Investors purchase shares in companies expecting income from their investment. This income comes in two forms. For most investors, capital gains from the appreciation in the price of a share constitute the primary earning from these investments. However, some companies also pay dividends that contribute to the income that shareholders …

Companies present their income statement to investors to help them make various decisions. It is a part of the financial statements that companies prepare. However, companies also prepare some reports internally which can resemble these statements. One of these includes the contribution margin income statement. It relates to the concept …

Accounting standards require companies to expense out their assets over their useful life. These assets come at a cost that companies must spread over that life. Usually, companies use techniques like depreciation or amortization to achieve that. However, both differ in various ways. Before discussing the differences, it is crucial …

Companies pay their employees for the services they provide. The compensation provided to those employees may include salaries or wages. In many places, salaries and wages are terms that often get confused. While both represent payments to employees for their services, these forms differ significantly. Before discussing the differences, it …

In financial accounting, costs usually appear as account balances on the balance sheet or as expenses in the income statement. Companies classify these costs based on accounting conventions and standards. However, the same does not apply to managerial accounting. In that branch, companies may divide costs based on other factors. …

Companies maintain an accounting system to record and report their financial transactions. Journal entries are the essence of that system. These are a system of recording transactions by creating an impact on the related accounts. However, journal entries follow the double-entry system of accounting. Before discussing these entries, it is …

Companies report their account balances on the balance sheet. These balances come from an underlying accounting or accumulation of accounts from the financial systems. However, some items may also reduce the total reported amount on these accounts. These items are known as contra accounts in financial accounting. They may relate …

Company’s assets are the sum of all the things they own. This includes cash, investments, property, inventory, and equipment. Every company needs to track its assets so it can make informed decisions and stay solvent. The Net Book Value or NBV is the record that a company keeps of its …

Some companies offer their customers the option to purchase goods or services for credit. It allows those companies to sell more items while allowing customers the facility to defer the payment. After a company delivers its goods or services, it will send the customer an invoice. The customer can pay …

Contra Asset is a term used in business to describe an asset that is used to offset another asset on the balance sheet. Contra assets are used to reduce the value of an asset, such as accounts receivable or inventory, that will eventually be sold or otherwise converted into cash. …