What is Folio coloumn and its use?
Folio, as in its literal meanings also, means a sequence of number of words for the purposes of dividing a book into meaningful parts or just for reference. Same goes for its use in accounting as well. Folio coloumn is used in Journals as well as in Ledgers. It usually contains the reference in forms […]
What is Substantive audit approach / Vouching approach?
There are many different auditing methodologies or in other words auditing approaches which can be used by the auditor to conduct an audit engagement. Which audit approach is better or should be used to much extent was (and to some extent still is) dependent on the audit firm. One of the approaches is vouching approach, […]
What are the Fundamental accounting Assumptions underlying Financial Statements?
Fundamental assumptions, basic assumptions or fundamental accounting assumptions mean the accounting concepts that have been considered and followed while recording financial information. As information needs are different from person to person, entity to entity and situation to situation thus such assumptions vary. But remember one thing fundamental accounting assumptions DOES NOT mean the rules that […]
What is tolerable misstatement and tolerable rate of deviation and the difference betweem them?
Auditor most of the time, due to number of factors, is unable to apply audit procedures on each and every piece of information available to him. Therefore, he applies different audit procedures on less then 100% items in a given population. This is called sampling. Among these audit procedures there are two types of procedures […]
What is the difference between budgeting and forecasting?
Budgeting and Forecasting are two important constituents of managerial decision making process. Even though both of these functions are distinct and are not same but their use and their dependency on each other make them inseparable and thus many confuse the two as same and use them interchangeably. Let’s understand the technical difference between these […]
What is the difference between revenue, income, profit, gain and return?
Every student who starts accounting and get an idea of these terms, the instinct of differentiating kicks in and he/she starts looking for the differences among these terms. Though there are sometimes minor and sometimes major differences among these terms but these days, with an exception of few, these terms are used interchangeably. For example, […]
What is the purpose of Statement of changes in equity?
Many students find it confusing that if we already have two financial statements, one covering the financial position of the business and the other telling about the financial performance then why do we need yet another statement with the name of Statement of Changes in Equity? And more interestingly, many think that its just a […]
What is the objective of an assurance engagement?
Well objective of every assurance engagement can be understood if we understand the elements of an assurance engagement. So let’s first of all understand the connection between three parties and what each do. Stakeholders like owner, employees, creditors, lenders and many other need financial information regarding financial performance and financial position of the business for […]
What is Inherent risk?
Inherent risk has been defined in the standards as follows: The susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls. Simply put, management make assertions in financial statements which might […]
What is the difference between ‘separate entity’ and ‘separate legal entity’?
Separate entity is basically an accounting concept where as separate legal entity is a legal concept which overrules the accounting concept of separate entity. According to separate entity concept (also termed as business entity concept) the business and the owner(s) of the business are two distinct and separate entities which implies that assets and liabilities […]
