Steps and Rules for Preparing a Bank Reconciliation Statement
The process for preparing the bank reconciliation statement follows the below steps or method: (1) Compare the both opening balances of cash book and bank…
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Basic Concepts of Financial Accounting for CPA Exam - Online Syllabus Topics for Financial Accounting Course
Bank Reconciliation Statement
Definition, Meaning and Need for BRS: If there is any discrepancy between the cash book balance and that of bank statement, then the business prepares…
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Absorption of Overheads
Absorption of Overheads or Cost Recovered – Definition, Procedure and Formula: Once total production overheads (calculation of overhead absorption rate) of production cost centers are…
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Plant Wide and Departmental Overhead Absorption Rates
Plant or Factory Wide (Single) Overhead Absorption Rate – Definition, Formula and Use: Plant or factory wide (single or blanket) rate is used for the…
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Calculation of Overhead Absorption Rate
Basis (Methods) for Calculating Overhead Absorption Rate: The production overheads calculated for each production department after going through apportionment and allotment are used to calculate…
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Overhead Absorption Rate
Overhead Absorption Rate (OAR’s) or Overhead Recovery – Definition, Uses and Types: Actual amount of overheads cannot be accurately determined at the time of producing…
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Allotment of Reciprocal Services
What is Allotment of Reciprocal Services Method or Re-Apportionment Method or Allocation of Service Department Overheads to Production Department Overheads? Definition and Procedure: A type…
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Allotment of Non Reciprocal Services
What is Allotment of Non-Reciprocal Service Method? Definition and Procedure: A type of cost allocation method (allotment of non-reciprocal service method) in which the usual procedure…
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Allotment of Service Department Cost to Production Department
Methods of Cost Allocation: There are two basic departments in a manufacturing company; one is production department and the other is service department. Allotment of service…
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Allocation and Apportionment of Production Overheads
Difference between Allocation and Apportionment of Production Overheads: Allocation of Production Overheads – Definition and Examples: Allocation of production overhead is a process to charge those…
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Cost Center and Cost Unit
Difference between Cost Center and Cost Unit: Cost Center – Definition, Types and Examples: Cost center includes a production or service location, function, activity or…
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Calculation of Total Sales Revenue under Absorption Costing System
Use of Absorption Costing System in Setting a Selling Price (Sales Revenue): One of the most important decision faced by an organization is the setting…
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Absorption Costing
Definition of Absorption Costing (Total Costing or Total Production Cost): Absorption costing or total costing or total production cost means all costs that are involve…
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Cash Budget Format and Example
Cash Budget Format and its Explanation with Solved Example: Cash Budget For the period ending……….. Solved Example: The directors of Kingston & Co. were concerned…
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Actions to Avoid Cash Shortage for Cash Budget
The cash budgets shows the pattern of future cash flows giving information on cash surpluses, which can be used, or deficits, which have to be…
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Introduction to Cash Budget
Definition and Explanation: Of all the components of the master budget, none is more important than the cash budget. Liquidity is of paramount importance to…
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Limiting Factor or Principle Budget Factor
Definition and Explanation with Solved Example: Limiting factors also known as key factors or principle budget factors or governing factors which put a limit to…
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Abandonment of a Product Line
Decision for Abandonment (Close) of a Product or Department – Explanation with Solved Examples: When a product line or department of business is unable to…
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Decisions for Accepting Special Order Pricing
Accepting Special Order Pricing to use up Spare Capacity – Explanation with Solved Examples: In the short term decision making, a business must ensure that…
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Make or Buy Decision
Explanation with Solved Example: Sometimes businesses encounter a situation where they have to decide between making a particular product themselves or to buy it from…
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Relevant and Irrelevant Costs for Short Term Decision Making
Relevant Cost – Definition and Explanation with Example: “The term relevant cost is used to describe not only changes in cost but also changes in…
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Difference between Marginal and Absorption Costing
The main difference between marginal (variable) costing and absorption costing techniques are given below: Marginal Costing (Variable Costing) Absorption Costing (1) Marginal cost is often…
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Income Statements under Marginal and Absorption Costing
Explanation with Solved Examples: In absorption costing technique no difference is made between fixed and variable cost in calculating profits. Absorption costing statement assumes that…
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Profit Volume Chart
Definition and Explanation: “Profit volume chart is a straightforward relationship of profits to sales level”. Break even chart does not directly show the amount of profit….
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Margin of Safety
Definition – Margin of Safety (MOS): Margin of safety (MOS) is defined as; “it is the difference between the actual or budgeted sales as the case…
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Assumptions and Limitations of Break Even Analysis
Assumptions: (1) All costs can be categorized as fixed or variable costs. (2) Total fixed costs remain unchanged for all output levels. (3) Total variable…
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Break Even Chart
Explanation of the Concept of Break Even Analysis with Diagram: Break even chart may be prepared in different forms and styles; but they all in…
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Target Profits
Definition, Explanation and Formula: Every business make plan to earn a specific amount of profit for a specific fiscal year, this profit is known as…
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Break Even Point in Sales Value
Methods to Calculate Break Even Point in Sales ($) Value: Break even point in sales ($) value may be calculated in two ways but both…
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Break Even Point
Definition: Break even point shows the output level (units produced or services rendered) at which total revenues just equals to total costs or point at…
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Break Even Analysis
Introduction to Break Even Analysis: Definition, Use and Components of Break-even Analysis: Break-even indicates a situation where; there is no profit or loss for a…
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Advantages and Disadvantages of Marginal Costing Technique
Advantages: The main advantages of marginal costing are given below: (1) By using marginal costing technique, the assessment of various sales or production alternatives options…
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Principles of Marginal Costing
Basic principles and guidelines for using marginal costing are as follows: (1) The sale of an extra unit of product or service results in the…
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Marginal Costing
Definition and Explanation of Marginal Costing (Direct or Variable Costing): Marginal costing is simply a technique to analyze cost information for decision making process. Different terms…
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Methods to Evaluate the Performance and Financial Strength of a Company
You as a financial consultant have been asked to evaluate the performance and financial strength of Deluxe Trading Co for the two years. For performance…
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Introduction to Financial Ratio Analysis
Definition and Explanation of Accounting Ratio Analysis (Financial Ratio Analysis): We have so far been concerned with the preparation of financial statements without any examination…
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Marginal Cost
Definition and Explanation: Marginal means Extra. Marginal cost is defined by CIMA as “the cost of one unit of a product or service which would…
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Analysis of Financial Statement of a Business
Analysis of Financial Statement by the Use of Solved Example of Financial Ratios: John Brown is running a business which manufactures nuts and bolts which…
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Preparation of Income Statement and Balance Sheet with the help of Financial Ratios
Sometimes examination questions may require the candidates to prepare financial statements with the help of a given set of financial ratios. In these cases at…
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Limitations of Ratio Analysis
Financial ratio analysis faces some limitations, which are given below: (1) Ratio analysis requires a proper comparison i.e., one ratio its own is of no…
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Uses of Financial Ratio Analysis
Financial ratio analysis helps a business in a number of ways. The importance and advantages of financial ratios are given below: (i) Ratios help in…
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Liquid Ratio
Liquid Ratio or Acid Test Ratio or Quick Ratio – Definition, Explanation and Use: Current ratio (which takes all current assets into account) may give…
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Current Ratio
Current Ratio or Working Capital Ratio – Definition, Explanation and Use: The current or working capital ratio is determined by dividing the total current assets…
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Liquidity Ratios
Definition, Explanation and Use: Liquidity ratios determine the ability of a business to finance, its day to day operations, or in other words, to pay…
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Non Current Asset Turnover
Definition, Explanation and Use: Non-current asset turnover ratio determines the efficiency with which a business uses its non-current assets to generate revenue for the business….
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Trade Payable Payment Period
Definition, Explanation and Use: The trade payables’ payment period ratio represents the time lag between a credit purchase and making payment to the supplier. As…
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Trade Receivable Collection Period
Definition, Explanation and Use: The trade receivables’ collection period ratio represents the time lag between a credit sale and receiving payment from the customer. As…
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Inventory Turnover Ratio
Definition, Explanation and Use: Inventory turnover ratio is often linked with the measurement of profitability. Though this ratio does not in itself measure profitability, but…
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Activity Ratios
Activity Ratios or Turnover Ratios – Definition, Explanation and Use: The activity ratios or turnover ratios (which are sometimes referred to as efficiency ratios or…
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Return on Equity
Return on Equity (ROE) Ratio – Definition, Explanation and Use: Return on equity ratio (ROE) is one of the most widely used financial ratio. This…
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Explains financial and managerial accounting. Exercises, problems, calculators and more.