What is the Matching Principle? The matching principle is an accounting concept that dictates that companies report expenses at the same time as the revenues they are related to. Revenues and expenses are matched on the income statement for a period of time (e.g., a year, quarter, or month). Example of the Matching Principle Imagine…
What is Share Capital? Share capital (shareholders’ capital, equity capital, contributed capital, or paid-in capital) is the amount invested by a company’s shareholders for use in the business. When a company is first created, if its only asset is the cash invested by the shareholders, the balance sheet is balanced with cash on the left…
What are Startup Valuation Methods? Valuing a startup is one of the most challenging tasks often required by financial analysts. In this article, we will discuss how to value a startup as well as some of the more popular valuation methods. Startups, in the most general sense, are new business ventures created by an entrepreneur….
What is Advanced Technical Analysis? Advanced technical analysis usually involves using either multiple technical indicators or a rather sophisticated (i.e., complex) indicator. “Sophisticated” does not necessarily mean “better” – it just means more difficult to calculate than, say, an arithmetic average. Technical analysis is a means of interpreting the price action over time of a…
What is Bookkeeping? Overview and Why It Matters Bookkeeping involves the recording, on a regular basis, of a company’s financial transactions. With proper bookkeeping, companies are able to track all information on their books to make key operating, investing, and financing decisions. Bookkeepers are individuals who manage all financial data for companies. Without bookkeepers, companies…
What are Taxation of Partnerships (754)? The analysis of inside basis vs. outside basis affects the taxation of a partnership. A partnership occurs when two or more parties cooperate to advance their mutual interests. This is done when each party contributes to carrying on a trade or operation of a business and divides its assets…
What is the Consolidation Method? The consolidation method is a type of investment accounting used for incorporating and reporting the financial results of majority-owned investments. This method can only be used when the investor possesses effective control of the investee or subsidiary, which often, but not always, assumes the investor owns at least 50.1% of…
How is a Deferred Tax Liability or Asset Created? A deferred tax liability (DTL) or deferred tax asset (DTA) is created when there are temporary differences between book (IFRS, GAAP) tax and actual income tax. There are numerous types of transactions that can create temporary differences between pre-tax book income and taxable income, thus creating…
What is Last-In First-Out (LIFO)? Last-in First-out (LIFO) is an inventory valuation method based on the assumption that assets produced or acquired last are the first to be expensed. In other words, under the last-in, first-out method, the latest purchased or produced goods are removed and expensed first. Therefore, the old inventory costs remain on…
