What is the accounting process? Various Steps Explained
The accounting process is a methodical procedure that organisations employ to account, analyze, and interpret business transactions. In other words, the accounting process is a series of steps that businesses follow to record, classify, summarize, and report their financial transactions. It is a cyclical process that typically takes place over an accounting period, which is […]
What are accounting estimates in financial accounting?
We have learned how to measure a transaction that has already occurred or taken place and for which either some value /money has been paid, or some valuation principles are to be adopted for their measurement. But certain items can not occur and cannot be measured, but they are necessary to record in the books […]
Systematic and Unsystematic Risks in Finance
Risk is the probability of an individual or organization incurring a loss. Risk can be classified as market risk, credit risk, operational risk, liquidity risk, and compliance. In finance, the risk is the chance that the actual rate of return on an investment will be different from what was originally expected. An investor can assess […]
Basics of Cost and Costing in Management Accounting
Cost and costing are basic principles of management accounting, enabling companies to monitor expenses, determine prices, and optimize profitability. Cost is the monetary amount of resources consumed in production, whereas costing is the recording, classification, and analysis of costs to facilitate decision-making. It is essential for businesses to understand cost behavior to manage expenses and […]
What is Momentum Analysis? When is it Used?
In finance, momentum analysis is a technique used to assess the speed and direction of a security’s price movement. It essentially tries to capture the idea that prices tend to continue in their current trend, either upwards or downwards, for a certain period of time. Types of Momentum Indicators There are a number of different […]
How to calculate liquidity ratios?- With examples
The term liquidity refers to the ability of the firm to meet its obligations as and when due. The current liability of the company meets the realising amount from current assets. The current assets may be in the form of liquid or near-to-liquid. The sufficient or insufficient current assets should be assessed by comparing the […]
What is a Perpetual Inventory System?
Businesses that use a perpetual inventory system maintain accurate records of the costs associated with each inventory acquisition and sale. These records show the inventory that should be kept on hand for each item constantly or permanently. For instance, a Ford dealership maintains distinct inventory records for each car, truck, and van on its lot […]
Closing Entries to Prepare Trading Account
With the completion of an accounting period comes the important activity of preparing the financial statements. The first thing one does in doing this, particularly for those dealing in goods or commodities of buy and sell type, is preparing the Trading Account. It facilitates the establishment of the Gross Profit or Gross Loss arising out […]
What is the Importance of Trading Account in Final Accounts
The Trading Account forms one of the critically important components of a company’s final accounts as it will determine gross profit or loss from its core business activity. It would include the revenues from sales and direct expenses like purchases, wages, and manufacturing costs. In analysing the Trading Account, a business will be able to […]
What is Triple Bottom Line Reporting (TBLR)?
Triple Bottom Line Reporting (TBLR) is a new process that focuses on reporting, assessing and improving organisational performance for sustainability. This helps companies better understand and communicate their sustainability efforts. TBR’s method of communication is simple. It’s an extension of the good practice of communicating how you want to be seen and how you want […]