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 […]
What is meant by Accounting concepts and principles?
Accounting is one of the vital tools to collect financial information pertaining to business activities. The same information is used in economic decisions users make. The apex of accounting or specifically financial accounting is financial statements that puts the gives the accounting records meaningful shape so that it can be used. However, preparing financial statements […]
What is Retail Price method of inventory valuation?
Inventory is an important asset entity holds and its valuation is critical as it not only affects figures in statement of financial position but also profit calculation. There are several methods to value year end inventory. However financial statements prepared under International Accounting Standards have limited set of methods that can be used to value […]
What is the accounting treatment for sale of fixed asset?
First important thing to understand is that the tern fixed asset or non-current assets are such resources of assets which are not bought or sold as main activity of the business and are distinct from stock or inventory. Therefore sale or purchase of fixed asset in accounting perspective is NOT same as sale or purchase […]
What is the difference between Cash basis and Accrual basis accounting and which one is better?
Accrual basis of accounting is one of the underlying assumption for preparing financial statements under International Accounting Standards. IASB Framework clearly demanded the financial statements to be prepared on accrual basis instead of cash basis of accounting. Among other notable benefits of usig accrual basis of accounting over cash basis is that it helps record the […]
What is Continuous stocktaking?
Stocktaking is simply physical checking or counting of inventory held by the entity and by continuous stocktaking it means inventory counts that are undertaken on regular basis. Continuous stocktaking method is used over periodic stock counts to increase accuracy especially for the goods which are high value or have high turnover i.e. fast moving inventory/goods and […]
Can we depreciate asset below residual value?
Main purpose of depreciation is to reduce the value of asset over its useful life in such a systematic way that such reduction corresponds with the rate at which benefits are rendered from the assets. To learn more about what is depreciation? You can visit this page. International Accounting Standard (ISA) 16 Property plant and […]
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 […]
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 […]
