Accounting

A:

A capital expenditure includes all costs incurred on the acquisition of a fixed asset along with subsequent expenditures that increase the asset's earning capacity, while revenue expenditure only includes costs that are aimed at maintaining fixed assets and not enhancing earning capacity. The distinction between capital expenditure and revenue expenditure is important because only capital expenditures are included in the cost of a fixed asset.

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  • What is a trade discount?

    Q: What is a trade discount?

    A: According to the Accounting Tools website, trade discounts are provided to retailers by wholesalers for goods. The retailer can then charge the full manufacturer suggested retail price for the goods, using the discounted amount as profit.
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  • What is the ordinary annuity formula?

    Q: What is the ordinary annuity formula?

    A: The ordinary annuity formula appears as "P = r (PV) / 1 - (1+R) - n." The formula is used to calculate the periodic payment against an annuity when the rate and payments remain the same, with the first payment exactly one period away.
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  • What is the main objective for any business?

    Q: What is the main objective for any business?

    A: Under traditional business theory, the main objective of any business is to make a profit for its owners. Only those business activities that result in the highest profit margin meet this basic objective.
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  • What is the definition of "costing"?

    Q: What is the definition of "costing"?

    A: In accounting terms, costing refers to a system of calculating the amount of money it takes to produce goods or operate a business. Generally, costs include variables like cost of labor, cost of materials, cost of distribution and selling, taxes and administrative costs.
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  • What is the meaning of gross pay?

    Q: What is the meaning of gross pay?

    A: An employee’s gross pay is the money earned from working before taxes and other deductions. An employee’s gross pay includes the money they earn from commissions, overtime and tips.
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  • Why is finance important to a business?

    Q: Why is finance important to a business?

    A: Finance helps businesses achieve their goals by providing the funding they need to achieve them. Without funding, businesses cannot be successful.
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  • What is the advantage of an accounting information system?

    Q: What is the advantage of an accounting information system?

    A: The main advantages of an accounting information system are the increased speed of processing the numbers, efficient organization, and classification and safety of inputted data. This contrasts the manual evaluation of information, which involves writing out the data by hand and doing time consuming calculations.
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  • How do I complete a petty cash book?

    Q: How do I complete a petty cash book?

    A: To complete a petty cash book, keep a running tally of cash in the account, deposits, withdrawals and dates. The petty cash book is a summary of trivial expenses. It can take the form of a ledger sheet or a spreadsheet, such as a Microsoft Excel file. Typically a business maintains a petty cash account for minor expenses, such as meals, flowers, stamps and office supplies, according to Accounting Tools.
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  • What are sundry expenses?

    Q: What are sundry expenses?

    A: Sundry expenses are costs which may be relatively small or occur infrequently and are therefore not assigned to a specific ledger group. They are also known as miscellaneous expenses and are classified together as a group when they are presented in an accounting statement.
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  • What is an invoice used for?

    Q: What is an invoice used for?

    A: An invoice is a document sent by a business to a client denoting an obligation to pay for goods or services. One primary purpose is to communicate the requirement to pay for the goods. The other is to document the transaction as an accounts receivable in its accounting system until the bill is paid.
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  • What are some advantages and disadvantages of trade credit?

    Q: What are some advantages and disadvantages of trade credit?

    A: The greatest advantages of trade credit to businesses include the availability of zero percent financing and potential discounts on needed goods, while the biggest disadvantage is the risk of late payment fees. Trade credit is an arrangement between a supplier and a business to receive goods or services while delaying cash payment until a later date.
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  • Why is accounting called the language of business?

    Q: Why is accounting called the language of business?

    A: Accounting is the language of business because it helps people, both internal and external, to understand what is happening inside of s business. Just as language is universal to people, so is accounting in business. Regardless of where in the world a business is located, financial information is interpreted in the same way.
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  • Why is financial reporting important?

    Q: Why is financial reporting important?

    A: Financial reporting is important because it helps to ensure that companies and organizations comply with relevant regulations and, if it is a public company, shows investors the current financial health of a company. Investors use need this data to make investment decisions, voice concerns and vote on issues at shareholder meetings.
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  • What is income from continuing operations?

    Q: What is income from continuing operations?

    A: Income from continuing operations is ongoing earnings from normal business activity. It is what a company can expect from future earnings, such as if a company plans to continue to produce shoelaces and buttons but no longer zippers, earnings from the zippers is not calculated as income from continuing operations.
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  • What is the difference between accounting and bookkeeping?

    Q: What is the difference between accounting and bookkeeping?

    A: Bookkeeping involves recording basic accounting transactions such as recording invoices from suppliers, paying suppliers, processing payroll and recording cash received from customers. Bookkeeping is a subset of accounting. Accounting is usually more involved and includes activities such as creating financial statements, creating budgets and compiling tax returns.
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  • What are examples of liquid assets?

    Q: What are examples of liquid assets?

    A: Some examples of liquid assets include cash held in a safe deposit box, checking accounts, saving accounts, money market accounts, U.S. Treasury bills and some types of retirement accounts. An asset is liquid if you can quickly turn it into spendable cash without a significant penalty or loss in the underlying value.
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  • What is strategic management accounting?

    Q: What is strategic management accounting?

    A: According to a Houston Chronicle article by Grant Houston, strategic management accounting is a form of business inquiry that combines the accounting criteria of an organization with external factors that influence the organization, such as industry trends in costing, pricing, market share and resources. The goal of strategic management accounting is to provide companies with a comprehensive means to analyze future business decisions. It is more complex than management accounting.
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  • What is a goods received note?

    Q: What is a goods received note?

    A: A goods received note is a receipt given to the supplier to confirm delivery or acceptance of goods by the customer. After the supplier receives this note, a payment invoice is sent to the customer.
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  • How long is the CPA exam?

    Q: How long is the CPA exam?

    A: The CPA exam lasts a total of 14 hours. It has four different sections, with two sections lasting four hours and two sections lasting three hours.
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  • What is a sales analysis report?

    Q: What is a sales analysis report?

    A: According to the Houston Chronicle, a sales analysis report is a report that shows the trends that occur in a company's sales volume over time. It shows whether or not a company's sales are increasing or decreasing.
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  • What are the benefits of using an accrual-basis income statement?

    Q: What are the benefits of using an accrual-basis income statement?

    A: An income statement that uses accrual-basis accounting methods recognizes losses more quickly, avoiding the distortion that sometimes occurs with cash-basis accounting, delaying the recognition of losses for several years. For some businesses, this method provides a more accurate picture of profitability.
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