How Does Inflation Affect Net Present Value Appraisals?

How Does Inflation Affect Net Present Value Appraisals? Inflation has an inverse relationship with interest rates. It lowers the present value of future cash flows. Thus, it can affect the net present value calculations as well. Let us discuss what is net present value and how does inflation affects it. What is Net Present Value? … Read more

What’s True-Up Adjustment?

What’s True-Up Adjustment? Several principles dictate how companies account for various transactions. These principles allow them to record those transactions under the accepted standards. Usually, companies conform to several accounting principles. These apply to all companies and organizations that prepare and present financial statements. One of these includes the matching principle in accounting, which is … Read more

What is Periodicity Assumption?

What is Periodicity Assumption? Companies use various accounting principles when preparing their financial statements. These principles include rules and guidelines they must follow when reporting financial data. Usually, accounting principles come from an accounting body that dictates the accounting standards. For example, the Financial Accounting Standards Board (FASB) issues the Generally Accepted Accounting Principles (GAAP). Most companies follow various … Read more

How to Increase Return on Assets?

How to Increase Return on Assets? Stakeholders use financial ratios to analyze various aspects of a company’s operations. Usually, this analysis can also occur through the financial statements. However, they do not provide the same level of comparability that comes with financial ratios. On top of that, these ratios are also easier to understand than … Read more

Why is Budget Forecasting Important?

Why is Budget Forecasting Important? Companies use various financial tools to plan for growth. Usually, these tools include budgets and forecasts, which help companies with that plan. These tools allow companies to forecast the future. By doing so, it provides a reference for future activities. On top of that, budgets and forecasts also act as … Read more

What is a Budgeted Income Statement?

What is a Budgeted Income Statement? Companies prepare various financial statements that report several aspects of their operations. Usually, companies use the balance sheet and income statement to provide a picture of those operations. On top of that, companies may also prepare the cash flow statement and statement of changes in equity. Each of these … Read more

What are Types of Budgeting Models?

What are Types of Budgeting Models? Companies use financial forecasting to create budgets and understand their revenue streams. This process helps create an expectation for companies to use as a reference in the future. On top of that, it also allows companies to control actual performance against the set benchmark. For companies, these tools are … Read more

Journal Entry for Cash Received From the Sale of Shares

Journal Entry for Cash Received From the Sale of Shares Businesses need money to eliminate the gap between a company’s goals and the current state of affairs. The needs of a business are fulfilled by hiring people, implementation of business projects, and operational activities. So, what is needed to execute these activities successfully? It’s the … Read more

What is Scrap Inventory

What is Scrap Inventory? Accounting records need to be updated after every event and transaction. Robust updating systems make it easy for accountants to look at the current position of a business, and it also eases the accessibility of business documents. Likewise, it is necessary to identify and maintain an updated record of scrap inventory. … Read more

Is Additional Paid-in Capital Debit or Credit?

Is Additional Paid-in Capital Debit or Credit? Par value of the shares is a base amount and must be paid to acquire the company’s share. However, at the time of IPO – (Initial public offering), if the company receives an additional amount over PAR value of the shares (can be seen like profit), it’s said … Read more