Accounting

Definition: Sunk cost is the cost that has already been incurred in the past and is unrecoverable. Thus it is also known as historical cost. It is the written down value of the plant after reducing the reclaim value of the plant. However, this cost is not relevant for making the decisions as it has already been incurred and cannot be refrained by taking decisions in … [Read more...] about Sunk Cost

Definition: Inventory valuation or stock valuation is the method of identifying the actual value of the inventories at the end of the year.  The foremost step of valuation is to ascertain the physical inventories of the company, i.e., raw material, work in progress goods, and finished goods. The main objective behind the valuation of inventory is to determine the true income … [Read more...] about Inventory Valuation

Definition: Trial Balance is a statement that assembles the balances of all ledger accounts in a definite format. It records both debit balance as well as credit balances from the ledger accounts, including cash and bank balances on a stated date. It is inclined with the purpose of testing the analytical or arithmetical accuracy of the books of accounts of a business. Content: … [Read more...] about Trial Balance

Definition: Balance Sheet is the final statement of the financial report prepared after trading and profit/loss account of a company. It shows the company's exact financial position at the end of the financial year after evaluating the true and fair value of all the assets and liabilities of a business. In short, it is the basic statement of the company that examines the … [Read more...] about Balance Sheet

Definition: Hire Purchase System is a system in which the hirer (hire purchaser) buys a good from the seller (hire vendor) but does not make a full payment at one time. However, makes a lumpsum amount as a down payment and the remaining amount will be paid in installments by the hirer. It is somehow like an installment system but, the major difference in installment system and … [Read more...] about Hire Purchase System

Definition: Contract Costing is an accounting of a long-term contract work usually applicable on construction work such as building construction, bridge construction, road construction and other long-run engineering works which take long duration in completion, i.e., a year or more. However, contract costing is very much similar to job costing but is not same, in contract … [Read more...] about Contract Costing

Definition: Accounting Principles are the rules and regulations of the accounting language accepted worldwide and are made to make the language understandable for all and ensures the accounting records reliability. Accounting principles should be followed to maintain the resemblance of the records. So that the records should reveal the same information to everyone using the … [Read more...] about Accounting Principles

Definition: In Marginal Costing, we study the impact of variable cost at distinctive levels of production capacity for that we need to divide the total cost into fixed and variable cost because the fixed cost does not make any impact on marginal cost. However, fluctuations in variable cost in different production capacities are known as the marginal cost for the … [Read more...] about Marginal Costing

Definition: Fixed cost is a cost that does not change with an increase or decrease in the number of goods and services produced. It is one of the two components of the total cost of goods and services along with the variable cost. These costs are applicable to all businesses doing any kind of business. In economics, a business can achieve economies of scale when it produces … [Read more...] about Fixed Cost

Definition: Rectification of errors is a procedure of revising mistakes in the entries. These errors can be of two types, i.e,  the errors committed on both sides in an entry that does not influence the trial balance and can be rectified by making a journal entry. And another one is the errors that occur on one side of the trial balance and disturbs the trial balance are … [Read more...] about Rectification of Errors