Category: ACCOUNTING

FIFO (First In, First Out): Method, Definition, Formula, Examples

Inventory valuation refers to an accounting practice that requires companies to evaluate their unsold inventory. This process involves estimating the value of the goods not sold at the end of each year. Usually, companies cannot calculate this value reliably without inventory valuation techniques. However, accounting standards require them to report …

Write Off Vs Disposal of Fixed Assets

A fixed asset is a resource that companies own or control for the long term. They include tangible assets that result in inflows of economic benefits in the future. Usually, companies acquire these assets and keep using them in business until the end of their useful lives. Once they reach …

LIFO Reserve: What Is, Formula, Calculation, Journal Entry

Companies can use multiple inventory valuation methods to estimate the value of their goods. This process is crucial to account for those goods. However, accounting standards only allow specific valuation methods when reporting inventory in the financial statements. On the other hand, companies may use another inventory valuation method internally. …

Debt Beta: Formula, Calculation, vs Equity Beta

What is Beta? Beta is a term used to quantify the systematic risk of a security or investment portfolio. It calculates that risk relative to the market. Since systematic risk is a type of uncertainty revolving around a market, it can be critical to some investments. Beta quantifies the correlation …

Depreciation Expenses: Definition, Formula, How to Calculate, Examples

Accounting standards require companies to separate capital expenditure from revenue expenditure. Both are crucial in determining the period to which an expense applies. On top of that, it also conforms to the matching concept in accounting. Revenues expenditure usually becomes a part of the expenses on the income statement for …

Capital Expenditures: Definition, Meaning, Formula, Examples

If you are willing to expand your business, capital expenditures are some of the investments you might make. Whether you want to buy a piece of new equipment or property or improve your current ones, these expenses can help you achieve your goal. Without them, your business could stagnate and …

Closing Entry: Definition, Example, Accounting

When it comes to accounting a closing entry is one of the crucial steps to finalizing an accounting period. This type of entry is made at the end of an accounting period and its purpose is to zero out all temporary accounts so that they are ready to be used …

Periodicity Assumption: Definition, Accounting, Example

Accounting concepts include assumptions that define the accounting process for entities. They differ from accounting standards as they do not apply to specific areas. Instead, accounting concepts cover all aspects of the accounting process for entities. The periodicity assumption is one of the crucial accounting concepts. What does Periodicity Assumption …