Classification of Accounts in Bookkeeping
Bookkeeping is the basis of financial management. All business transactions must be systematically recorded and categorized in bookkeeping. Classification of accounts is one of the most important part of bookkeeping which facilitates the organization of financial data for reporting and analysis. Proper classification does not only simplify financial tracking but also enhances decision-making through the […]
How to Prepare Profit and Loss Account?
A profit and loss account, also known as the income statement or statement of revenues and expenses, is prepared to ascertain the profit earned or losses suffered by the business entity. We have already discussed the theoretical concepts of profit and loss accounts. Now here we shall discuss only practical aspects only. The profit and Loss […]
What are Coverage Ratios – Meaning and Calculation
A coverage ratio is a common metric used in financial analysis that determines how much of a company’s assets are covered by its liabilities. This ratio can help determine whether a company is financially stable and able to meet its obligations. The coverage ratio measures the firm’s ability to service or repay the fixed liabilities. […]
What is Financial Statement Analysis?
The term ‘financial statement analysis‘ refers to determining the firm’s financial position by reviewing and analysing the balance sheet items, profits and loss accounts, cash flow statements, funds flow statements, etc. The financial analysis aims to understand the company’s financial health to judge the firm’s profitability. Several groups of stakeholders are interested in the analysis […]
The Meaning of Consignment Accounting
Consignment refers to selling the goods manufactured by a company through an agent. This sales method is especially popular among businesses located abroad who want to sell their products in your country. For example, if a US-based company wants to sell its phones in India, it can hire a local agent who will sell the […]
What are various methods of valuation of goodwill?
Goodwill is an intangible asset that represents the value of a business’s reputation, customer base, brand recognition, and other non-physical assets. Valuing goodwill can be challenging because it does not have a physical existence or a straightforward way to measure its worth. However, it is an essential element in determining the overall value of a […]
What do you mean by Systematic Risk
Systematic risks are market risks or undiversifiable risks, and the essential characteristic is that these are inherent risks that have an effect on the whole financial market or at least a large segment of it. Unlike those risks attributed to individual companies or industries, systematic risks impact all companies and sectors, though to different extents, […]
What Are Accounting Principles, Concepts and Conventions?
Accounting is a fundamental aspect of running a business. It involves recording, analyzing, and interpreting financial transactions to provide an accurate picture of the company’s financial health. However, following certain principles, concepts, and conventions is essential to ensure that accounting information is consistent and reliable. This article will explore the basics of accounting principles, concepts, […]
Accounting Policies, Selection and Changes in Accounting Policies
Accounting policies are the specific policies and procedures used by a company to prepare its financial statements. These include the methods, measurement systems and procedures for presentation and disclosures. Accounting policies vary from accounting principles in that the principles are the rules and the policies are a company’s way of adhering to the rules. The […]
What is the Accrual Concept in Financial Accounting?
The accrual concept is an accounting method used to record revenue and expenses when they occur rather than when they are paid. This means that revenues and expenses are recognised on the income statement in the period they are generated or incurred, regardless of when the cash is received or paid. This is the case […]