Retained earnings is the net amount retained by the entity or corporation over a period of time until the reporting time or fiscal year end. This total amount excludes any dividends that need to pay out to investors.
Appreciation is the increase in the value of assets over a period of time, unlike depreciation. Appreciation occurred due to certain factors like increase in demand, change in inflation rates etc. It’s totally opposite of depreciation. Appreciation is of two types, capital appreciation & currency appreciation.
Income tax rebate can be claimed by resident individuals whether male or female & senior citizens or you can say by all taxpayers.
As the name suggests it’s a tax levied on incomes or earnings by companies & individuals. The government imposes this tax to provide better infrastructure & facilities to citizens also for some Government’s own activities. Income tax needs to be filed every year by individuals & entities. The only sector exempted from income tax is agriculture.
Indirect cost as the name suggests costs those are not directly linked to any product, project, facility etc. are called indirect costs. Examples are administration costs, operations costs, product cost etc. Indirect cost is of two types: fixed cost and variable cost.
An invoice represents the sum due for a service or product provided by a seller. It also called a bill.
Organisation chart represents the company’s structure which typically includes the hierarchy of employees, their roles and relations with each other.
Marginal revenue can be defined as the extra revenue earned by selling one extra unit of product. It’s beneficial for a company as the profit margin increases with same marginal cost. It would be profitable, as long as the rate of marginal revenue remains higher.
The line of credit is a kind of loan agreement between a bank or any financial institution and a customer. A customer can be an individual person, a business entity, non-financial institute, Government etc.
Incremental revenue is the additional revenue incurred from the selling of additional units. Incremental revenue occurs in the below-mentioned situation:
A holding gain is a gain of value that incurred after holding an asset. This gain happens over a period of time and the owner can sell it at any time in exchange for cash or other assets.
A flexible budget changes with production volume. For example, if the production increases then the budget will increase and vice versa.
FIFO stands for “First in First out”. FIFO is an asset & stock management and valuation method. This method is widely accepted by businesses.
Pharmacy stores mainly use this method to manage stock and to check which one needs to be ordered on urgent basis.
Capital expenditure is the total amount of money a business bears in buy and maintain fixed assets like building, furniture, machinery etc.
A debit note issued by a buyer to a seller at the time of returning purchased goods in credit. Debit note is a type of invoice whereas; it’s not a regular invoice.
A deferred expense is a cost that has been incurred but not yet consumed. This cost is termed as an asset until and unless underlying goods & services are consumed.
Demand deposit and term deposit are two different types of deposit accounts either in the bank or any financial institution.
Let’s find out the definition of Demand deposit …
The total amount of interest earned or paid in a year on any financial products, loans etc. is called as the effective annual interest rate. The effective annual interest rate is also known as an effective interest rate.
So, how to calculate effective interest rate? Here is the formula: r = (1+i/n) n -1
r= effective interest rate n = no. of periods i= annual interest rate
Effective annual interest rate calculates while considering compound rates instead of static interest rates.
Cash receipts journal is a special type of ledger which records details of only cash receipts. This ledger reflects in the journal under the category “Cash Sales”. Debit and credit both columns need to be recorded simultaneously. In debit side cash should be debited and in credit side sales need to be entered.
Capital Budgeting is a process which analyzes the frequency of return on long-term & short-term investments to be made by a business. Capital Budgeting is same as Investment appraisal.
Capital Budgeting is an important & complex task as the analysis needs to be accurate to determine the return value of investments.
Carrying cost of Inventory or carry cost is the total cost of managing inventory. It includes tax, opportunity cost, salary, insurance, inventory hold cost etc.
Break-even point is a point where a company faces a win-win situation; Means Company’s all debts are paid and gain no income. There is loss or profit at this point. Break-even point is a term used in financial analysis. A company can have a lower or higher break-even point.
Accounting rate of return also called as Average rate return. Accounting rate return calculates the amount of profit company/entity incurred from the money invested. Accounting rate of return never considers the time value of money.
The formula to calculate accounting rate of return is: Average return during period / Average investment
Average Investment = Book value at the beginning of 1st year + Book value at the end of useful life /2
Average return during period = Profit after tax/ Life of investment
Asset turnover ratio generally used to evaluate company’s performance in a financial year. Asset turnover ratio shows or indicates a company’s efficiency to generate revenues in the form of sales by using available assets.