What is ABC Analysis?
ABC analysis is one of the known inventory classification methods available in which inventory is categorized in three classes A, B and C where A being most important, B being important and C being less important. ABC analysis is also known as Pareto Analysis, Pareto rule or 80/20 rule. ABC analysis must not be confused with […]
What is meant by Carriage inwards and its accounting treatment?
Carriage inwards, transportation inwards, transport inwards, freight inwards or shipping cost are the cost borne by the buyer of the goods for moving the goods from supplier’s place to his own place (usually raw material store) or for receiving the goods at his place as such costs are to paid once delivered. It is often […]
What is age, aged, ageing or aging analysis?
Age analysis is simply a time-based analysis with reference to due date to determine either how much time is left until due date or how much time has passed since due date. Most of the time age or aged or ageing analysis refers to the second type of analysis i.e. how much time has passed […]
What is work in process or work in progress inventory?
Work in process inventory is such asset that is still in the process of completion and not yet ready to be categorised as finished goods.In a manufacturing concern raw materials are converted to finished goods by applying labour and overheads (thus the main reason why labour and overheads cost collectively called conversion cost). However, it […]
How to account for change in residual value of fixed asset?
International Accounting Standard (IAS) 16 recognizes that residual value of asset may increase or decrease as a result of revaluations or future assessments of non-current asset. IAS 16 recognizes such change as a change in accounting estimate i.e. adjustment will be prospective in nature. There is no need to adjust for previously recorded depreciation charge […]
How fixed assets are revalued if fair value cannot be determined using market value?
IAS 16 Property, Plant and Equipment (IAS 16) recognizes the fact that fair value of every asset may not be determined using market value basis. Although it is recommended and hardly the case where market information does not help but still exceptions exist. IAS 16 recognises such assets specialized assets for which fair value cannot […]
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 other words costs shall be recognized at the rate at which benefits are rendered or revenue/income is earned by the entity. […]
What is Accrual basis of accounting?
According to accrual concept or accrual principle or accrual basis of accounting revenues and expenses are recorded in books of accounts when they are earned or incurred and not when they are received or paid in cash. In essence events of business are captured in accounting system when they are actually happening and not when […]
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 or day books. While making a record certain format is followed that only summarizes the information but also keep the value of information […]
What is the difference between accounting concepts accounting principles and accounting rules?
These three are definitely different but connected and their connection is critical in accounting. Under International Financial Reporting Standards (IFRSs) IASB Framework sets out accounting concepts in terms of: Objectives of financial statements: it is simple financial statements should be prepared in a manner that users can use the underlying financial information relating to entity […]
