Understanding financial terms is crucial in the business world. One such term, Selling, General & Administrative (SG&A) Expense, is often encountered in financial reports. This term may sound complex but it’s an integral part of a company’s operations. It encompasses a wide range of costs, all of which play a …

Quality, for companies, means consistently delivering products or services that meet or exceed customer expectations and conform to established standards. It’s important because high quality enhances customer satisfaction, builds brand reputation, fosters loyalty, and often translates into a competitive edge. Companies must track quality costs to ensure these features. What …

Companies record liabilities at their discounted value in the first year. As time passes, they recognize an interest charge on the screen while increasing the obligation. This process liability on the balance sheet reflects the actual amount paid by the company. Companies use accretion expenses to achieve that. What is …

Other comprehensive income (OCI) is a part of the statement of other comprehensive income. When companies have gains from several accounting periods, they must accumulate it and report it on the balance sheet. This cumulative figure appears as accumulated other comprehensive income, similar to accumulated profits and losses. What is …

Startups incur various costs they must account for following the relevant accounting standards. However, the accounting treatment is not as straightforward. Before discussing that, it is crucial to know what startup costs are. What are Startup Costs? Startup costs (or initial or setup costs) represent the financial outlays associated with …

Expenses are a part of operations and crucial to generating income. However, companies must understand how and when to recognize them under the relevant accounting principles. That is why expense recognition is a critical part of accounting. What is Expense Recognition? Expense recognition in accounting is a critical principle that …

Companies set a par value for their shares, representing the minimum price. However, they may still sell those shares at a higher rate. This process results in capital in excess of par. What is Capital in Excess of Par? Capital in excess of par, often referred to as additional paid-in …

Gross profit represents the earnings a company generates from its operations. Companies include it in the income statement as a part of the calculation for net profits. However, the figure is incomparable and does not show how the company performs over time. Therefore, investors may rely on the gross profit …

For companies offering sales on credit, accounts receivable balances are prevalent in the balance sheet. These balances may vary based on several factors. However, it may affect ratios and financial metrics that use accounts receivable balances. Therefore, companies may calculate average net receivables instead. What is Average Net Receivables? Average …

Companies accumulate financial performance as a metric in the balance sheet. Depending on whether a company has been profitable or loss-making historically, the name will differ. If companies make more losses than profits, they get an accumulated deficit. What is Accumulated Deficit? Accumulated deficit, or retained deficit or accumulated losses, …