Companies prepare budgets that plan how long it should take employees to produce a specific number of products. However, the actual result may not always be close to that forecast. Therefore, companies must calculate variance to understand why differences exist. One variance they might calculate is for direct labour efficiency. …

A search for unrecorded liabilities is a critical process to assess the reliability and accuracy of a company’s financial statements. This procedure examines various financial records to identify potential liabilities that might have been overlooked or not accounted for. What is Search for Unrecorded Liabilities? Search for Unrecorded Liabilities (SURL) …

Companies must prepare financial statements at the end of each accounting period. The information that goes into these comes from the trial balance. Before that, however, companies adjust the trial balance to reach a post-closing version of this report. What is a Trial Balance? The trial balance is a fundamental …

In financial reporting, certain assets undergo a classification when a company decides to divest them. This special treatment involves changes in presentation and valuation, providing stakeholders with valuable insights into the company’s strategic plans. These resources fall under the definition of assets held for sale. What are Assets Held for …

Depreciation is an accounting method that allocates the cost of a tangible asset over its useful life, reflecting its gradual decrease in value or wear and tear. By spreading the cost, it accurately represents the asset’s impact on a company’s financial statements. Methods like straight-line, declining balance, and units-of-production help …

Determining an asset’s residual worth after its useful life plays a significant role in financial calculations and asset management. This consideration encompasses estimating the value derived from the asset’s disposal. In accounting, this worth falls under the definition of salvage value. What is an Asset’s Salvage Value? The salvage value …

Companies must report their revenues for each accounting period in the income statement. Typically, companies use the sales account to record and track these revenues. Before discussing the accounting treatment, it is crucial to know what this account is. What is the Sales Account? The sales account is a financial …

Employers pay various taxes to the government on behalf of their employees. Some of these are collected from the employees, while others are the employers’ responsibility solely. One of the taxes falling under the latter category comes from the Federal Unemployment Tax Act. What is the Federal Unemployment Tax Act …

Companies use various techniques to determine the cost of a product. It is crucial in managerial accounting as it allows for better decision-making regarding costs and profitability. Companies may use product costing to determine those costs. What is Product Costing? Product costing is a process to determine the total cost …

One of the crucial sources of cash inflows for a company is its sales. However, some companies offer credit, which can postpone those cash flows. Companies must manage these balances effectively to operate efficiently. They can use accounts receivable days to determine how long it takes them to recover debt …