Accounting standards require a company to record inventory when the risks and rewards associated with the goods get transferred to it. Sometimes, the company may not be in physical possession of those goods. However, they may still need to record the inventory they have not yet received. In most cases, …

Some companies take up construction projects for internal use. These may include building a fixed asset for future use. Sometimes, this work may not be complete when a company prepares its accounts. Therefore, the company must perform specific accounting treatments to present this work. The process is not complex but …

Assets are the essence of a company’s operations. Every company has fixed assets that help them generate revenues. Unlike other resources, companies cannot charge the cost of these assets to one fiscal period. Instead, accounting standards require them to spread over several periods. This process occurs through depreciation. This expense …

If a company has a cash surplus, it can invest the money in various projects or activities. In most cases, the goal is to increase the returns shareholders get from these projects. Sometimes, though, companies may also invest that money in their own shares. Treasury stock is a common concept …

Most assets depreciate as they near the end of their useful life. While companies account for it using depreciation, they have other costs associated with them as well. Specifically, the more a company uses an asset, the more it becomes prone to wear and tear. However, that does not imply …

Companies use various techniques to retain their customers. Usually, it involves offering them the best quality products for a reasonable amount. Sometimes, though, customers may not like the items sold to them by their suppliers. Companies also offer purchase returns as a part of their policies to ensure customer retention …

Inflation is the increase in the price of goods or services in a country. Usually, governments or economists measure it as a rate of change in specific items over time. This rate is increasing steadily, causing many investors to suffer a loss on their investments. Investors can still manage or …

Most companies focus on the cost of their products or services. Usually, these include direct and indirect production costs, including material, labor, and overheads. These determine a product’s profitability after deducting those costs from the sale price. However, they do not show how profitable the company is because other expenses …

When recording an asset in the financial statements, companies must have a value for it. However, it may not be as straightforward as there are several techniques to derive this cost. Most accounting principles rely on historical costs when recognizing various elements. However, some may also allow other methods, such …

A journal is a book or record of transactions that companies maintain to aid their financial accounting process. Usually, it is the first step in the accounting cycle. Once a company identifies any financial transaction, it must record it with the amount and any relevant details in a journal. From …