FINANCIAL STATEMENTS

Accounting principles are fundamental concepts that guide the process of accounting and ensure consistency, accuracy, and reliability of financial statements. They provide a common set of guidelines that companies must follow when preparing their financial statements. Key Accounting Principles: 1. Generally Accepted Accounting Principles (GAAP):– Establish common accounting standards and guidelines that are widely accepted […]

A valuable asset is a tangible or intangible object that is used as a resource for future use in the production of wealth or services, or for investment purposes. Assets can include cash, investments, property, equipment, and other valuable items. Here are some key points about assets: Here are some examples of assets: FAQs

Working capital is a company’s current assets that are used to finance its current liabilities. It includes accounts receivable, accounts payable, inventory, and cash. Formula for Working Capital: Working Capital = Current Assets – Current Liabilities Components of Working Capital: Importance of Working Capital: Examples: Key Considerations: FAQs

Purpose: The annual report is a comprehensive document that provides a summary of a company’s financial performance and operations for a particular fiscal year. It is a key communication tool between companies and their shareholders, providing transparency and accountability. Key Components: 1. Cover Page:– Company name and logo- Reporting period (fiscal year) 2. Company Profile:– […]

The direct method records depreciation expense in accordance with the asset’s actual use. As of the asset’s disposal, any accumulated depreciation is included in the cost of the asset sold and is merely adjusted to the asset’s sales price. Examples: Advantages: Disadvantages: Additional notes: In general, the direct method is a straightforward depreciation method that […]

The word “margin” has a few different meanings, depending on the context. In mathematics: In publishing: In general usage: Here are some examples of how the word “margin” is used: The word “margin” is a versatile word that has a variety of meanings. It is a commonly used word in many different contexts. FAQs

Definition: Fixed costs are expenses that do not vary with changes in the volume of production or sales. They are costs that remain constant regardless of the company’s activity level. Examples: Rent Depreciation Interest expense Salaries of fixed staff Depreciation of equipment Characteristics: Invariable: Do not change with variations in production or sales volume. Irrecoverable: […]

Explicit Cost Explicit cost is the cost that is paid directly for the acquisition of an asset or the incurrence of a liability. It is the cost that is spent to acquire an asset or incur a liability in the course of business operations. Examples of Explicit Costs: Purchase price of equipment Cost of materials […]

Financial Statements Financial statements are formal records that provide a comprehensive summary of a company’s financial activities and position. They are prepared in accordance with generally accepted accounting principles (GAAP) and are used by investors, creditors, and other stakeholders to assess the company’s financial health and performance. Types of Financial Statements: 1. Balance Sheet:– Also […]

Sure, here’s the definition of accruals: Accruals are accounts used to track expenses and revenue that have accrued but not yet been billed or received, respectively. In simple terms, they are amounts owed to and by the company that are currently not reflected in the company’s books. Here is a breakdown of accruals into their […]