What are Reserves in Accounting? Reserves in accounting encompass allocated portions of a company’s profits or capital earmarked for specific purposes, contributing to financial stability and strategic planning. They contribute to a company’s financial health, serving as a cushion for uncertainties, supporting strategic initiatives, and ensuring compliance with regulatory standards. …

Inventory is any goods that a company produces to generate revenues. For most companies, it is the primary income source. Before selling these items, companies must know what inventory cost is. What is Inventory Cost? Inventory cost encapsulates the comprehensive expenses incurred by a business throughout the inventory management process. …

Companies prepare an income statement to provide a report of their financial performance. Sometimes, they may focus on a specific area instead of a comprehensive view of its performance. Therefore, they may prepare a partial income statement. What is a Partial Income Statement? A partial income statement is a targeted …

Estimating the revenues and expenses for a project is not as straightforward as it is a continuous process. Therefore, companies must use various approaches to assess them. One of those approaches is the percentage of completion method. What is the Percentage of Completion Method? The percentage of completion method is …

Companies purchase products from different sources, which requires using various transportation channels. One of these includes FOB destination. What is FOB Destination? FOB (free on board or freight on board) destination signifies a shipping agreement wherein the seller assumes the responsibility and cost of delivering goods to a specific destination. …

Companies sell products to increase revenues. However, some transactions may also decrease them while not directly stated on the income statement. The accounts for these transactions are contra-revenue accounts. What is Contra Revenue? Contra revenue serves as a mechanism in accounting to accurately portray a company’s net revenue by subtracting …

Nonprofits must follow a reporting structure that differs from other businesses and companies. The primary difference comes from the reports. The financial statements for nonprofits include the statement of financial position, statement of activities, statement of cash flows, statement of cash flows, and notes to financial statements. What are Financial …

Companies often encounter situations where they have to choose one of several options. When considering these, they must look at various aspects. Usually, companies use relevant costs to determine the best choice among those. What is Relevant Cost? Relevant cost, within managerial accounting, encompasses future-oriented expenses and incomes crucial for …

Vendors are parties that provide products or services to a company and get compensation in exchange. Companies may have various vendors. In financial accounting, companies do not report each supplier separately. In some countries, however, companies must disclose certain vendors. One example of this is the 1099 vendor requirement by …

Indirect costs can be highly crucial to a company’s profitability. Companies must determine and quantify these costs to ensure accurate accounting. Therefore, they can use the burden rate. What is the Burden Rate? The burden rate (or overhead rate) is a percentage or predetermined rate used to quantify the indirect …