What is Gross Income? Gross income refers to the total income earned by an individual on a paycheck before taxes and other deductions. It comprises all incomes received by an individual from all sources – including wages, rental income, interest income, and dividends. For example, if the revenue earned by an individual for rendering consultancy…
What is the Chart of Accounts? The chart of accounts is a tool that lists all the financial accounts included in the financial statements of a company. It provides a way to categorize all of the financial transactions that a company conducted during a specific accounting period. Companies often use the chart of accounts to…
What are Overheads? Overheads are business costs that are related to the day-to-day running of the business. Unlike operating expenses, overheads cannot be traced to a specific cost unit or business activity. Instead, they support the overall revenue-generating activities of the business. For example, a vehicle retail company pays a premium rent for business space…
What is Customer Acquisition Cost (CAC)? Customer acquisition cost (CAC) is the cost related to acquiring a new customer. In other words, CAC refers to the resources and costs incurred to acquire an additional customer. Customer acquisition cost is a key business metric that is commonly used alongside the customer lifetime value (LTV) metric to…
What is Average Revenue Per Paying User (ARPPU)? Average revenue per paying user (ARPPU) is a non-GAAP metric used to assess the average revenue generated from a paying customer. Although similar to average revenue per user (ARPU), the fundamental difference with ARPPU is that the calculation of the metric only involves active paying customers and…
What are Equity Issuance Fees? “Equity issuance fees” is the accounting term used to reference the costs a company incurs when they introduce securities into the market. A company commonly introduces shares of capital stock when it’s looking to grow its business, expand its operating footprint, and establish a broader base of shareholders. The Fees…
What is Average Revenue Per User (ARPU)? Average revenue per user (ARPU), also known as average revenue per unit, is a non-GAAP metric commonly used by digital media companies, social media companies, and telecommunications companies to assess their revenue-generating capabilities at the per-customer level. Formula for Average Revenue Per User The formula for average revenue…
What is Reconciliation? Reconciliation is the process of matching transactions that have been recorded internally against monthly statements from external sources such as banks to see if there are differences in the records and to correct any discrepancies. For example, the internal record of cash receipts and disbursements can be compared to the bank statement…
What are Threats to Auditor Independence? In the auditing profession, there are five major threats that may compromise an auditor’s independence. Before an audit engagement, it is crucial that each member of the audit team review the five threats to independence. If an auditor is exposed to a certain threat, he or she should either…
What are Unexpected Earnings? “Unexpected earnings” is the term used in accounting to address the difference between a company’s actual earnings for a period and the earnings they were expected to generate. It is also sometimes referred to as an “earnings surprise.” The “unexpected” aspect can be either positive – meaning the company generated more…
