What are Real accounts and what is the related ledger and the accounting rule?
There are many different ways in which accounts can be classified and types of accounts be discussed. One of the ways is to divide all of the accounts in personal and impersonal accounts. Real accounts are basically a sub-classification of accounts under the type of accounts which are impersonal accounts. Such classifications are usually taught […]
What is the recognition criteria for subsequent expenditures incurred on non-current assets?
Subsequent expenditures refers to such costs which are incurred after the asset is recognized in the financial statement and brought to the location and condition intended. Examples of such expenditures include repair and maintenance, overhauling, upgradation, replacement costs etc. However, not all the subsequent costs can be capitalized in the carrying amount (carrying value or […]
Can we capitalize material relocation expenses incurred on non-current asset?
First of all we must be clear about subsequent expenditures, criteria for capitalizing subsequent expenditures in carrying amount of non-current/fixed assets and relocation costs or expenses. Subsequent expenditures refers to such costs which are incurred after the asset is recognized in the financial statement and brought to the location and condition intended. Examples of such […]
Is depreciation expense a fixed cost or a variable cost?
Let’s revisit the terms Fixed cost and Variable cost and then we will discuss where depreciation cost/expense really fits. Fixed costs are such costs that do not change with the change in activity level (e.g. units produced) with in the relevant range. Where relevant range can be defined in terms of time or activity level. […]
Is ‘Cost of goods sold’ a Product cost or a Period cost?
Before we discuss under what heading should we classify cost of goods sold, let’s first of all clear out our minds for the terms inventoriable costs and period costs with a quick review. You can the answer on difference between period costs and product costs in good detail here. Inventoriable costs (Product cost) or Product […]
What is the difference between Product cost and Period cost?
Product costs or Inventoriable costs are all such costs that form part of the inventory.These are basically such costs that relates directly to the products and are incurred to produce such products and also include the costs that are incurred to bring these products into saleable condition (or simply present location and condition). Examples are […]
What is Contingent rent in leases?
IASB’s International Accounting Standard IAS 17 defines contingent rent as follows: Contingent rent is that portion of the lease payments that is not fixed in amount but is based on the future amount of a factor that changes other than with the passage of time (eg percentage of future sales, amount of future use, future […]
What are different types of audit reports or auditor’s reports?
The nature and type of reports issued by the practitioner depends on the type of assurance engagement. However we will be speaking strictly in context of audit engagement as the question is about the types audit reports. We can classify audit reports in number of ways but usually audit reports are classified n TWO broad […]
What is the difference between Objective of audit and Purpose of audit
Although the terms objective and purpose are mostly used to mean the same and are used interchangeably but under International Auditing Standards (ISAs) the purpose of audit and objective of audit is NOT the same thing. Under ISAs the term purpose of audit simply means why audit is conducted. Whereas objective of audit means what […]
What is the difference between Complex asset and Cash generating unit?
To keep things simple, complex asset (or also known as separate component asset) and cash generating unit (CGU) is more of a concept rather than kinds of assets. These concepts are there just to make accounting easy and hassle without disturbing the basic accounting concepts. Complex asset is an asset in which different components are […]
