Based on the association with the product, cost can be classified as product cost and period cost. Product Cost is the cost that is attributable to the product, i.e. the cost which is traceable to the product and is a part of inventory values. On the contrary, Period Cost is just opposite to product cost, as they are not related to production, they cannot be apportioned to the product, as it is charged to the period in which they arise. Product cost comprises of direct materials, direct … [Read more...]

Based on payment, costs are classified into two categories; they are Explicit Costs and Implicit Costs. Explicit Cost is the cost which is actually incurred by the organization, during production. On the other hand, Implicit Cost, are just opposite to the explicit cost, as the organization does not directly incur them, but they are implied in nature which does not involve a cash payment. The former is an out of pocket cost, while the latter is an opportunity cost. Explicit Cost refers to the … [Read more...]

Nowadays, if you want to use an asset, you don't need to purchase it from the seller. There are many offers whereby, you can use the asset just by paying the price for using it, such as Hire Purchasing and Leasing. The former is a business deal in which the purchaser of the asset, pays a small amount at the beginning and the rest of the price in installments. On the contrary, the latter is an agreement between two parties in which the lessor purchases the asset and permits the lessee, use the … [Read more...]

Millions of purchase and sale transactions occur in day to day life, and so does the returns are made by many customers, when the find the products are not upto their requirement. Debit Note and Credit Note are used while the return of goods is made between two businesses. Debit Note is issued by the purchaser, at the time of returning the goods to the vendor, and the vendor issues a Credit Note to inform that he/she has received the returned goods. When the goods are returned to the seller … [Read more...]

In the normal course of business, goods are bought and sold on credit, which is not a new thing. Selling and purchasing of goods on credit change the relationship between buyer and seller into debtor and creditor. Debtors are the one, to whom goods have been sold on credit, whereas Creditors are the parties who sold the goods on credit. They both are relevant for an effective working capital management of the company. Debtors are an integral part of current liabilities and represent the … [Read more...]