Companies use various financial tools to forecast information. This information helps anticipate future outcomes, enabling informed decision-making, strategic planning, and efficient resource allocation based on anticipated business conditions. One of these tools is the three-statement model. What is the 3 Statement Model? The three-statement model is a core financial modeling …

Depreciation refers to the reduction in an asset’s value over its life. In accounting, it is crucial to identify whether a company can depreciate a specific asset. Therefore, companies know what a depreciable asset is. What is a Depreciable Asset? A depreciable asset is a long-term tangible asset that experiences …

One of the most crucial measures of success for a company includes its ability to generate money. In accounting, the term used to describe it is sales turnover. What is Sales Turnover? Sales turnover (also known as turnover or sales revenue) is the total amount of money a company generates …

Before a company issues its financial statements, it goes through several stages. After preparing these statements, companies must evaluate all events occurring after it that may indicate changes to those figures. These are a part of subsequent events. What are Subsequent Events? Subsequent events in accounting pertain to occurrences or …

What are Reserves in Accounting? Reserves in accounting encompass allocated portions of a company’s profits or capital earmarked for specific purposes, contributing to financial stability and strategic planning. They contribute to a company’s financial health, serving as a cushion for uncertainties, supporting strategic initiatives, and ensuring compliance with regulatory standards. …

Inventory is any goods that a company produces to generate revenues. For most companies, it is the primary income source. Before selling these items, companies must know what inventory cost is. What is Inventory Cost? Inventory cost encapsulates the comprehensive expenses incurred by a business throughout the inventory management process. …

Companies prepare an income statement to provide a report of their financial performance. Sometimes, they may focus on a specific area instead of a comprehensive view of its performance. Therefore, they may prepare a partial income statement. What is a Partial Income Statement? A partial income statement is a targeted …

Estimating the revenues and expenses for a project is not as straightforward as it is a continuous process. Therefore, companies must use various approaches to assess them. One of those approaches is the percentage of completion method. What is the Percentage of Completion Method? The percentage of completion method is …

Companies purchase products from different sources, which requires using various transportation channels. One of these includes FOB destination. What is FOB Destination? FOB (free on board or freight on board) destination signifies a shipping agreement wherein the seller assumes the responsibility and cost of delivering goods to a specific destination. …

Companies sell products to increase revenues. However, some transactions may also decrease them while not directly stated on the income statement. The accounts for these transactions are contra-revenue accounts. What is Contra Revenue? Contra revenue serves as a mechanism in accounting to accurately portray a company’s net revenue by subtracting …