Companies purchase products from different sources, which requires using various transportation channels. One of these includes FOB destination. What is FOB Destination? FOB (free on board or freight on board) destination signifies a shipping agreement wherein the seller assumes the responsibility and cost of delivering goods to a specific destination. …

Companies sell products to increase revenues. However, some transactions may also decrease them while not directly stated on the income statement. The accounts for these transactions are contra-revenue accounts. What is Contra Revenue? Contra revenue serves as a mechanism in accounting to accurately portray a company’s net revenue by subtracting …

Nonprofits must follow a reporting structure that differs from other businesses and companies. The primary difference comes from the reports. The financial statements for nonprofits include the statement of financial position, statement of activities, statement of cash flows, statement of cash flows, and notes to financial statements. What are Financial …

Companies often encounter situations where they have to choose one of several options. When considering these, they must look at various aspects. Usually, companies use relevant costs to determine the best choice among those. What is Relevant Cost? Relevant cost, within managerial accounting, encompasses future-oriented expenses and incomes crucial for …

Vendors are parties that provide products or services to a company and get compensation in exchange. Companies may have various vendors. In financial accounting, companies do not report each supplier separately. In some countries, however, companies must disclose certain vendors. One example of this is the 1099 vendor requirement by …

Indirect costs can be highly crucial to a company’s profitability. Companies must determine and quantify these costs to ensure accurate accounting. Therefore, they can use the burden rate. What is the Burden Rate? The burden rate (or overhead rate) is a percentage or predetermined rate used to quantify the indirect …

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 …