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 …

Managing assets is a crucial part of any business, as assets are the resources that a company uses to generate revenue. Companies need to know what assets they have and how long they will be useful for. Without identifying and cataloging assets, companies cannot make plans for their future. In …

Accounting standards are a set of rules and practices that dictate the accounting process in a company. These standards guide companies in recording and presenting financial information. While these standards are crucial, some accounting principles also dictate the process. These principles apply to all companies and cover the accounting process …

Companies usually receive compensation for their products and services after delivery. In some cases, they may also charge the customer simultaneously as they deliver. However, some companies also receive advances for products and services that they will supply later. Accounting standards require companies to record these revenues as unearned revenue. …

Companies use assets to generate revenues. Usually, they include fixed assets, which are crucial to running operations. Most of these assets contribute to the production of goods or services. However, some assets may also be critical in running the administrative side of the business. One of those assets includes office …