If this negative number continues over time, the business might be required to sell some of its long-term, income producing assets to pay for current obligations like AP and payroll. Expanding without taking on new debt or investors would be out of t... Read more
Additionally, firms may reduce prices to generate sales in an effort to cycle inventory. In this article, the terms “cost of sales” and “cost of goods sold” are synonymous. In accounting, the inventory turnover is a measure of... Read more
The primary difference between the two systems is that GAAP is rules-based and IFRS is principles-based. This disconnect manifests itself in specific details and interpretations. Basically, IFRS guidelines provide much less overall detail than GAAP. ... Read more
Other valuation or costing methods like replacement cost or current cost fluctuate with the market and economy. If these methods were used, the company would report the same piece of property at different values every year based on the market. A hist... Read more
But when you do find yourself acquiring another business, you’ll want to make sure you follow U.S. If you do carry goodwill on your balance sheet, you’ll also want to make sure you conduct impairment tests each year and enter adjusting jo... Read more
Accounting should be conducted based on the assumption that a company will continue to operate indefinitely. If an accountant is required to make any assumptions, those assumptions should be based on historical precedents set by the business. Account... Read more
For instance, if your business borrows $50,000 from the bank to purchase additional inventory for resale, that is using financial leverage. Leverage is a financial tactic to multiply gains and losses, accomplished through borrowing capital on existin... Read more
A decrease in deferred revenue may indicate that a company does not have as much work as it did in past years. Deferred revenue is equal to the value of invoices to date over the recognizable revenue to date calculated by customer contract and then a... Read more
The responsibilities of the board of directors can vary rather significantly from company to company. Some boards do little whereas others are heavily involved in strategy and policy making. Some of these terms have been examined previously, others h... Read more
To learn more, check out CFI’s free Accounting Fundamentals Course. Whether you opt for a quarterly, annual, or monthly accounting period, make sure it’s consistent. The primary purpose of the accounting period concept is to streamline re... Read more
