Companies use various techniques to retain their customers. Usually, it involves offering them the best quality products for a reasonable amount. Sometimes, though, customers may not like the items sold to them by their suppliers. Companies also offer purchase returns as a part of their policies to ensure customer retention …

Inflation is the increase in the price of goods or services in a country. Usually, governments or economists measure it as a rate of change in specific items over time. This rate is increasing steadily, causing many investors to suffer a loss on their investments. Investors can still manage or …

Most companies focus on the cost of their products or services. Usually, these include direct and indirect production costs, including material, labor, and overheads. These determine a product’s profitability after deducting those costs from the sale price. However, they do not show how profitable the company is because other expenses …

When recording an asset in the financial statements, companies must have a value for it. However, it may not be as straightforward as there are several techniques to derive this cost. Most accounting principles rely on historical costs when recognizing various elements. However, some may also allow other methods, such …

A journal is a book or record of transactions that companies maintain to aid their financial accounting process. Usually, it is the first step in the accounting cycle. Once a company identifies any financial transaction, it must record it with the amount and any relevant details in a journal. From …

A liability is an obligation that results in a probable outflow of economic benefits. This obligation comes from past events, for example, contracts or agreements. For most companies, these include payables, loans, etc. However, it may also consist of provision expenses relating to future costs. In accounting, these fall under …

In managerial accounting, classifying costs into different categories is crucial in analyzing and controlling costs. However, there are various categories within those classes. One such classification is differentiating between direct and indirect costs. While they may sound straightforward, the classification may be complex due to how managerial accounting separates them. …

A liability is obligation companies accumulate from past transactions and events. This obligation creates an economic outflow of benefits in the future. Practically, liabilities may come in various forms for a company. Two of the two common ones include account and note payable. Both are similar in many aspects. However, …

Companies need financial assets to operate and survive in the long run. Most companies focus on working capital, including liquid assets that help run daily operations. However, that does not imply non-liquid resources do not play a role in activities. Companies also need long-term assets that help provide the base …

When a company sells goods, it must record them as sales. For the companies that offer credit to customers, these also become a part of the accounts receivable balances. Sometimes, however, they may also appear as accrued revenues, which can create confusion. Fundamentally, both are the same due to their …