“Luca Pacioli” is the father of accounting. He discovered the concept of a double-entry system of book-keeping. As per this system, each business transaction affects two sides of an account, i.e. debit, and credit. While debit indicates the destination, credit implies the source of monetary benefit. As per the Double Entry System: For each debit or credit entry, there is always a corresponding and equal credit or debit entry. The debit and credit entries are made in the ledger accounts to … [Read more...]

A centre for which cost is ascertained and used to control cost is Cost Center. Whereas a centre whose performance we can measure through its income earning capacity is Profit Center. We divide the organization into various sub-units for the purpose of costing. That is the collection and utilization of cost data in an optimum manner. These sub-units are the smallest area of responsibility or segment of activity. Such sub-units are nothing but cost centres. In the simplest sense, those … [Read more...]

Accounting is the art of keeping the record of business events and transactions in a systematic manner. It helps in determining the financial position and profitability of the company at the end of the financial year. It is not exactly the same as finance. Technically, finance is a part of economics that is concerned with resource allocation and management of funds. While accounting is a sub-domain of finance. The two differ in the sense that accounting is all about recording the flow of … [Read more...]

Financial Accounting is the original form of accounting that deals with recording business transactions and summarizing the data into reports, which are presented to the users so that financial decisions can be made rationally. On the other hand, management accounting is a new field of accounting that studies managerial aspects. It deals with the provision of financial data to the company's management so that they can make rational economic decisions. Financial accounting emphasizes on giving … [Read more...]

The Cash Flow Statement shows the changes in the cash position (Inflows and outflows) of a firm. It is an analytical reconciliation statement that explains the reasons for the differences between the opening and closing cash balances over a period. On the other hand, the Fund Flow Statement is a statement that shows the ups and downs of the financial position or the changes in working capital of the entity between the two financial years. While a cash flow statement is concerned with the flow … [Read more...]

In finance, the term 'insolvency' can be used in the context of both individuals and organizations. Insolvency represents that particular 'state' in which the individual or organization is not able to settle debts on time when they fall due for payment because of lack of funds or bank balance. On the other hand, Bankruptcy can be defined as a formal and legal declaration of an individual's inability to settle debts. What is Liquidation? Liquidation implies the closure or winding up of the … [Read more...]

Assets refer to the economic resources of the business which the firm acquires either out of its own funds or borrowed funds which are expressed in terms of money. These are meant for use in the business and will increase the firm's profit-earning capacity. On the other hand, Liability refers to the amount payable by the firm to external parties. It is the claim of external parties like creditors, banks, debenture holders, etc. on the assets of the firm arising due to past transactions. In … [Read more...]

Discount is an allowance provided to the customers in specific circumstances. In business, there are two main types of discounts, i.e. trade discounts and cash discounts. While trade discount is the reduction in the list price of the product, whereas cash discount is offered by the firms to its customers to encourage early payments. The main difference between trade discount and cash discount is that a separate ledger account for discounts allowed is opened in the books of the seller and … [Read more...]

Stock Exchange is a marketplace, wherein the trading of securities between buyers and sellers takes place. The two largest and famous stock exchanges of India are the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Sensex is a flagship index of BSE, whereas Nifty is a main index of NSE. Important: Every share of a company has equal value and Prices of shares fluctuate depending on the demand and supply of the shares in the market. Nifty and Sensex are basically market indices, … [Read more...]

Taxes charged directly on the income or wealth of an individual is called Direct Tax. On the contrary, an indirect tax is a tax that is added to the price of goods and services. What is a Tax? Tax is a financial obligation, payable to the government for the cost of living in a society. It is a fee levied by the government of the respective country or territory on income, activities, goods, and services. It is broadly classified into direct tax and indirect tax. Why Tax is imposed? The main … [Read more...]