In conjunction with the concept of accrual basis accounting, it’s important for businesses to follow the matching principle. This concept states that during an accounting period, businesses should report complete financial transactions, both expenses and revenue. For example, if a company reports the...
: Business Entity, Money Measurement, Going Concern, Accounting Period, Cost Concept, Duality Aspect concept, Realisation Concept, Accrual Concept and Matching Concept. What is periodicity and its causes? Periodicity : "The repetition of Certain properties by the elements at a regular interval is kno...
Although it is easier to use the cash method of accounting, the accrual method can reveal a company’s financial health more accurately. It allows companies to record their sales and credit purchases in the same reporting period when the transactions occur. Therefore, the accrual method of accoun...
While accounting profit is a critical metric, it is important to distinguish it fromeconomic profit, which incorporates both explicit and implicit costs. Implicit costs, also known as opportunity costs, represent potential earnings from alternative uses of resources. For example, if a business owner ...
Going Concern Principle is one of the several accounting principles being followed in accounting. Going Concern Principle operates under the assumption that a business will keep operating in the foreseeable period of time due to the several factors observed...
1. Accurate Financial Reporting:The matching concept ensures that revenues and related expenses are recognized in the same accounting period, providing a more accurate depiction of the financial performance of a business. This accuracy in financial reporting is crucial for investors, creditors, and othe...
This is the most common and simplest depreciation method. Formula: (Cost of asset – Scrap value of asset) / Useful life of asset = Depreciation expense Most often used for: Equipment that loses value steadily over time. Pros: It spreads the expense evenly over each accounting period. It’...
A deep dive on why you can't afford to miscalculate your MRR, covering why MRR is important, mistakes to avoid, and ways to keep your MRR on track. Includes MRR formula.
What is an Accounting Period? What are the Generally Accepted Accounting Principles? Discussion Comments SmartCapitalMind, in your inbox Our latest articles, guides, and more, delivered daily. Subscribe Categories Finance Taxation Marketing HR
If you do decide to write an account receivable off as bad debt, this is how to record it on the books. Before the relevant accounting period, estimate the proportion of annual revenue you expect to be unable to collect. Include a credit entry for “allowance for uncollectible accounts” in...