Variance Analysis in Management Accounting

Management accounting is a part of accounting that concerns a company’s internal matters. Usually, it consists of establishing costs for various products or services and preparing forecasts or budgets. The purpose of management accounting is to help companies with planning, controlling, and decision-making. There are no specific requirements for management accounting, unlike financial accounting, which […]

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Capital and Revenue Expenditure

It is necessary for companies and businesses to differentiate between capital and revenue expenditures. While capital expenditures relate to large investments, revenue expenditures are smaller, day-to-day operating expenses. However, the differentiation between both of these isn’t as straightforward. There are some factors that companies can use to differentiate between their expenses. Before understanding the differences

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Bill Of Exchange Vs Promissory Note

Promissory notes and bills of exchange are both negotiable instruments. Both instruments are used as a means of payment. They are used in trade deals for transferring payments according to the specified terms and conditions. Bills of exchange and promissory notes are both formal written agreements. Bills of exchange are primarily used in international trade

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Letter of Credit Discounting

Parties involved in a trade deal can choose a letter of credit as a payment option. Buyers can often choose to make the payment using a delayed LC. Payments to the sellers can be delayed for other reasons as well. Banks can help the sellers with early payments through a letter of credit discounting. It

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Letter of Credit vs Escrow

Letters of credit and escrow services work similarly in facilitating the trade deals. Both instruments offer a financial guarantee to both parties in a trade deal. Transactions with large financial values are a riskier option and often require third-party guarantors. Two parties in a domestic or international trade deal can seek expertise from third-party institutes.

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What is a Promissory Note?

A promissory note is a debt instrument. It is used to borrow money from private lenders usually. It works similarly to a bank loan with both parties agreeing on the repayment terms. Additionally, it can take the form of a secured or unsecured debt instrument. It is a written agreement for the borrowed money. It

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What is Escrow?

An escrow is a financial agreement controlled by a third-party to manage the trade deal payments. The trade deal can be for products or services. The third-party is often called an escrow agent or company. The third-party in such contracts is the financial guarantor for both parties. What is Escrow? In an escrow financial arrangement,

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Journal Entry for Depreciation

What is Depreciation? In accounting, depreciation is an expense account to record the allocation of the cost of fixed assets or non-current assets over the useful life or life expectancy of the assets. The depreciation is calculated and recorded as an expense in the profit or loss statement. It is a non-cash transaction; therefore, when

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Accounting Ratio Analysis

Businesses prepare financial statements that provide useful information to the user of those statements. Financial statements prepared by businesses consist of the Statement of Financial Position, Statement of Profit or Loss, Statement of Cash Flows and Statement of Owners’ Equity along with the Notes to the Financial Statements. Each financial statement has its uses and

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