What is the difference between Cost and Expense?
Most of the time the difference between the terms Cost and Expense is ignored and are used interchangeably. However, the difference is significant from accounting perspective and being an accountant it is good if we keep these two terms separate to cause lesser confusion and clearer communication of financial information. Cost can be defined as […]
What is Sampling risk in auditing?
In order to express an opinion, auditor needs sufficient appropriate audit evidence. To obtain audit evidence, auditor applies range of audit procedures. But due to limited time and resources and also to conduct audit efficiently, auditor does not apply audit procedures to the whole population in consideration. Instead, he carefully selects reasonably small proportion, which […]
What is Non-sampling Risk?
Before we look at the definition of non-sampling risk, let’s understand the background why we are even discussing this question i.e. why we even have something with the name “non-sampling risk” In order to express an opinion, auditor needs sufficient appropriate audit evidence. To obtain audit evidence, auditor applies range of audit procedures. But due […]
What is meant by Shadow prices?
Shadow price or dual price is a quantitative technique to analyze the improvement in the contribution or costs by having one additional unit of a resource which is causing a bottleneck. This analysis basically helps management in deciding whether a struggle to uplift the constraint is worthwhile or not. Before we look at the definition […]
What is the difference between Cost accounting and Management accounting?
Usually the terms, Cost accounting and Management accounting, are used interchangeably and are used in one and the same sense. However, there are differences between these two terms conceptually and in application. Cost accounting deals with calculation and measurement of resources utilized for different business activities usually production and service provision. It relates to calculation […]
What is meant by Apportionment of overheads?
Most of the time overheads are not caused by a single product or a cost center and are jointly incurred on one or more product or by one or more departments. Therefore, we cannot charge such overheads specifically to each department or simply they cannot be allocated. Even though we cannot charge some kinds overheads […]
What is meant by Allocation of overheads?
While calculating overheads and especially working out overheads distribution sheet we came across the term “allocation” and during the distribution of overheads, we allocate, apportion and re-apportion overheads. Each term has separate meaning and should not be considered as one and the same. It must also not be confused with usual division of overheads. Allocation […]
What is meant by direct overheads? Does allocated overheads mean direct overheads?
First of all we need to understand the definitions of overheads, direct expenses, allocation and apportionment itself in order to explain the answer of this question. Overheads mean such costs and expenses that were incurred during the production process but it is impossible to identify or trace such costs back to a particular product or […]
What is conversion cost?
Conversion cost is the sum of all such costs that are incurred in converting one article into intended output. Mostly, coversion costs represents the costs of all such activities or resources that have been applied in converting raw materials to finished items. In mathematical or equation form conversion costs are forumalated as follows: Conversion cost […]
What is the difference between negative assurance and positive assurance?
Positive assurance is a positive assertion or in other words when opinion is stated in “positive form”. On the other hand, negative assurance is simply an opinion expressed in negative wordings. We call negative assurances negative because of the sentence structure. Sentences that contain NOT in them are called negative sentences or negation But such […]
