Companies must record an accurate value for inventory in their financial statements to represent an accurate financial picture. However, this task is not straightforward due to the challenges in evaluating inventory. Therefore, it is crucial to understand what inventory valuation is and how it works. What is Inventory Valuation? Inventory …

Borrowing and lending can be confusing – however, it’s one of the main forces of the economy. Without borrowing or lending, many people would not be able to afford big purchases like a house or car, and businesses would struggle to grow and expand. However, with borrowing and lending comes …

Companies use the going concern principle when preparing financial statements. In its absence, these statements may look very different. Therefore, it is crucial to discuss it. What is the Going Concern Principle in accounting? The going concern principle is a foundational accounting concept that assumes a business will continue to …

Demonetization is all about taking away the value of certain currency notes to tackle problems like black money and counterfeit cash. By pulling specific notes from circulation, the government shifts the economy towards greater transparency and accountability. It’s a powerful tool that can reshape monetary habits and impact various sectors, …

Companies must adhere to accounting principles to ensure accurate and fair representation of financial records. The matching principle is one of the most crucial accounting principles in accrual accounting. What is the Matching Principle in accounting? The matching principle is a fundamental accounting concept that requires expenses to be recognized …

Macroeconomic factors play a crucial role in shaping the economy’s big picture. They influence everything from the cost of groceries to the availability of jobs – which makes their impact felt in everyday life. Understanding how these factors interact gives one a clearer view of economic trends and cycles. Whether …

Manufacturing companies with secondary costs that support primary activities must assign them to their products. Usually, they achieve this by allocating the costs using an allocation method. It allows companies to assign those costs to a specific product or unit. One such technique is known as the direct allocation method. …

Restricted cash plays a key role in managing finances because it’s often set aside for specific purposes. Businesses need to keep track of this cash to meet legal or financial obligations. It can help ensure that funds are available when needed, especially for big projects or debt payments. Having these …

For most companies, the cost of goods sold or services rendered constitutes the most significant portion of total expenditure. However, another expense that is often also crucial is organization cost. What are Organizational Costs? Organizational costs encompass expenses related to managing and administering a company rather than its direct production …

Knowing how the effective tax rate works is key to managing overall finances. It shows the real percentage of income that goes to taxes, giving a clear view of tax responsibilities. This rate is important because it allows for comparing tax loads between different income levels, ensuring everything’s fair. By …