Difference Between Net Profit and Gross Profit
Profit is one of the most significant measures of a company’s financial well-being, but profits differ. Two critical metrics—gross profit and net profit—serve distinct purposes when assessing a firm’s performance. Gross profit is the profit after excluding the direct costs of goods or services manufactured, whereas net profit is the actual profit after deduction of […]
What is the Going Concern Concept?
The going concern concept is a principle that assumes a business entity will continue operating for the foreseeable future, typically in the next 12 months. This signifies that the company doesn’t plan or anticipate ceasing operations, liquidating its assets, or significantly reducing its business scale. Why is the Going Concern Concept Important? This concept is […]
Difference Between Fixed and Floating Rate of Interest
Interest rates form a vital aspect of the financial landscape. Whether you are considering taking out a loan for a major purchase or investing in a bond, understanding the difference between fixed and floating rates of interest is crucial. Let’s explore the difference between fixed and floating rates of interest, their advantages and disadvantages, and […]
Benefits of Computerised Accounting Systems
In today’s fast-paced, technology-driven world, businesses need to keep up with the latest advancements to remain competitive. One area where embracing technology is crucial is in financial management. Gone are the days of manual bookkeeping and piles of paperwork. The advent of computerised accounting systems has revolutionised the way businesses handle their finances. There are […]
What is a Consolidated Financial Statement?
A consolidated financial statement is a report of financial position and performance of a parent company and its subsidiaries as a single entity. It is an essential tool for investors, analysts, and other stakeholders to assess the overall financial position and performance of a group. Consolidated financial statements are particularly significant in the context of […]
What does mean reporting period in accounting
The reporting period, also known as the accounting period, refers to the specific timeframe for which a company’s financial performance and position are measured and reported. This timeframe serves as the foundation for a company’s financial statements, including the income statement, balance sheet, and cash flow statement. Common reporting periods Annual: Most companies follow the calendar […]
What is Meant By Impairment of Assets
In simple terms, an impaired asset is one whose market value has fallen below its value listed on the company’s balance sheet. Think of it as a valuable painting fading or a fancy smartphone becoming obsolete. These assets, once prized possessions, no longer command the same price they used to. Similarly, companies hold various assets […]
Indirect Method of Preparing Cash-Flow Statement
A cash flow statement is a crucial financial statement that provides insights into a company’s liquidity and its ability to generate cash. When it comes to preparing a cash flow statement, there are two methods: direct and indirect. In this article, we will focus on the indirect method and explore its significance in reconciling net […]
What is the Capital Adequacy Ratio?
In finance, stability is a key determinant for keeping the public trust and economic activities smooth. One of the critical measures that regulators and banks rely on to measure such stability is the Capital Adequacy Ratio (CAR). Often called the backbone of prudent banking, this metric plays a significant role in determining a bank’s financial […]
What Are Joint Products and By-Products?
In cost accounting, joint products and by-products are two types of products that are produced from the same manufacturing process. Joint Products Joint products are two or more products that are produced simultaneously from a common input or process, each having a significant relative sale value. They are also known as co-products or primary products. […]