Companies pay employees through various forms of compensation. Usually, companies have two types of employees classified based on these forms. These include salary and wage expenses for employees. The former category receives a fixed compensation, while the latter gets compensated based on hourly work. Typically, companies use a wages expense …

It is common in most rental agreements for the landlord to ask for advance rent. Its accounting treatment also differs from the compensation paid in the typical course of the lease. Therefore, it is crucial to understand how it works. What is Advance Rent? Advance rent is a common term …

Changes are inevitable in companies. Sometimes, these changes may relate to accounting standards, policies, and estimates. However, it may not be as straightforward due to various reasons. One of the most common of these includes the comparability of financial statements. Companies must refer to the relevant accounting standards to ensure …

A transaction is a financial event involving the exchange of goods, services, or money between two or more parties. In accounting, a transaction typically includes a change in a company’s financial position, which gets recorded in a company’s accounting system. It provides insight into the company’s financial performance and helps …

An acquisition is a process through which one company acquires another company. It usually occurs when the buyer purchases over 50% of the shares in another company. Sometimes, this percentage may vary based on the voting rights that come with the obtained stock. In most cases, the buyer pays more …

A fixed cost is a type of expense that does not change. In accounting, it means the amount remains the same over several periods. Usually, companies view this cost according to the activity levels over that period. Therefore, a fixed cost is an expense that does not change regardless of …

Companies need a base to operate in the business environment. While many companies have adopted a model to promote remote work, one element has remained the same. Despite the changes in modern business frameworks, companies still need electricity, water, and other utilities to operate. These items fall under the utility …

The matching concept in accounting requires companies to match expenses to the revenues to which they relate. Therefore, companies may spread costs over several years to ensure that. A typical example of the matching principle affecting accounting is depreciation. Companies spread the cost of their assets over several years to …

Companies and individuals use bank accounts to facilitate their transactions. These accounts also come with the safety of their money and other benefits. However, these parties must also pay the bank for their services. The payments constitute an expense for the account holder while being an income for the bank. …

A lease is a contractual agreement between two parties. The lessor is the party that grants the use of an asset or property to another party, also known as the lessee. Usually, the lease agreement also includes other terms, for example, the duration, payment schedule, ownership, etc. In accounting, leases …