Accounting for leases is a complicated topic. With recent changes, the IFRS has clarified how companies can distinguish a capital lease. This standard also guides on what the accounting treatment is. What is a Capital Lease? A capital lease, often referred to as a finance lease, is a lease agreement …

Governments need funds to finance activities. These funds may come from various sources. One of these is operations run by a government to generate income. In accounting, they fall under proprietary funds. What is the Proprietary Fund? A proprietary fund is a specialized accounting category employed in government accounting to …

There are two types of accounts in finance. The first type keeps a balance that companies carry over to the next period. On the other hand, the second type only keeps figures for one fiscal period. The latter are known as nominal accounts. What is a Nominal Account? A nominal …

Managerial accounting, often referred to as cost, corporate, or management accounting, is a crucial discipline that empowers businesses to make informed decisions, streamline operations, and achieve financial objectives. Unlike financial accounting, which focuses on external reporting, managerial accounting is internally oriented, providing valuable insights to aid in managerial decision-making. This …

Intangible assets are non-physical assets with no tangible form that hold value for a company. Like other assets, these can be economic inflows to a company. One item that falls under this category is patents. What is a Patent? A patent is a legal right granted by a government to …

Deferred tax, in accounting, represents the temporary difference between a company’s taxable income and its accounting income. Sometimes, companies might need to recognize a valuation allowance for deferred tax assets. Before discussing it, it is crucial to understand what deferred asset means. What is a Deferred Tax Asset? A deferred …

When it comes to finance, it’s important to get familiar with different metrics and terms. One such term is EBITA – a popular financial indicator used by investors, analysts, and businesses alike. It provides a snapshot of a company’s operational performance, excluding certain financial and tax considerations. A thorough understanding …

Companies bear various risks associated with inventory. One of these includes the difference between the book and the actual value of stock. This occurrence falls under inventory shrinkage. What is Inventory Shrinkage? Inventory shrinkage, often termed “shrink,” encompasses the unaccounted loss or reduction in a company’s inventory levels. This loss …

Understanding financial terms is crucial in the business world. One such term, Selling, General & Administrative (SG&A) Expense, is often encountered in financial reports. This term may sound complex but it’s an integral part of a company’s operations. It encompasses a wide range of costs, all of which play a …

Quality, for companies, means consistently delivering products or services that meet or exceed customer expectations and conform to established standards. It’s important because high quality enhances customer satisfaction, builds brand reputation, fosters loyalty, and often translates into a competitive edge. Companies must track quality costs to ensure these features. What …