What Does Mean Substance Over Form?
In accounting, the phrase “substance over form” refers to a preference for the underlying truth of a transaction above its legal form. The accounting idea is that a transaction’s economic substance should take precedence over its legal structure. This principle ensures that financial accounts accurately reflect the economic substance of a transaction, regardless of its […]
What is Trade Discount in Accounting?
In accounting, a trade discount is a reduction in price a manufacturer or wholesaler offers a trade buyer on the list price of goods. Offering trade discounts is a standard practice in many sectors as a means of encouraging clients to make greater purchases or to develop long-term business partnerships. Purpose of Trade Discounts The […]
Capital Expenditure Vs Revenue expenditures in Accounting
Capital Expenditure Capital expenditures comprise costs incurred for the acquisition of a fixed asset, such as land, a building, a car, machinery, etc. It also includes any expenditures incurred thereafter that boost the earning capacity of an existing fixed asset. In addition to the cost of purchasing, the cost of acquisition also includes any additional […]
What is the Definition of Revenue in Accounting?
In accounting, revenue is defined as the total value of all money and other assets received by a company over a period of time. This can include money received from sales, investments, and any other sources. Revenue is typically recorded on a company’s balance sheet as “total revenue” or “net sales.” For example, if a […]
What is Bin Card in Cost Accounting?
In cost accounting, bin cards are physical or electronic records used to track inventory levels in a stockroom, warehouse, or another storage facility. The card typically contains the item’s stock number, description, location, current inventory level, and minimum and maximum levels that should be maintained. Bin cards can be used to track inventory levels manually […]
What is the Difference Between Cost and Financial Accounting?
Financial accounting and cost accounting are two different types of accounting that are used to track and report the financial performance of a business. While both financial and cost accounting provide insights into a company’s financial position, there are several key differences between the two. Financial accounting focuses on the big picture. Financial accounting is […]
What is the Owner’s Capital in Accounting?
In accounting, the owner’s capital refers to the owners’ equity in the business. This can be calculated by subtracting the liabilities from the assets. The owners’ equity is what is left over after the business liabilities have been paid. It represents the owner’s investment in the business and is also known as the owners’ contribution […]
What is Working Capital? Why is it Necessary for Businesses?
Working capital refers to the difference between a company’s current assets and current liabilities showing the liquidity strength of a company. Here current assets include cash, accounts receivable and inventory that can be converted into cash within one year. Current liabilities refer to any obligations due within 12 months – accounts payable, wages payable and […]
Why internal control is necessary for accounting system
Internal control procedures in accounting are the policies and procedures implemented by a company to ensure the reliability of financial reporting, safeguard assets, and promote operational efficiency. These controls are designed to prevent fraud, errors, and irregularities in the financial reporting process. In this blog post, we will explore why internal control is necessary for […]
What is the Revenue Recognition Principle?
The revenue recognition principle directs a business to recognise revenue in the period in which it is earned; revenue is not considered earned until a product or service is provided. This means that revenue is recognised during the period in which the service was rendered or the product was delivered to the customer. There is […]