Impairment refers to the loss of value of a fixed asset. In accounting, impairment loss quantifies this loss. Several factors may contribute to a fixed asset losing its value. These factors may be external or internal. Usually, companies conduct an impairment test to determine if a fixed asset has suffered …

Most companies prefer conducting their cash transactions through banks. However, they also need small sums of money in cash form to pay for insignificant transactions. Companies manage this cash through the petty cash system. This system is prevalent in most companies and businesses. The accounting for the petty cash system …

Assets are resources owned or controlled by companies and used in operations to generate revenues. They are a part of the balance sheet and appear as a separate section. Since assets are crucial in running a business, they also contribute to various financial metrics. However, they may not be a …

Shareholder’s equity is a part of the balance sheet. It represents the equity portion of the accounting equation presented in the financial statement. In most cases, it includes prevalent items such as ordinary stock, retained earnings, and other reserves. Some people may wonder how shareholder’s equity is different from retained …

Understanding business fundamentals are not as simple as it may first seem. If we only consider income there are different types that we must take into account when trying to get a clear picture of a company’s finances. In this article, we will be discussing operating income, also known as …

Companies write off debts that they deem as uncollectible. This write-off is often called bad debt. In most cases, it occurs when a debtor fails to repay their debt. When companies consider the repayment chances to be virtually low, they can write it off as a bad debt. Usually, it …

Invoices and bills are payable within a certain number of days after the invoice date. This is called the credit period, and the length of time between the invoice date and payment date is called the days payable outstanding (DPO). It is an important metric used in accounts receivable management, …

Financial ratios are a relative measure of a financial metric to another. These ratios fall under different categories and are essential to evaluating a company. However, some are more relevant in some cases than others. In those cases, users must calculate specific ratios based on the type of investment they …

Debt Service Coverage Ratio (DSCR) is a common term used in corporate, government, and personal finance. It’s mostly used to measure the cash flow of a business and gives investors an idea of how well a company can pay its debts. The higher the DSCR, the better. In this article, …

The balance sheet presents a company’s assets, liabilities, and equity. Usually, these elements appear after some adjustments to the costs or base amounts. With fixed assets, the presentation occurs net of various figures. This presentation is known as the net of fixed assets. Before discussing the net of fixed assets …