Why Financial Statements are prepared on Accrual basis?

Financial Statements assist internal and external users by providing them financial information which they in making economic decisions. As their decisions are based on financial information underlying financial statements therefore, decision making...

What is Journal and how many types of journals are in accounting?

These are the first formal books in which information regarding transaction is recorded . For the same reason they are also named as books of prime entry or books of original entry orĀ ...

Can we capitalize material relocation expenses incurred on non-current asset?

First of all we must be clear about subsequent expenditures, criteria for capitalizing subsequent expenditures in carrying amount of non-current/fixed assets and relocation costs or expenses. Subsequent expenditures refers to such costs which are...

Is Drawings an expense account or a liability account?

In order to understand the nature of drawings account in accounting and why is it deducted from capital or equity total the better is that we look at the definitions of expense, liability and...

When training costs can be capitalized?

It is correct that International Accounting Standards and especially IAS 16 Property, Plant and Equipment has specifically ruled out the capitalization of any expenditure incurred on training costs. You can read in more detail...

What is the difference between Exceptional item and Extraordinary item?

So far International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs) have not defined such terminologies. However, apparently these terms seem to have different treatments according to accounting standards especially IAS 1 in...

What is the recognition criteria of equity?

Framework for Preparation and Presentation of Financial Statements (Framework) issued by International Accounting Standards Board (IASB) is one of the important documents. Many of the basic concepts that also form the very foundation of...

Why amortisation of goodwill is not permissible?

Before IFRS 3 was introduced, entities were allowed to amortize goodwill. However, after it was introduced back in 2004-2005, amortization of goodwill was strictly prohibited and entities were required to follow impairment regime. As...

What is Matching principle in accounting?

Accounting principle that requires costs to be recognized after matching with the revenues earned associated with such costs i.e. the amount of costs recognized must be on equal footings with the revenues recognized. In...

Why impairment of goodwill is not reversed?

First of all we must be clear that goodwill is an intangible asset that entities can recognize in their financial statements but only such goodwill that is acquired in business combination. Internal goodwill or...