A liability is an obligation that results in a probable outflow of economic benefits. This obligation comes from past events, for example, contracts or agreements. For most companies, these include payables, loans, etc. However, it may also consist of provision expenses relating to future costs. In accounting, these fall under …

In managerial accounting, classifying costs into different categories is crucial in analyzing and controlling costs. However, there are various categories within those classes. One such classification is differentiating between direct and indirect costs. While they may sound straightforward, the classification may be complex due to how managerial accounting separates them. …

A liability is obligation companies accumulate from past transactions and events. This obligation creates an economic outflow of benefits in the future. Practically, liabilities may come in various forms for a company. Two of the two common ones include account and note payable. Both are similar in many aspects. However, …

Companies need financial assets to operate and survive in the long run. Most companies focus on working capital, including liquid assets that help run daily operations. However, that does not imply non-liquid resources do not play a role in activities. Companies also need long-term assets that help provide the base …

When a company sells goods, it must record them as sales. For the companies that offer credit to customers, these also become a part of the accounts receivable balances. Sometimes, however, they may also appear as accrued revenues, which can create confusion. Fundamentally, both are the same due to their …

Warranty is a term often associated with electronics. It represents a promise from the manufacturer about the condition of the underlying product. Usually, it includes compensation to the buyer if that product is defective or doesn’t work as expected. This compensation may come in many ways, for example, repairs and …

Money is undoubtedly the building block of any business. It is essential to every transaction that a company undertakes. Sometimes, companies may also partake in activities that may not have a monetary worth. Although these transactions may be materialistic, they do not hold significance in accounting. If a company cannot …

Retailers are intermediaries in a supply chain responsible for delivering a product to a customer. In a given supply chain, retailers are usually the last parties that keep inventory and dispose of it to a customer. Sometimes, they must obtain and hold a significant amount of stock to meet demands. …

Companies often operate from a physical location, which includes land and a building. In some cases, companies may also have manufacturing plants or factories. Mostly, companies own these locations. However, some may also rent or lease property from other parties, known as landlords. The company becomes a tenant in this …

A transaction between two parties involves some form of compensation. For most businesses, it occurs through cash or bank payments. In most cases, these payments happen when a customer buys a product or service from a supplier or at a later date. Sometimes, however, customers may also pay in advance …