Category: ACCOUNTING

Audit Risk and Materiality

Two topics in auditing closely relate to each other. These are audit risk and materiality. While both of these are crucial in any audit assignment, they are different concepts. Therefore, it is necessary to know what each of these is to understand them better. What is Audit Risk? Audit risk …

Fair Value vs Market Value

When it comes to evaluating assets, there are various methods prevalent in finance. Among those, two common ones include fair value and market value. There are several differences between both of them. However, it is crucial to understand what each of these is first. What is Fair Value? The fair …

Fair Value in Accounting

What is Fair Value? The fair value of an asset refers to its estimated worth in the market. It may also refer to the actual agreed-upon value of an asset by a buyer and a seller. These may include products, inventory, stock, or security.  Any asset traded on the market …

Amortized Cost vs Fair Value

There are various methods of valuing bonds that companies may use. Among these, the prevalent method is using the amortized cost technique of valuation. However, some companies may also evaluate their bonds using the fair value method. There are some differences between both of them. It is better to understand …

Net Income on Balance Sheet

What is Net Income? Companies need to be profitable to stay in business. Therefore, they need to ensure their earnings exceed their expenses. Sometimes, it may not stand true. However, in the long run, it is crucial to maintain a positive net income. Companies can calculate their earnings by deducting …

Price to Book Ratio

Investors can use various ratios to calculate the value of their investments. Each of them illustrates a different aspect of the investment, which can help investors in their decision-making. Among these, one ratio is the price-to-book (P/B) ratio. What is the Price-to-Book Ratio? The price-to-book ratio is a comparison of …

Price Earnings (P/E) Ratio of Stocks

The price-to-earnings (P/E) ratio represents the relationship between the market value of the stock of a company and its earnings per share (EPS). It is one of the most commonly used and well-known ratios used by investors in valuing the stocks of a company. Other names for the P/E ratio …

Accounting for Stock Warrants

A stock warrant is a financial contract between a company and investors, which gives them the right to purchase newly issued shares of a stock at a set price for a set period of time. The company directly issues the new stock instead of using issued stock. However, investors that get a …

Accounting For a Bond

A bond is a debt instrument issued by entities to obtain a loan. It comes with a fixed income, usually based on a fixed interest rate. Usually, companies use bonds to raise debt finance. However, other entities, such as government organizations may also issue bonds to gather funds. Overall, a …