What is Depreciation? Depreciation can be defined as the cost reduction of a fixed asset in a manner systematically designed to reduce the value of the asset to zero. Depreciation reflects the wear and tear in assets that are incurred as a result of the usage of the asset. In typical accounting terms, depreciation can

Overview A non-profit entity is considered a public entity that works for public interest without an intention to generate any profit. Non-profit organizations have an underlying objective or a mission to provide benefit to the public. Unlike organizations that are made for profit, non-profit organizations have different ways of representing information on the financial statements.

What are Accounts Payable? During the normal course of the business, several different transactions are completed on a credit basis. This means that the company purchases goods at an earlier date, and then pays the supplier at a later date, after mutual consensus. When this happens, the company is said to have purchased goods on

Definition of Unearned Revenue Unearned Revenue is referred to as deferred revenue. It can be defined as a payment that the company receives against goods and services that are not yet delivered. They are meant to be delivered sometime in the future. In accordance with the accrual principle of accounting, companies are required to record

Tax filing tends to be a challenging task for all organizations to ensure complete compliance and avoid any penalties or IRS Audits. In case of dividend payments, too, organizations are supposed to ensure that they keep a proper track record of the taxes paid in terms of acting as an agent between the government (the

Income Statement was previously referred to as the Trading and Profit and Loss Account. The Trading Account outlays the revenues, and the relevant expenses incurred in selling those goods. This implies that the trading account simply outlines the gross profit of the company. It has two broader components, the revenue part, and the Cost of

Financial statements of the company hold tantamount value in terms of stakeholders, as well as internal decision-makers of the company. Factually, it can be seen that financial statements are resourceful because they hint regarding the profitability and the performance of the company. Therefore, preparation of the financial statements tends to be one of the most

What are purchases? Purchases are categorized as expenses that are incurred by organizations when they procure goods and services, for purpose of reselling, or value-addition followed by reselling. Purchases are categorized as costs incurred by the company to bring goods and services to a sellable condition. Technically, purchases are defined as the act of a

Companies cannot expense assets in one accounting period. This requirement comes from accounting standards. However, it does not imply companies must not include those costs as a part of their profit calculation. At the same time, companies must abide by the matching principle in accounting. This principle requires companies to match expenses to the revenues