In the business glossary, provision implies money set aside to cover an anticipated liability or loss. Look the other term Reserve, reserves refer to withholding some amount for any use in future. Provision and reserves are two terms which are highly confused, but they carry different meanings. While running a business, some expenses or losses relate to the current financial year, but their amount is not known, as they are not yet incurred. For such expenses/losses provision is created, as a … [Read more...]

Financial Management is concerned with the proper utilization of funds in such a manner that it will increase the value plus earnings of the firm. Wherever funds are involved, financial management is there. There are two paramount objectives of the Financial Management: Profit Maximization and Wealth Maximization. Profit Maximization as its name signifies refers that the profit of the firm should be increased while Wealth Maximization, aims at accelerating the worth of the entity. Profit … [Read more...]

When accounting process ends, auditing begins, for the purpose of determining the true and fair picture of books of accounts. It is an activity of record keeping and preparation & presentation of the financial statement. Accounting is used by the firms for keeping a track of their monetary transactions. It is the language the business understands, as it is the tool for reporting financial statement of the business entity. Conversely, Auditing is an activity of verification and evaluation … [Read more...]

The lease is a finance agreement in which lessor (owner of the asset) purchases the asset and let the lessee (user of the asset) use the asset for a limited period against periodic payments, i.e. lease rentals. The terms and conditions of the lease are written in the lease deed. Finance or capital lease and operating lease are two types of lease. Finance Lease is a lease in which the risk and rewards are transferred to the lessee with the transfer of the asset. Unlike Operating Lease, in which … [Read more...]

Depreciation and amortisation both meant to reduce the value of the asset year by year, but they are not one and the same thing. The difference between the two must be appreciated. Writing off tangible assets for the period is termed as depreciation, whereas the process of writing off intangible fixed assets is amortization. Fixed assets refers to the assets, whose benefit is enjoyed for more than one accounting period. Fixed assets can be tangible fixed assets or intangible fixed assets. The … [Read more...]

Many use the terms bookkeeping and accounting interchangeably, but the fact is the former is the first step to the latter, i.e. bookkeeping is the stepping stone of accounting. As far as the scope is of these two processes is concerned, Accounting is much wider and analytical than bookkeeping. Bookkeeping it is only a part of accounting, which creates a base for accounting. While bookkeeping stresses on the recording of transactions and so the work is clerical in nature. On the other hand, … [Read more...]

One of the major concern of the enterprise is to maximize the profit, which is possible only through decreasing the cost of production. For this purpose, two efficient tools are used by the management, i.e. cost control and cost reduction. Cost Control is a technique which provides the necessary information to the management that actual costs are aligned with the budgeted costs or not. Conversely, Cost Reduction is a technique used to save the unit cost of the product without compromising its … [Read more...]

Based on variability, the costs has been classified into three categories, they are fixed, variable and semi variable. Fixed costs, as its name suggests, is fixed in total i.e. irrespective of the number of output produced. Variable costs vary with the number of output produced. Semi-variable is the type of costs, which have the characteristics of both fixed costs and variable costs. Many cost accounting students, are not able to bifurcate fixed and variable cost. Fixed costs are one that do … [Read more...]

Cost Accounting refers to that branch of accounting which deals with costs incurred in the production of units of an organization. On the other hand, financial accounting refers to the accounting concerned with recording financial data of an organization, in order to exhibit exact position of the business. Cost accounting generates information so as to keep a check on operations, with an aim of maximizing profit and efficiency of the concern. Conversely, Financial accounting ascertains the … [Read more...]

Balance Sheet is a statement which exhibits the company's financial position on a specific date, by listing out the assets, liabilities, and capital. It is used to denote the ownership and owings of the company, at a given point in time. It plays a pivotal role in indicating the financial health of the entity, to help the users of the statement to take rational decisions. It is not exactly same as a consolidated balance sheet. Consolidated Balance Sheet is prepared when the details of … [Read more...]