Financial Accounting

This category covers various aspects of financial accounting such as basic accounting, principle of accounting, accounting treatment as well as financial statements or financial reporting.

Opportunity Costs vs Sunk Costs – Key Differences

Opportunity costs represent a foregone opportunity for an investor or entity when choosing one option over the other. It is a widely used concept in the capital budgeting method when deciding between mutually exclusive projects. Sunk costs represent a type of non-relevant costs that cannot be recovered and already spent. Investment decisions mainly focus on …

Opportunity Costs vs Sunk Costs – Key Differences Read More »

What is Donated Capital and How to Account for it under US GAAP Rules

Donated capital comes in the form of nonreciprocal transfer of assets to a company. This form of capital is rare with for-profit organizations. However, not-for-profit (NFP) organizations can receive assets and capital donated by individuals and governments. ASC 958-605-25-2 and ASC 845-10-30 combined guide on the accounting treatment of donated capital. What is Donated Capital? …

What is Donated Capital and How to Account for it under US GAAP Rules Read More »

Accounting for Deferred Compensation Contracts

Deferred compensation contracts are arranged for paying employees at a later date. Employers set aside a proportion of deferred liability to compensate employees at retirement. An employer can use different methods to fund deferred compensation contracts. The employees can also participate in a volunteer contribution plan such as an insurance plan to fund their compensation. …

Accounting for Deferred Compensation Contracts Read More »

Sale-Leaseback Accounting Under ASC 610 and ASC 842 – US GAAP Rules

A sale-leaseback transaction basically occurs when an owner of an asset sells the asset and immediately leases it back from the buyer. A sale-leaseback option provides a liquidity boost to the company. It also helps a company is managing its debt ratio. These transactions offer several benefits to both parties. The accounting treatment of a …

Sale-Leaseback Accounting Under ASC 610 and ASC 842 – US GAAP Rules Read More »

5 Criteria Test to Distinguish Operating Lease vs Finance Lease under GAAP Rules

A lease contract can be classified as an operating or finance lease. In some cases, both parties can recognize a lease contract as a direct finance lease as well. US GAAP rules ASC 842 – Leases define five criteria test points to evaluate a lease contract classification. It’s important to note that both the lessor …

5 Criteria Test to Distinguish Operating Lease vs Finance Lease under GAAP Rules Read More »

Accounting for Asset Retirement Obligation (ARO) – ASC 410 and ASC 842

A lessee can make several temporary installments or improvements in an underlying asset. However, at the time of lease contract expiry, these installments must be removed. Asset retirement is an obligation under certain terms and conditions in leasing. US GAAP rules ASC 410 and ASC 842 apply to asset retirement obligation accounting in various cases. …

Accounting for Asset Retirement Obligation (ARO) – ASC 410 and ASC 842 Read More »

Scroll to Top