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 […]
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 a Cost Centre in Costing? Purpose and Benefits
Cost centres refer to specific divisions and departments, that are responsible for managing their own expenses and can have costs assigned to them. In cost accounting, a cost centre is any department or function within an organisation for which costs are incurred. Cost centres are utilised to separate financial activity according to the nature of […]
What is Abnormal Loss in Cost Accounting?
An abnormal loss is a cost accounting term that refers to a situation where the expected output of a production process is not achieved due to factors beyond the control of management. This can lead to an increase in the cost of goods sold and, ultimately, a decrease in profits. Let’s try to understand in […]
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 […]