What are the Different Types of Cost Audit?
A cost audit is an independent examination of an organization’s cost accounting records and procedures. It is used to ensure that the organization is following sound cost accounting principles and practices. Cost audit can also be described as “the verification of cost records and accounts and a check on the adherence to the prescribed cost […]
What is the Importance of Overhead Costs
Overhead costs are expenses incurred during the production of a product or the operation of a department but cannot be directly attributed to the product or department. Unlike direct costs, which can be readily traced to specific products or services, overheads represent the indirect expenses that underpin the overall functioning of an organization. While they […]
How to Calculate Accounting Rate of Return [With Example]
When a company makes an investment it evaluates the financial feasibility of the investment. This process is called investment appraisal. Investment appraisal is a critical stage of investment because it allows the company to invest funds in the most optimal options. The investment appraisal approach is a way of appraising financial assets following their anticipated […]
What is a Cost Audit? – Meaning and Definition
A cost audit is designed to uncover and correct or prevent errors in the accounting of materials and services to customers. It is an ongoing process of checking the accuracy of company costs. Often costs are not matched up against the service or work that has been performed. The auditors check that the number of […]
What are limited liability companies?
A limited liability company, LLC, is a form of business organization that incorporates elements of corporations and partnerships. As such, the owners of this business are given limited personal liability, which allows their personal assets to be secured from the claims of debts in business as well as other litigation. An LLC also allows tax […]
What are the advantages of absorption costing?
Absorption costing is a method of accounting for production costs that assign all direct and indirect costs to the products being produced. This method is also known as full costing or traditional costing. Under absorption costing, the cost of each product includes the direct materials, direct labour, and both variable and fixed overhead costs associated […]
GAAP and IFRS: Effects of Globalization
Globalisation has considerably influenced the way accounting is being practised worldwide. The reason for this is that laws are diverse throughout every country. U.S. accountants are required to follow the Generally Accepted Accounting Principles (GAAP). Worldwide, there are currently over 115 countries using the International Financial Reporting Standards. Accountants understand that global businesses will profit […]
What is Ratio Analysis? – Meaning and Types of Ratios
Ratio analysis is one of the most useful techniques for the analysis or interpretation of a financial statement and performance of a company. It provides insights into a company’s profitability, liquidity, efficiency, and solvency, enabling businesses, investors, and creditors to make informed decisions. In simple words, we can say that a ratio is an expression […]
What are various equity valuation methods?
The term equity valuation refers to the process of determining the fair market value of equity securities. In simpler terms, it’s figuring out what a company is truly worth to investors. There’s no single, perfect way to value a company. Different analysts use various methods and assumptions, leading to a range of possible values. In […]
What is Direct Labour Cost Variance
Direct labour cost variance refers to the standard cost of direct labour for the actual number of units produced less the actual cost. A total variance might have been caused by two factors: either the difference in the number of labour hours that are being used or by a difference in the wages paid to […]