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 …

A cash journal is a record that tracks the cash transactions of a business over a specific period. It is a crucial accounting document that records all incoming and outgoing cash transactions, including those made through bank transfers, checks, and cash payments. The purpose of the cash journal is to …

Direct expenses are costs specifically and directly attributable to a particular product, project, or department. Companies incur these expenses when producing or delivering goods or services. Therefore, they relate directly to the revenue generated by those goods or services. Companies can understand their cost structure and profitability by tracking and …

Companies operating in the manufacturing, construction, and consulting industries may use a contract structure for their clients. It allows them to treat each job separately and work on it according to the client’s needs. In accounting, these companies may use a contract account to track these jobs. Therefore, it is …

Direct materials refer to the tangible components or raw materials used directly in manufacturing a finished product. They are physically identifiable and traceable materials in the final product. Similarly, direct materials are a critical part of the production process, as they get transformed with other materials to create the end …

Cost behaviour refers to how costs change in response to changes in activity levels or production volumes. It describes the relationship between costs and the company’s activity levels or production output. Understanding cost behaviour is crucial for companies to forecast, budget, manage costs and make informed decisions about pricing, production …

Companies acquire goods or services from others to run their businesses. These items represent the input to their processes which can help produce finished goods. Usually, companies obtain these items through a credit transaction, meaning the settlement occurs sometime after the purchase. Companies must record these transactions in a purchase …

Companies must allocate indirect costs to products or services to determine their costs accurately. It involves considering expenses not directly tied to specific products or services, such as rent, utilities, and overhead labour. Consequently, this allocation process helps companies include these indirect costs to use in several areas. This process …