This Accounting category will cover various topics on accounting ranging from financial, management, and advance accounting.
Budget padding aims to inflate the proposed budget; it can be done by artificially increasing estimates that favor managers. This results in the room to cover unexpected expenses the business may have to face during the project. Artificial increment/budget padding can be perceived as unethical, but sometimes it’s logical in times of inflation when there […]
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Definition The current ratio measures the ability of the business to pay off short-term obligations falling due in the next twelve months. Calculation and analysis of the current ratio help to assess the liquidity of the business and offers great help in understanding if the business is liquid and able to meet the commitments in
What is the Current Ratio? Advantages and disadvantages of Current Ratio – Explained Read More »
Every business sets a shutdown point. It is the point where a company cannot sustain its operations. The point can be about a product, a department, or a company. Several factors contribute to the shutdown decisions. The most prominent factor is profitability. A business must also consider broader factors. Let us discuss what are shutdown
Shutdown Decisions: What Is It, Why Companies Opt For Shutdown Decision and More Read More »
Shadow pricing or proxy pricing is the process of assigning theoretical values to different metrics. The method can be used to assign values to intangible assets such as social welfare services. Companies can use this method in several cost-benefit and project appraisal scenarios. However, this method relies heavily on estimates. Let us consider what is
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Full cost-plus and marginal cost-plus are two widely used pricing methods. Both methods calculate the selling price of a product per unit in different ways. Both methods offer some benefits and limitations to their users. A business must consider a few key factors discussed below in detail before choosing one of these two methods. Full
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The marginal cost-plus pricing approach considers variable costs of production. It is a useful method for businesses with a large proportion of variable costs. It is a simple and easy method to practice. Businesses can set the desired markup on top of the variable costs. However, this method is not suitable for all types of
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Cost-plus pricing is one of the most commonly used pricing methods. It helps a business calculate the total costs of production and set a fixed markup over it. This approach is useful for retail and other businesses with several products. It offers a simple approach and it is understood easily by managers. Let us discuss
Cost Plus Pricing: Definition, How It Works, and More Read More »
Accrued vacations are entitled absence payments to an employee from the employer when certain conditions are fulfilled. An employer may adopt a certain compensation policy that includes compensated absence. ASC 710 provides guidelines on the accounting treatment of compensated vacations and the accrued liability for an employer. Let us discuss how an employer can account
Accounting for Accrued Vacation – US GAAP Rules Read More »
Joint ventures are commonly known as equal investments in a new entity. However, the definition and accounting treatment of a joint venture does not require equal investment and ownership stakes in the joint entity. Joint ventures can be in the form of partnerships, for projects, or for any other investment purposes. The accounting for joint
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Internal reconstruction is the process of reorganizing affairs of the business in terms of assets revaluation, liability assessment, reducing share capital, restructuring the liability, and varying the rights associated with the equity. Reconstruction is considered when the business makes consistent losses, and there is a need to review the balance sheet if assets/capital is overstated.
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