Reversing entries are crucial adjustments that companies make in every fiscal period. Therefore, it is critical to understand what they are and how they impact accounting. What are Reversing Entries? Reversing entries in accounting are adjustments made at the beginning of a new accounting period to counteract the impact of …

The cash flow is one of the four primary financial statements in accounting. Typically, companies prepare it using the indirect method. However, there is an alternative presentation known as the cash flow statement direct method. What is the Cash Flow Statement Direct Method? The cash flow statement prepared using the …

Companies require assets to generate revenues and run operations. However, not all of those resources may be essential for a company’s activities. Operating assets help run operations and build a company. Therefore, it is crucial to understand what they are. What are Operating Assets? Operating assets are the essential tools …

As companies grow, the size of their operations and segments increases. Accounting standards may entail reporting these segments separately. However, the requirements may differ between different accounting frameworks. Segment reporting is a crucial aspect of accounting, especially for larger companies. Therefore, it is critical to discuss it. What is Segment …

A general ledger is an accounting record summarizing financial transactions for a specific account. However, companies need more information than that provided in this ledger. Therefore, they may use a supplementary record to back it up, known as the subsidiary ledger. What is a Subsidiary Ledger? A subsidiary ledger is …

When a company acquires interest in another company, it must establish a relationship. If this relationship is deemed “controlling”, the parent company must prepare consolidated financial statements. What are Consolidated Financial Statements? Consolidated financial statements are a crucial tool in financial reporting that combines the financial information of a parent …

Accounting for leases is a complicated topic. With recent changes, the IFRS has clarified how companies can distinguish a capital lease. This standard also guides on what the accounting treatment is. What is a Capital Lease? A capital lease, often referred to as a finance lease, is a lease agreement …

Governments need funds to finance activities. These funds may come from various sources. One of these is operations run by a government to generate income. In accounting, they fall under proprietary funds. What is the Proprietary Fund? A proprietary fund is a specialized accounting category employed in government accounting to …

There are two types of accounts in finance. The first type keeps a balance that companies carry over to the next period. On the other hand, the second type only keeps figures for one fiscal period. The latter are known as nominal accounts. What is a Nominal Account? A nominal …

Managerial accounting, often referred to as cost, corporate, or management accounting, is a crucial discipline that empowers businesses to make informed decisions, streamline operations, and achieve financial objectives. Unlike financial accounting, which focuses on external reporting, managerial accounting is internally oriented, providing valuable insights to aid in managerial decision-making. This …