Inventory is a crucial aspect of the operations and activities conducted by many companies. Usually, it includes the acquisition cost and any additional expenses in bringing the goods to their current condition. Accounting standards require companies to record inventory at that cost. Sometimes, though, it may not reflect the value …

Retailers and wholesalers may purchase inventory from various suppliers to sell further. These businesses exist to invest money in goods from other companies and market them as a part of their operations. However, these goods do not constitute their finished goods. Instead, they classify as merchandise inventory. What is Merchandise …

Owners invest in a business expecting returns which may come in various forms. For companies, these returns include dividends, which are the distribution of earnings during a period. On top of that, it may also consist of a capital gain on shares over a period. Owners do not need dividends …

Revenue refers to the income a company generates from its operations. Some companies also term it as sales. Typically, it is the first item that appears on the income statement. Revenue plays a crucial role in companies and how they operate. However, the source of these proceeds may differ from …

Companies pay employees through various forms of compensation. Usually, companies have two types of employees classified based on these forms. These include salary and wage expenses for employees. The former category receives a fixed compensation, while the latter gets compensated based on hourly work. Typically, companies use a wages expense …

It is common in most rental agreements for the landlord to ask for advance rent. Its accounting treatment also differs from the compensation paid in the typical course of the lease. Therefore, it is crucial to understand how it works. What is Advance Rent? Advance rent is a common term …

Changes are inevitable in companies. Sometimes, these changes may relate to accounting standards, policies, and estimates. However, it may not be as straightforward due to various reasons. One of the most common of these includes the comparability of financial statements. Companies must refer to the relevant accounting standards to ensure …

A transaction is a financial event involving the exchange of goods, services, or money between two or more parties. In accounting, a transaction typically includes a change in a company’s financial position, which gets recorded in a company’s accounting system. It provides insight into the company’s financial performance and helps …

An acquisition is a process through which one company acquires another company. It usually occurs when the buyer purchases over 50% of the shares in another company. Sometimes, this percentage may vary based on the voting rights that come with the obtained stock. In most cases, the buyer pays more …

A fixed cost is a type of expense that does not change. In accounting, it means the amount remains the same over several periods. Usually, companies view this cost according to the activity levels over that period. Therefore, a fixed cost is an expense that does not change regardless of …