What is the Modified Internal Rate of Return (MIRR)?
In an effort to solve some of the shortcomings of the IRR method, financial analysts have devised an alternate evaluation procedure that is comparable to the IRR but modified. The modified internal rate of return (MIRR) is a monetary indicator of an investment’s appeal. The IRR has a number of issues, but MIRR fixes two […]
What is Throughput Costing? When to Choose it?
Throughput costing is a system based on the fact that most production costs will not vary at the level of the individual unit produced. Throughput costing, also known as super-variable costing, is a relatively recent concept. All expenditures except direct materials are treated as period expenses under throughput pricing. Unlike traditional costing methods that allocate […]
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 Simple Interest and How to Calculate it?
Often we come across the term ‘interest rate’ when we have to borrow funds or invest money somewhere. An interest rate is the cost of financing that we pay when we take money on a loan and we get it when we have lent money or made the investment. There are two types of interest: […]
What is Compound Interest and How to Calculate It?
Compound interest involves earning interest not only on the initial amount of money or principal but also on any previously accumulated interest. This means that as time goes on, the interest earned on an investment or loan can increase exponentially. Compound interest is typically calculated and added to the principal at regular intervals, such as […]
What is Idle Time in Cost Accounting
In cost accounting, idle time is when a production resource is available but not used. Idle time can occur for several reasons, such as when a production line is shut down for maintenance or when there is a shortage of raw materials. In many factories, idle time is a major source of inefficiency and wasted […]
What is Labour Turnover in Cost Accounting?
Labour turnover is a crucial metric in cost accounting that measures the rate at which employees leave a company and are replaced by new employees. A high rate of labour turnover can have significant financial implications for a company, including increased costs related to recruitment, training, and lost productivity. In this article, we will explore […]