Cash Discounts
Cash Discount (Prompt Payment Discount, Settlement Discount) – Definition, Calculation and its Types: Cash discount sometimes called prompt payment discount. It is the difference between the…
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Basic Concepts of Financial Accounting for CPA Exam - Online Syllabus Topics for Financial Accounting Course
Cash Book
Cash Book – Definition, Explanation, Preparation and its Types: Cash book is used to record all cash transactions. Cash transactions not only involve receipt and…
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General Journal
General Journal or Journal Proper – Definition and Explanation: Majority of all business transactions pass through books of original entry before being posted to ledgers. General…
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Return Outwards Journal
Return Outwards Journal or Return Outwards Day Book or (Purchase Returns) – Definition and Explanation: Return outwards journal sometimes call return outwards day book or…
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Return Inwards Journal
Return Inwards Journal or Return Inwards Day Book or (Sales Returns) – Definition and Explanation: Return inwards journal sometimes called return inwards day book or…
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Purchases Journal
Purchases Journal or Purchases Day Book – Definition and Explanation: Purchases of goods may be on cash or on credit basis. Purchases journal sometimes called…
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Sales Journal
Sales Journal or Sales Day Book – Definition and Explanation: The sales of goods may be on cash or on credit basis. Cash sales are…
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Books of Original Entry
Books of Original Entry or Books of Prime Entry or Day Books and Journal – Introduction and Definition: A business must ensure that its accounting…
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Effects of Incorrect Treatment of Capital and Revenue Items
As we know about capital and revenue items. These are: (1) Capital Expenditure (2) Revenue Expenditure (3) Capital Receipt (4) Revenue Receipt Effects of Wrong/Incorrect…
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Capital Receipts and Revenue Receipts
Definition of Receipts and its Types: Receipts are the amounts actually received in cash. The receipts may be categorized as: (1) Capital Receipts and (2)…
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Capital Expenditure and Revenue Expenditure
Before this article, we should know the difference between terms; expenditure and expense. Expenditure is an amount incurred by a business to purchase assets and…
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Capital and Revenue Items
Introduction – Capital and Revenue Items: In order to know the fair performance and financial standing of a business; the nature of business transactions taking…
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Revaluation of Assets Concept
Definition – Accounting Concept for Revaluation of Assets: Accounting concept for revaluation of assets defines and states that, it is proper adjustment made to the…
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Money Measurement Concept of Accounting
Definition, Explanation and Use of Money Measurement Concept (Convention, Principle) of Accounting or Monetary Unit Assumption: Money measurement concept (convention or principle) of accounting or…
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Objectivity Concept of Accounting
Definition, Explanation and Use of Objectivity Concept (Convention, Principle) of Accounting: Objectivity concept (convention or principle) of accounting defines and states that while preparing the…
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Substance Over Form Concept of Accounting
Definition of Substance Over Form Concept (Convention, Principle) of Accounting: Under Substance over form concept (convention, principle) of accounting, “transactions should be dealt with reference…
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Accrual Concept of Accounting
Definition, Explanation and Application of Accrual Concept (Convention, Principle) of Accounting: Accrual is derived from the verb “accrue” which means to increase, to accumulate or…
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Matching Concept of Accounting
Definition of Matching Concept (Convention or Principle) of Accounting: Matching concept (convention or principle) of accounting defines and states that “while preparing the income statement,…
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Materiality Concept of Accounting
Definition of Materiality Concept (Convention, Principle) of Accounting: Materiality concept (convention, principle) of accounting defines and states that “items, transactions or an event which significantly…
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Consistency Principle of Accounting
Definition of Consistency Principle (Concept, Convention) of Accounting: Consistency principle (concept, convention) of accounting defines and states that, “accounting transactions and accounting methods should be…
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Historical Cost Concept of Accounting
Definition of Historical Cost Concept (Convention, Principle) or Cost Principle of Accounting: Historical cost concept (convention, principle) or cost principle of accounting states and defines…
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Going Concern Concept of Accounting
Definition of Going Concern Concept (Convention, Principle): “Going concern concept (convention, principle) defines and assumes that a business intends to operate as a business unit for…
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Prudence Concept of Accounting
Definition of Prudence Concept (Convention, Principle) or Conservatism Concept of Accounting: Prudence concept (convention, principle) of accounting is also well known as conservatism concept. This…
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Business Entity Concept of Accounting
Definition of Business Entity Concept (Convention, Principle): “Business entity concept (convention, principle) of accounting entails that business is to be treated as a self-contained entity….
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Basic Accounting Concepts and Conventions
Basic Accounting Concepts, Conventions, Assumptions and Principles: Accounting concepts, conventions, assumptions and principles suggest logical and generally accepted accounting treatments and principles. These concepts are…
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Accounting Treatment of Depreciation for Non Current Assets
Following are the accounting procedures or treatment for depreciation non-current assets. The journal entries are as: (1) Journal entry to record purchase of non-current assets:…
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Provision for Depreciation
Definition of Provision for Depreciation or Accumulated Depreciation or (Difference between Depreciation and Provision for Depreciation): Depreciation is an expense which is charged in the current year’s…
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Features of Straight Line and Reducing Balance Methods of Depreciation
Features and Differences – Straight Line and Reducing Balance Methods: Straight Line Method: (1) Depreciation rate and amount remain the same in each year of…
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Annual Depreciation under Reducing Balance and Straight Line Methods
Under annual depreciation method, higher depreciation charge is recognized in earlier years of asset’s life but charges lower depreciation in the later years compared to…
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Reducing Balance Method
Reducing Balance Method or Diminishing Balance Method or Written Down Value Method of Depreciation: Reducing balance method is also named as diminishing balance or written…
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Straight Line Depreciation Method or Original Cost Method
Straight line depreciation method or original cost method is the simplest and most commonly used depreciation method. Under this method, the difference between the original…
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Revaluation Depreciation Method
Revaluation depreciation method is usually used to calculate depreciation of assets where, there are numerous small identifiable assets of low value but nevertheless of lasting…
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Methods for Calculating Depreciation
Different methods are used to calculate the amount of depreciation charge. These are following: (1) Revaluation Depreciation Method (2) Straight Line Depreciation Method or Original…
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Characteristics of Depreciation
Depreciation has the following characteristics or attributes: (1) Depreciation is only charged on non-current assets. (2) Depreciation occurs from the date of purchase of an…
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Factors for Calculating Depreciation
While calculating the depreciation of non-current assets, following factors involve and must always be consider: (1) Cost Factor – The Original Cost of Asset: The cost…
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Depreciation
Non-Current Assets and Depreciation – Definition, Concept and Explanation: Non-current assets are purchased by a business not for resale but to be used within the…
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Accounting Treatment of Provisions for Doubtful Debts and Discounts Allowed
There are following important points related to accounting treatment of provisions for doubtful debts and discounts allowed: (1) Both provisions for doubtful debts and provision for…
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Advantages of Offering Cash Discounts
There are following benefits or advantages of offering cash discounts in business: (1) Discount offer induce a trade receivable to pay early, which not only…
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Cash Discounts Allowed and Provision for Discounts Allowed
Cash Discounts Allowed – Definition: Some firms allow cash discounts to their customers for prompt payment. In that case at year end, the outstanding trade…
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Recovery of Bad Debts and their Journal Entries
Recovery of Bad Debts – Concept, Accounting Journal Entries and Solved Example: Some times business receives a pleasant surprise, when it recovers the bad debts which…
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Aging Schedule of Trade Receivables
Definition and Concept of Aging Schedule for Calculating Provision for Doubtful Debts: Sometimes provision for doubtful debt is calculated with the help of aging schedule…
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Provision for Doubtful Debts
Concept and Definition of Provision for Doubtful Debts or Allowance for Bad Debts or Allowance for Un-Collectible Accounts: Businesses usually create a provision for doubtful…
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Bad Debts and Doubtful Debts
Bad Debts, Trade Receivables and Doubtful Debts – Definition, Example, General Journal Entry and their Difference: Bad Debts: A bad debt is a debt that is…
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Purpose and Use of Bank Reconciliation Statement
Purpose of Bank Reconciliation Statement (BRS): The purpose of bank reconciliation statement is to carried out uncover and correct any errors in the recording of…
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Steps and Rules for Preparing a Bank Reconciliation Statement
The process for preparing the bank reconciliation statement (BRS) follows the below steps or method: (1) Compare the both opening balances of cash book and…
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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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Explains financial and managerial accounting. Exercises, problems, calculators and more.