What Are the Assumptions and Limitations of CVP Analysis?
Cost-Volume-Profit (CVP) analysis is a method for assessing the links between selling prices, total sales revenue, and the volume of production, expenses, and profit. CVP analysis can be critical in providing management with information about financial results when a specified level of activity or volume fluctuates, the relative profitability of the company’s various products, and […]
What are non-manufacturing costs or period costs?
Period Costs Period costs, also referred to as nonmanufacturing costs, are expenses that a business incurs to maintain its operations but are not directly associated with the manufacturing process. These costs are not directly tied to the production of goods or services, but rather to the overall operation of the company. Examples of period costs […]
Purpose of Financial Accounting, Cost Accounting, GAAP, and IFRS
Accounting is also vital in making business decisions through providing transparency, accuracy, and conformity with financial laws. Financial accounting deals with recording and reporting the financial transactions of a company to external parties, while cost accounting assists firms in monitoring and managing costs for improved efficiency. To maintain consistency in financial reporting, accounting frameworks like […]
What are fundamental accounting principles?
Accounting is integral to any organization’s success, and fundamental accounting principles serve as a foundation for accurate financial reporting. Fundamental accounting principles are a set of rules that govern how financial information should be recorded, reported, and analyzed. These principles provide a standard framework for financial reporting, enabling businesses to convey their financial position to […]
Ethical Perspectives in the Accounting Profession
Accountants have a significant responsibility to the public. This responsibility exists because outside shareholders, creditors, employees, and others rely on financial statements in making various business decisions. Internal accountants are employed by businesses to prepare financial statements. These financial statements are then audited by an independent CPA company. Both internal accountants and external auditors are […]
Key Users of Financial Statements for Decision-Making
Financial statements are an essential source of financial information for a wide range of users and decision-makers. These statements provide a comprehensive overview of a company’s financial position, performance, and cash flows. But who are the various users of financial statements who rely on these accounting records prepared by accountants? Let’s talk about them in […]
Differences between management and tax accounting
Financial accounting and reporting are only part of the broad field of accounting. Other significant kinds of accounting include management accounting and tax accounting. While both are essential in providing financial information, there are some key differences between management accounting and tax accounting Management Accounting Management accounting is internal accounting designed to meet the information […]
What Are Operating and Financing Leases?
Leases are also generally categorized under operating leases and financing (or capital) leases with different accounting and financial effects. An operating lease is an agreement for rental of assets of short term wherein the lessee does not retain ownership and so is best for assets that will have a finite useful life. Conversely, a financing […]
What is a sunk cost and its impact on decision making
A sunk cost is that which has been incurred or committed in the past and is, therefore, irrelevant to the decision-making purpose because the decision-maker no longer has discretion over that. For example, if a company purchased new machinery without a warranty that failed the next day, the purchase price is irrelevant to the present […]
Differences between standard cost and standard costing
The standard cost is the amount anticipated to be paid for materials or labour. The standard quantity is the estimated amount of materials or labour used. It is essential to establish cost standards at the beginning of a period to construct a budget, control material, labour, and administrative expenses, and set a fair price for […]