Basics of Cost and Costing in Management Accounting
Cost and costing are basic principles of management accounting, enabling companies to monitor expenses, determine prices, and optimize profitability. Cost is the monetary amount of resources consumed in production, whereas costing is the recording, classification, and analysis of costs to facilitate decision-making. It is essential for businesses to understand cost behavior to manage expenses and […]
What is Momentum Analysis? When is it Used?
In finance, momentum analysis is a technique used to assess the speed and direction of a security’s price movement. It essentially tries to capture the idea that prices tend to continue in their current trend, either upwards or downwards, for a certain period of time. Types of Momentum Indicators There are a number of different […]
How to calculate liquidity ratios?- With examples
The term liquidity refers to the ability of the firm to meet its obligations as and when due. The current liability of the company meets the realising amount from current assets. The current assets may be in the form of liquid or near-to-liquid. The sufficient or insufficient current assets should be assessed by comparing the […]
What is a Perpetual Inventory System?
Businesses that use a perpetual inventory system maintain accurate records of the costs associated with each inventory acquisition and sale. These records show the inventory that should be kept on hand for each item constantly or permanently. For instance, a Ford dealership maintains distinct inventory records for each car, truck, and van on its lot […]
Closing Entries to Prepare Trading Account
With the completion of an accounting period comes the important activity of preparing the financial statements. The first thing one does in doing this, particularly for those dealing in goods or commodities of buy and sell type, is preparing the Trading Account. It facilitates the establishment of the Gross Profit or Gross Loss arising out […]
What is the Importance of Trading Account in Final Accounts
The Trading Account forms one of the critically important components of a company’s final accounts as it will determine gross profit or loss from its core business activity. It would include the revenues from sales and direct expenses like purchases, wages, and manufacturing costs. In analysing the Trading Account, a business will be able to […]
What is Triple Bottom Line Reporting (TBLR)?
Triple Bottom Line Reporting (TBLR) is a new process that focuses on reporting, assessing and improving organisational performance for sustainability. This helps companies better understand and communicate their sustainability efforts. TBR’s method of communication is simple. It’s an extension of the good practice of communicating how you want to be seen and how you want […]
What Are the Factors Governing Dividend Decisions?
Dividends are an essential aspect of a company’s financial strategy. It is the distribution of profits to shareholders, which can be in the form of cash or additional shares. The decision to pay dividends is crucial and requires careful consideration by the company’s management team. Several factors govern this decision, such as financial performance, growth […]
Meaning of Treasury Stock and Its Accounting Treatment
Treasury stock is the stock issued by the company and may later be reacquired by the company from its shareholders. The company may retire or cancel these stocks. The reacquired stock which is not retired by the company is called “treasury stock”. Treasury stock is not an asset for the company. A company creates its […]
Classification of Accounts in Bookkeeping
Bookkeeping is the basis of financial management. All business transactions must be systematically recorded and categorized in bookkeeping. Classification of accounts is one of the most important part of bookkeeping which facilitates the organization of financial data for reporting and analysis. Proper classification does not only simplify financial tracking but also enhances decision-making through the […]