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 does favourable and unfavourable variance mean?
Variance analysis is a known quantitative technique that involves identification and evaluation of causes behind differences between actual costs/revenues and standard (or expected) revenues/costs. Variances are analysed in terms of being favourable or unfavourable for business and are monetized as a difference given a financial value it is more easier for the relevant authorities to […]
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 meant by Cost?
Cost is the monetary amount of resources or the consideration for using the resource invested or consumed or used up. In its most simplistic form cost is monetary measurement of resource outflow due to any reason. As cost is an information, user of information may require this information to be generated or processed as per […]
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 […]
What is Cash Conversion Cycle and how to interpret it?
Cash conversion cycle is one of the important tools in hands of users of financial statements including investors to measure liquidity performance of the business and ultimately it will also reflect how good the entity is being managed with its resources especially in short-term. Cash is life line of every kind of business. Without cash […]
What is Idle time and its accounting treatment?
Idle time is the simply the time for which labour has been paid for but no work has been done. Whereas inefficiency arises when labour is actually engaged on production but output is not as expected or simply not 100%. Idle time may arise out of normal or abnormal situations and it is the situation […]
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 […]
