Accounting Terms

Financial vs Managerial Accounting: Everything You Need to Know The main difference between financial and managerial accounting is that financial accounting is concerned with financial statements. While managerial accounting is concerned with planning and decision making. Financial accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in …

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Classified Balance Sheet – Definition and Examples The classified balance sheet is one of the two types of balance sheets used by businesses. The other type is the unclassified balance sheet. The classified balance sheet is more common because it provides a more detailed picture of the financial health of the business. The classified balance …

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Net Realizable Value – Definition and Examples Net realizable value is the dollar amount that an entity expects to receive from the sale of an item, after deducting the estimated costs of completing the sale. In other words, net realizable value is the market value of an item minus the selling expenses. Therefore, to calculate …

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Accounting Equation – Definition & Examples The accounting equation is the foundation of the double-entry accounting system, which is the accounting system that most businesses use. It shows that all assets are financed either by borrowing money or by using equity from the business’s owners. The accounting equation also shows that all assets liabilities and …

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Double Entry Accounting: What Does it Really Mean? Double-entry accounting is a system where you can record each financial transaction in at least two accounts. The double-entry accounting system is designed to provide a more accurate picture of a company’s financial state and can be used to verify entries. One advantage of double-entry accounting is …

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The Normal Balance of Accounts – A Short Guide In double-entry bookkeeping, the normal balance of the account is its debit or credit balance. And it’s depending on the type of account. Accounts that typically have a debit balance include asset and expense accounts. While those that typically have a credit balance include liability and …

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What is IAS (International Accounting Standards)? The International Accounting Standards (IAS) are a set of accounting principles that guide how to prepare financial statements. International Accounting Standards Board (IASB) is the supplier of International accounting standards-IAS. International accounting standards are designed to improve the comparability of financial statements across jurisdictions and to provide a common …

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Everything You Need to Know About Time Value of Money The time value of money is a powerful tool. It can help you understand the time value of money. It also shows the relationship between cash flows and time. Furthermore, it helps you understand the time value of money. By showing you the present value …

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What is FUTA? The federal unemployment tax act-FUTA is a tax imposed by the federal government on employers. The tax is used to fund the unemployment compensation program, which provides benefits to workers who have lost their jobs. Employers must pay FUTA tax quarterly, and they are responsible for filing annual reports with the IRS. …

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What are Debits and Credits? Debits and credits are a vital part of accounting because they allow you to keep track of financial transactions in an accurate way. Debts increase the balance while Losses decrease it, but both sides should always balance out when recording any kind of transaction or gain/losses from one day’s activities …

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