Characteristics of an Effective Financial Reporting Framework
In the current world of financial complication, organizations and companies heavily count on financial reports to make suitable decisions. Having a strong framework of financial reporting is critical for generating precise, credible, and useful financial details. This post will explore what the major elements are that can characterize an effective financial reporting framework and their […]