Difference between Spoilage and Defectives in Cost Accounting
In cost accounting, spoilage and defectives refer to different types of quality issues that arise during the production process. While both terms indicate a deviation from the desired product standards, there are distinct differences between spoilage and defectives. Spoilage Spoilage refers to products that do not meet the required specifications or quality standards but cannot […]
A Short Note on the LIFO Method of Inventory Valuation
The LIFO method, or last-in, first-out, is one of the most popular and widely used inventory valuation methods in cost accounting. Under this approach, the cost of goods sold (COGS) and ending inventory are determined based on the assumption that the most recently acquired or produced items are sold or used first. In other words, […]
What is meant by annual holding cost in costing?
Annual Holding Cost or carrying cost refers to the total expense a business incurs to store and manage inventory over a year. It encompasses expenses like warehousing, insurance, depreciation, security, and obsolescence, and the opportunity cost of capital invested in unsold goods. Excessive holding costs can put a strain on a company’s finances, lowering profitability, […]
What is Economic Order Quantity and Its Assumptions?
Economic Order Quantity (EOQ) is a formula used in inventory management to determine the optimal quantity of goods that should be ordered at one time. EOQ takes into account various factors such as ordering costs, carrying costs, and the demand for the product. By finding that sweet spot where the cost of ordering and holding […]
Differences Between Equity and Preference Shares
Equity shares and preference shares are both types of stocks or shares that represent ownership in a company. However, they differ in terms of rights, dividend payments, and risk profiles. This article will disclose the difference between equity shares & preference shares in detail to give our readers a better understanding of the subject. To […]
What Are the Differences between Accounting and Auditing
Accounting involves tracking, reporting, and analyzing financial transactions. It covers everything from preparing individual tax returns to preparing financial statements for multinational corporations and is considered a fundamental discipline within the field of accounting. Auditors come in behind accountants and verify the work they do. They examine the financial statements prepared by accountants and ensure […]
Differences between Lease and Hire Purchase
When purchasing assets for business or private purposes, two popular financing methods are leasing and hire purchase. Although both enable you to utilize an asset without paying the entire amount in advance, they differ in ownership, payment terms, and financial implications. The appropriate choice depends on considerations like long-term expense, flexibility, and tax advantages. In […]
What is the FIFO Method of Inventory Control
The FIFO or First-In, First-Out inventory method is probably one of the most popular used by companies to manage their stocks. It lies on the rationale that the products oldest in (first-in) should be utilized or sold prior (first-out). This can work well especially with companies operating in perishables, including drugs, food products, and similar […]
What is a Bill of Exchange?
A bill of exchange is a financial instrument or written document that represents an order made by a drawer to another party drawee for the payment of a specific amount of money to a third party (payee) at a fixed future date or on demand. This article seeks to give a thorough understanding of what […]
Differences Between General Reserves and Capital Reserves
Reserves are essential for strengthening a company’s financial situation. General reserves and capital reserves are two different kinds of reserves. Both provide organizations with a financial cushion, but their functions, funding sources, and ways of use are different. In order to give readers a thorough knowledge of these crucial accounting concepts, this article tries to […]