Depreciation refers to the systematic allocation of the cost of a tangible asset over its estimated useful life. It is an accounting method used to recognize and distribute the expense of a resource over time. Depreciation helps match the asset’s cost with the revenue it generates and considers factors such …

Manufacturing and construction companies typically use the exponential depreciation formula when calculating the depreciation of their fixed assets. For companies that make long-term investments in large equipment and machinery, it’s important to use a formula that considers how the value of the asset decreases with time. This way they can …

A balance sheet is a financial statement that presents a snapshot of a company’s financial position at a specific moment. It has three main components: assets, liabilities, and shareholders’ equity. Assets represent what the company owns, liabilities represent its obligations, and shareholders’ equity represents the residual interest of shareholders in …

The cost of goods sold (COGS) refers to the direct costs incurred by a company in producing or acquiring the goods it sells during a specific period. It includes all the costs directly associated with goods, such as raw materials, direct labour, and manufacturing overhead. Companies may divide this amount …

Companies in the services industry earn revenues through the fees they charge their clients. However, not all of these fees may qualify as “earned”. Therefore, it is crucial to understand how it works. What are Fees Earned? Fees earned refer to revenue a company or individual receives for providing a …

Dual pricing, also known as price discrimination, is a pricing strategy that has been used by businesses for many years. It involves charging different prices for the same product or service to different customers. This strategy is often used in situations where businesses can identify different groups of customers with …

What is Free Cash Flow? Free cash flow (FCF) is a financial metric representing the amount of cash a company has available after deducting its operating expenses, taxes, and investments in fixed assets. It measures the cash generated by the company’s operations for various purposes, such as investing in new …

In the modern world, cash transactions continue to play a significant role despite the increasing popularity of digital payment methods. While technology advancements have introduced alternative forms of payment, cash remains a widely accepted medium of exchange. Therefore, companies hold cash drawers in their retail locations to facilitate these transactions. …

 Cost classification is an important concept in accounting that enables businesses to better understand the different types of expenses they incur. By categorizing costs, companies can analyze and monitor their expenditures, make informed decisions about resource allocation, and ultimately improve their financial performance. By understanding how costs are classified, businesses …

Companies undertake restructuring for various reasons, including financial distress, mergers, and acquisitions, strategic repositioning, etc. Restructuring allows companies to adapt to changing market conditions, improve financial performance, enhance operational efficiency, meet regulatory requirements, capture new opportunities, and navigate challenges. However, this process may come with restructuring costs. Their classification may …