Key Differences

Balance Sheet, or otherwise called as Position statement, is an integral part of the financial statement which shows the statement of affairs of an entity, in terms of what the business owns and what it owes to the external parties and to the owners, on a particular date. Balance Sheet of a trading concern and that of a banking concern are prepared differently because the act which rules the two are different. So, there are different formats provided in advance for the preparation of Balance … [Read more...]

Gross Profit and Gross Profit Margin are two closely related terms that it is hard for one to recognize their difference, in general. Gross Profit is described as the difference between amount earned from the sales and the amount spent on production activities. And if we talk about gross profit margin, it is a profitability ratio, which is expressed as a percentage of gross profit to sales, during the accounting period. These two are used as a key indicator of operational efficiency, overall … [Read more...]

Every business organization, irrespective of the size, structure, and nature, needs cash for running the business smoothly. In the absence of sufficient cash, the business may not be able to fulfill long term and short term obligations, which might lead to discontinuation of business. The movement of cash can be of two types i.e. cash flow and free cash flow. Cash flow refers to the inflow and outflow of cash to/from the organization. On the contrary, Free cash flow, as the name suggests, is … [Read more...]

Revenue, profit and income, are three terms which sound same to a layman, although in business terminology there is a huge difference between them. Revenue implies the money received by the company from its day to day operations, alongwith the non-operating activities. On the other hand, profit implies the financial gain, which is arrived after deducting amount spent from the amount earned, by the concern, during the course of business in an accounting period. Income can be understood as the … [Read more...]

In business, the transaction may occur in two ways, i.e. cash or credit. For recording cash transaction, there are separate books or accounts are maintained by the business entities, which are cash book and cash account. Cash Book is a subsidiary book, which records all the cash related transactions, i.e. receipts or payments. In the same way, Cash Account is an account in which cash receipts and disbursements are entered. These two differ in the fact that cash book is a subsidiary book, while … [Read more...]

In general, two types of receipts occur during the course of business. Capital Receipt is described as the money brought to the business from non-operating sources like proceeds from the sale of long-term assets and capital brought by the proprietor. These receipts do not affect the company's profit or loss. In contrast, revenue receipts are the result of the firm’s routine activities during the financial year, which include sales, commission, and interest on investment. These receipts affect … [Read more...]

The occurrence of expenditure during the course of business is very natural. These are broadly classified into two categories, i.e. capital expenditure and revenue expenditure. Capital Expenditure is the one which a company incurs to acquire an asset or improve the capacity of the asset or repay long-term liability. Conversely, revenue expenditure implies the routine expenditure, that the company incurs to undertake day-to-day operations. Introduction Basically, we use the word 'capital' for … [Read more...]