Definition: Absorption Costing is the oldest technique for estimating profit/cost per unit for Goods and Services. More precisely, it is a technique to determine the cost or profit of the manufactured products. Here, production is taken as the base for the profit calculation. It identifies and combines all the production costs, whether Variable or Fixed. After that, … [Read more...] about Absorption Costing
Accounting
Single Entry System
Definition: Single Entry System is a hybrid and unscientific bookkeeping method that partially records business transactions. More precisely, it records only a single aspect of financial transactions and excludes the idea of duality. Small businesses generally use this system of bookkeeping. Because these businesses can't afford to hire a professional accountant for account … [Read more...] about Single Entry System
Internal Reconstruction
Definition: Internal reconstruction is the rearrangement of the company's existing capital structure. More precisely, it involves a change in the financial structure by Alteration or Reduction. The reorganization takes place without liquidation. So, there is no need to dissolve the existing venture. Thus, the formation of a new company is not needed. An Internal … [Read more...] about Internal Reconstruction
Differential Costing
Definition: Differential costing is a technique that examines changes in the total cost and revenue by analyzing proposed alternatives. These changes comprise an increase/decrease in the cost of crucial elements affecting decision-making. Financial managers conduct a comparative analysis to ascertain the difference in the cost due to the change in operations. It involves … [Read more...] about Differential Costing
Fund Flow Statement
Definition: Fund Flow Statement summarises the movements of funds in the business between the two accounting periods. It provides analytical data about the procurement and utilization of funds. It is a technique that studies, controls and monitors the number of changes in the funds during a period. Consequently, financial managers can judge whether the funds are efficiently … [Read more...] about Fund Flow Statement
Computerized Accounting
Definition: Computerized accounting refers to carrying out accounting functions or processes using computers. It involves recording and analyzing financial transactions electronically over accounting software. The accounting software serves as a framework for data recording and processing. Companies may use readymade accounting software available in the market or get a … [Read more...] about Computerized Accounting
Responsibility Accounting
Definition: Responsibility accounting is an accounting system that controls cost and revenue, by delegating responsibility to individuals or groups and apportionment of responsibility centres. It aims to achieve minimum variance between actual and planned goals. Responsibility Accounting focuses on monitoring and controlling costs through personal responsibility within the … [Read more...] about Responsibility Accounting
Integrated Accounts
Definition: Integrated Accounts are statements in which financial and cost accounting transactions are maintained jointly. In other words, when the cost and financial accounts are merged and recorded in the same set of books, it is referred to as Integrated Accounts. It accommodates complete information about both areas. However, the transactions are recorded based on the … [Read more...] about Integrated Accounts
Batch Costing
Definition: Batch costing is an extension of Job costing which calculates costs and profit for batches. The production in batches decreases the setting up costs. Whereas, it increases the carrying and holding costs. Moreover, Economic Batch Quantity (EBQ) is considered during production. It is also known as 'Lot Costing'. Preparation of Batch cost sheet facilitates … [Read more...] about Batch Costing
Financial Statement Analysis
Definition: Financial Statement Analysis is the assessment of the firm's financial well-being. It determines relations among various items of the financial statements. Also, it helps in identifying strengths and specifying the areas of concern persisting in the firm. It aims to scrutinize, interpret, compare and depict useful relationships among financial statements (Balance … [Read more...] about Financial Statement Analysis