To understand how important a company’s inventory is, many investors will look at the company’s inventory turnover ratio. It is an important factor for every business that deals with inventory. It gives an idea of how well the business can sell its inventory in a given time frame. A high …

Companies pay taxes due to their operations. Usually, these taxes fall under the corporation and other taxes. However, income taxes may also apply to individuals and businesses. These entities must calculate the taxes they must pay annually under the tax law. For entities that prepare financial statements, creating a provision …

Trade receivables or accounts receivables are prevalent balance sheet items for most companies. These include any amounts owed from customers. Usually, trade receivables refer to money due from customers for goods and services delivered or used. These accounts are prevalent for companies that provide credit sales facilities. In some cases, …

When manufacturing a product, companies incur various expenses. These expenses are crucial in helping companies produce that product. Similarly, they contribute to the cost of that product. Based on that cost, companies can decide the pricing and other factors. Companies may also classify those costs for several reasons. One such …

Depreciation is a technique used in accounting to spread an asset’s cost over its useful life. This method is crucial in helping companies conform to the matching principle in accounting. This way, they can match expenses to the revenues they help generate. Depreciation also gives rise to accumulated depreciation. While …

Most companies handle inventories that are crucial in generating revenues. These inventories usually include raw materials and finished goods. However, some companies may also report these inventories in another category. Most companies term this category as work in progress. The accounting for work in progress may differ from the other …

Accounting is a complex process that requires companies to conform to several rules and regulations. These rules usually come from accounting standards relating to specific areas within the accounting process. However, these standards may not cover all transactions. In that regard, accounting concepts and conventions can be significantly crucial for …

A company’s accounting cycle starts from a business transaction. From there, it goes to the books of prime entry, which constitute its entrance to the accounting systems. Companies then summarize those books and post them to the general ledger. Next, they prepare the trial balance from those ledgers. The trial …

Companies incur various costs and expenses when producing an item. They may be variable or fixed in nature. Usually, they relate to the production process, which is the primary contributor to the product’s cost. Companies calculate the overall expense they incur during that process. From there, they can calculate the …

In financial accounting, derivative financial instruments are assets and liabilities whose value is based on the prices of other underlying assets. They can be used to hedge risk or for speculation. In a balance sheet, they are typically listed as either current or non-current assets or liabilities, depending on how …