Interest Expense
What is Interest Expense? Interest expense is one of the core expenses found in the income statement. A company must finance its assets either through debt or equity. With the former, the company will incur an expense related to the cost of borrowing. Understanding a company’s interest expense helps to understand its capital structure and…
Forensic Audit Guide
What is a Forensic Audit? A forensic audit is an examination of a company’s financial records to derive evidence which can be used in a court of law or legal proceeding. For example, Telemart, on the recommendation of its Chief Financial Officer (CFO), entered into a contract with RJ Inc for the supply of carts….
Target Costing
What is Target Costing? Target costing is not just a method of costing, but rather a management technique wherein prices are determined by market conditions, taking into account several factors, such as homogeneous products, level of competition, no/low switching costs for the end customer, etc. When these factors come into the picture, management wants to…
Budgeting Software
What is Budgeting Software? Budgeting software is any computer program that helps an individual or business design, manage, monitor, and alter their budget. Examples of software range from Microsoft Excel on one end to SAP on the other end. In this article, we will examine and compare various types of software for budgeting purposes. Types…
Prorated
What is Prorated? In accounting and finance, prorated means adjusted for a specific time period. For example, if an employee is due a salary of $80,000 per year, and they join the company on July 1, their prorated salary for that year would be $40,000. How to Prorate a Number Let’s look at an example….
Equity Method
What is the Equity Method? The equity method is a type of accounting used for intercorporate investments. It is used when the investor holds significant influence over the investee but does not exercise full control over it, as in the relationship between a parent company and its subsidiary. In this case, the terminology of “parent”…
Installment Sale
What is an Installment Sale? An installment sale is a financing arrangement in which the seller allows the buyer to make payments over an extended period of time. In an installment sale, the buyer receives the goods at the beginning of the installment period and makes payments over an installment period. Revenue and expense are…
Weighted Average Cost Method
What is Weighted Average Cost (WAC)? In accounting, the Weighted Average Cost (WAC) method of inventory valuation uses a weighted average to determine the amount that goes into COGS and inventory. The weighted average cost method divides the cost of goods available for sale by the number of units available for sale. The WAC method…
Deferred Revenue
What is Deferred Revenue? Deferred Revenue (also called Unearned Revenue) is generated when a company receives payment for goods and/or services that have not been delivered or completed. In accrual accounting, revenue is only recognized when it is earned. If a customer pays for goods/services in advance, the company does not record any revenue on…
