What is Business risk?
Doing day to day business involves carrying out numerous activities of different nature. It involves all kinds and sorts of business transactions. Some of these activities gets accounted for and some are simply dealt out of books. However, everything business do has inherent benefits and inherent problems. And it is the job and responsibility of […]
Is Sales tax included in the cost of the asset?
General rule is that everything paid specifically for the asset will form part of the cost of the asset purchased by the entity i.e. any cost incurred specifically towards the asset until it is brought in to an intended use, everything will form part of cost of the asset. However, things are not that simple […]
What is Cash cow?
Boston Consulting Group (BCG) developed a product analysis methodology in which entity’s product portfolio is analysed against two criteria or potentials i.e. market share and market growth. On the basis of such analysis products can be divded in four categories. One of the four categories is named as cash cow which represents such products that hold high […]
What is Trade discount?
In the business world while selling goods or services the price charged is often lesser than the list, retail or quoted price and the amount by which the price is reduced is called discount. And as this discount is offered at the time of trade therefore trade discount. Another lesser known name of trade discount […]
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 possibly the drawings as well. Expense can simply be defined as outflow of resources of entity in order to earn revenue […]
Is Accumulated depreciation an expense account or an asset account?
Before this question is answered specifically it will be good if we clear an important connected concept of historical cost. According to historical cost concept, assets are recognized and reported in the financial statements at the amount that were paid at the time of acquisition of the asset. And this amount remains unchanged for years […]
What is a non-cash expense?
Non-cash expenses are such expenses that do not involve real cash outlay or against which no real cash outflow has taken place at least in the period in which such expense has been reported. And as they are recognized as an expense they will cause entity’s retained earnings to decrease but such expenses will not […]
What is the difference between depreciation account and accumulated depreciation account?
Capital assets also known as fixed assets are simply such assets which are used over a period longer than one year. Although real cash outflow takes place for the whole price at the time of acquisition of such assets however, for reporting purposes such costs are not expensed out in the year of purchase of […]
What is meant by Temporary accounts?
Temporary account is in simple words are such accounts that are maintained only until the end of particular accounting period (which can of any length of time i.e. a week, a month, two months, a quarter, semi annual or annual). And when such accounting period lapses, these accounts are closed and nothing of such accounts […]
What is Credit note and when is it used?
A credit note is a source document providing evidence that a credit entry has been made in the financial records for specific reason which is explained on the face of this business document. Credit note is also known as credit memo or credit memorandum as it only notifies about the entry made in the financial […]
