Most business entities prepare financial statements that focus on profitability. The accounting systems these businesses use also reflect this focus. However, the same does not apply to nonprofits and government organizations where profitability is not the emphasis. For these entities, other accounting systems exist, including fund accounting. What is Fund …

Consumer behavior is a complex topic, but understanding it is critical for businesses that want to stay competitive. One important concept in consumer behavior is the idea of switching costs. Switching costs are the costs associated with changing from one product or service to another. They can be financial, such …

In accounting, expenses refer to the outflow of economic benefits during a financial period. This definition is crucial in setting apart various spending during that period. Usually, companies write off an expense in the same period as the settlement occurs. However, it may not apply in every case, like for …

Costs are crucial to the operations and business of a company. They help create assets that help in generating revenues. However, not all expenditure falls under costs. On top of that, companies may also categorize these costs to understand their operations better. One such categorization includes the cost of sales, …

There are different types of goods in the market and each has its characteristics. The demand for some goods increases when the consumer’s income rises while the demand for others falls. It mainly depends on the utility derived from the consumption of the good. These goods are the opposite of …

Companies require assets to operate. An essential of these includes a physical location, such as a building. Usually, companies acquire their property and work from it directly. However, some companies may use a leased property for their operations. Companies may also need to modify this property to ensure it suits …

A budget is a monetary plan for an upcoming period. It can also help forecast financial performance and position. Usually, companies prepare a budget for every financial period. Once created, companies can use it as a tool to control performance. Companies can use various types of budgets for different areas …

The SEC or Securities and Exchange Commission defines a prospectus as, “A formal document that is required by and filed with the SEC when securities are first offered for public sale. A prospectus includes information about the offering, such as the price of the security, the risks involved, and the …

Companies can choose between various forms of finance. The two most common ones include equity and debt. However, each source comes with its costs. While equity is more expensive, it is easier to obtain. The primary expense associated with equity finance is dividends paid to shareholders. In contrast, debt finance …

Companies that offer credit sales accumulate accounts receivable. These are balances that they expect their debtors to pay before a set credit term. Usually, debtors repay their debts before the defined period. However, some may also go beyond that or not settle those debts at all. Companies must analyze their …