What is meant by Cost object?
Cost object is anything in relation to which user of cost information wants to measure cost. It can be a product or collection of products or even a unit of product. It can be an activity. It can be a cost center i.e. a department responsible to incur cost. It can even be an instance […]
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 […]
What is Cost classification and in how many ways can we classify cost?
Cost classification is a simple process in which we group or categorize costs on the basis of common characteristics. Grouping costs on the basis of their nature, form, source or any other attribution makes it really easy to understand their effects and ultimately to take decisions about costs and beyond any shadow of doubt classifying […]
Is Residual value of the asset calculated on Present value or Future value basis?
One of the reasons for charging depreciation against the historical cost of the asset, revalued amount or simply carrying value of asset is that asset’s book value should be reduced to such residual value which was expected at the time of purchase. For that, depreciation expense charged in an accounting period is adjusted accordingly. Residual […]
What is meant by Depreciation?
Depreciation simply means a steady decrease in the value of asset. Often it is studied in relation to the time period over which such decrease in the value has occurred. Therefore, often it is also defined as the value lost by the asset over its useful life i.e. the time period for which it was subjected […]
What is NIFO inventory valuation method?
NIFO - Next in, First out is an inventory valuation technique in which issues to the production hall are valued at the current market price i.e. current cost or replacement cost instead of the cost at which material was bought i.e. historical cost. This valuation method attempts to keep the production cost accurate according to […]
What are different inventory valuation methods?
There are numerous valuation techniques to value the inventory or stock. However, here is the short list of those which are known. To learn more about each method, click the name! Specific identification method FIFO - First in, First out method LIFO - Last in, First out method HIFO - Highest in, First out NIFO […]
