STANDARD COSTING
Standard costing is a technique that establishes predetermined estimates of the cost of products and services and compares these costs with the actual costs as they incur. Standard costing can be considered as a yardstick to measure the efficiency with the actual cost incurred. Hence, standard costing is system of costing which makes a comparison between the standard cost of each product or service with...
Make Or Buy Decisions
Make Or Buy Decisions
A Company may be producing a product by itself or receive an offer from an outside supplier to supply that product. Similarly, a firm may be buy a product from outside or may make/produced/manufacture that product in the firm itsel...
Continuous Audit: Meaning, Advantages & Disadvantages Of Continuous Audit And Steps for Effectiveness
Continuous Audit
What is a Continuous Audit?
Continuous audit or a detailed audit is an audit which involves a detailed examination of books of accounts at regular intervals i.e. monthly, quarterly or yearly. The auditor visits clients at regular intervals during the financial year and checks each and every transaction.
An auditor checks the profit and loss account and the balance sheet at the end of the year. A continuous audit is...
Computerized Accounting System VS Manual Accounting System
Differences Between Computerized Accounting System And Manual Accounting System
Computerized System:
1. Starts with the account balances in the ledger at the beginning of the period.
2. Analyzes and classifies business transactions by type. Access appropriate menus for data entry.
3. Computer automatically posts transactions as a batch or when entered on-line.
4. The unadjusted balance are available immediately after each posting.
5. The trial...
Taxation: Basis Period Of Assessment, Capital Allowance And Loss Relief
The following topics will be discussed in this series, those topics are: -
a. Basis period of assessment
b. Capital allowance
c. Loss relief.
Assessable Profit
The accounting profit arrived at in the trading, profit & loss account is not usually the same as “tax profit”. This is because...
Taxation: Capital Allowance And Loss Relief
To read the previous article on basis period of assessment, please click here
CAPITAL ALLOWANCE
Definition
Capital allowance are a form of relief granted to any company which has incurred qualifying capital expenditure during a basis period in respect of fixed assets in use at the end of the basis period, for the purpose of a trade or business. Capital allowance is granted in lieu of depreciation. Capital allowance covers initial allowance,...
Difference Between Internal And External Recruitment
INTRODUCTION
Internal recruitment is concerned with recruiting people internally through transfer and promotion and external recruitment is associated with recruiting people externally through advertisement, employees referrals and other external sources.
A comparison between internal recruitment and external recruitment is as follows:
1....
External Recruitment: Sources, Methods, Advantages And Disadvantages
INTRODUCTION
External sources refer to recruiting employees from outside the organization. In fact, a pool of qualified candidates lie outside the organization. Firms cannot always get all required members from their current staff. In such a situation, an arrangement is made to attract qualified candidates from other sources.
An organization...
Internal Recruitment: Aspects, Methods And Advantages
Internal Sources Of Recruitment
Introduction
Internal recruiting refers to recruiting employees from within the organization. In deciding requirement of employees, initial consideration should be given to a company's current employees, which is concerned with internal recruitmen...
Recruitment: Definition, Processes And Factors Affecting It
INTRODUCTION
Recruitment is a process of identifying and preparing potential candidates to fill the application form. It is an initial phase of employment process. Recruitment inspires the potential candidates to fill the application form for employment. After estimating the need and requirement of human resource in an organization, the HR manager ...
Job Evaluation: Importance And Processes
JOB EVALUATION
Introduction
Job evaluation is the process of establishing values of
different jobs. Job evaluation provides a basis for ranking different jobs and developing a pay structure for them. Evaluation of job is the
process of describing the duties, authority relationships, skills,
condition...
Accounting Treatment Of Consignment
Valuation Of Unsold Stock In Accounting For Consignment Of Goods
Introduction
The stock lying in the hands of consignee at the end of accounting year is valued at cost or market price whichever is less. The cost of unsold stock or closing stock should be valued at cost to the consignor plus proportionate non-recurring expenses incurred by the consignor and...
Introduction To Consignment Account
INTRODUCTION
Maximization of profit is the main objective of each and every business. For the fulfillment of this objective, the firm has to increase the sale of goods. For this purpose, the firm has to push its sales by all possible means. The sales can be increased by opening different branches within the territory or abroad. Opening a branch is a costlier affair....
Preparation Of Liquidator's Final Statement
INTRODUCTION
The liquidator is required to keep proper books to record receipt and payment which is known as liquidator's final statement, in every mode of winding up. The liquidator has to submit a report together with the audited final accounts to the CRO. The liquidator has to submit the statement to the court in the case...
Meaning Of Liquidation, Reasons For Liquidation And Calculation Of Liquidator's Remuneration
LIQUIDATION
Meaning Of Liquidation
A company is an artificial person or body created by law and only the law can dissolve it. The legal procedure by which the corporate life of a company can be brought to an end is known as liquidation. The liquidation of company is defined as " the termination of legal existence of company by closing its business". Liquidation is...
Accounting Treatment For Partner's Salary And Commission, Partners' Interest On Capitals And Partners' Drawing Accounts
Accounting Treatment For Partner's Salary And Commission
Introduction
We all know that no partner can entertain any salary or commission unless it is provided by the partnership deed. The salary or commission to a partner could be allowed to her/him if she/he does the most of the work of the firm according to the agreement...
Partnership Businesss And Partnership Agreement
PARTNERSHIP BUSINESS
Introduction
The traditional form of business organization is sole proprietary system. Because of weakness in this form (i.e one man talent, capacity, knowledge, skill, qualification, experience and the like), the partnership form of business organization commences in the world of business. In case of sole proprietorship, single person is absolutely...
Meaning, Needs And Methods Of Valuation Of Shares
VALUATION OF SHARES
Concept And Meaning Of Valuation Of Shares
Introduction
Every share has its value printed in its front. Such a value is called as par value or face value of shares. The face value is assigned by the promoters of joint stock company and is given in the memorandum of associatio...
Cost Volume Profit (C.V.P) Analysis
COST VOLUME PROFIT ANALYSIS
Introduction
Cost Volume Profit (C.V.P) analysis is the analysis of the relationship between cost and volume of activities and the effect of the relationship on profit. Managers can use the concept of cost-volume-profit analysis to forecast volume of activity at which the firm will break-even or attain target profits. CVP analysis...
Bad Debts And Provision For Doubtful Debts
BAD DEBTS AND PROVISION FOR DOUBTFUL DEBTS
Bad debts
The amount of the debtors which cannot be recovered is known as bad debt. At the end the accounting year, the amount of bad debt is shown as an expense in the profit & loss account and deducted from the debtors. The double entry for recording the bad debt is:
...
Company Accounts
COMPANY ACCOUNTS
Introduction
Company account is a fiinancial information that a company is required to produce at the end of every year, including details of its profits or losses.
The capital of a limited company is divided into shares. A person can become the member of a company if he buys a share, then he is known as the shareholder. If the shareholder...
Manufacturing Accounts
INTRODUCTION TO MANUFACTURING ACCOUNTS
Manufacturing of goods is the transformation of raw materials into finished goods. A manufacturing organization will acquire raw materials, engage labour and other inputs necessary to change the raw materials into finished goods. Manufacturing accounts are prepared to ascertain the cost of goods manufactured during the financial...
Concept Of Audit Program
Concept Of Audit Program
After selecting senior and junior staffs, allocating the jobs to them, mentioning when to start, how to do the work etc., an auditor prepares a plan. This plan is called audit program. An auditor needs to include all the procedures in written form, objectives of each sector and all directions which are to be given to the staff members which...
Partial Audit: Objectives, Advantages and Disadvantages
PARTIAL AUDIT
Introduction
A partial audit is an audit that is conducted considering the particular area of accounting. Under partial audit, audit of the whole account is not conducted. Only the audit of the particular area where the owner thinks it is essential to conduct an audit will be conducted. Normally, business transaction is concerned with cash, debtor,...
Concept Of Single Entry System And Incomplete Records
SINGLE ENTRY AND INCOMPLETE RECORDS
Introduction
Single entry system is an incomplete way of recording financial transactions. This system does not record two aspects (debit and credit) or accounts of all the financial transactions. Also, this system has no established or fixed set of rules in recording the financial transactions of the busines...
Concept Of Delegation Of Authority
DELEGATION OF AUTHORITY
Delegation is the process of assigning specific works to individuals within the organization and giving them the right to perform those works. Delegation of authority is, of course, one of the most significant concepts in management practices that affects managerial functions. Management is the art of getting things done through others and delegation means getting things done through the subordinate...
Materials Control: Definition, Objectives, Needs and Essentials
Material Control
The systematic control over the purchase, store and consumption of materials is what we refer to as Material control. It helps in maintaining a regular and very timely supply of materials by avoiding both over and under-stocking. It ensures that the right quantity and quality of materials is available to the organization at the right tim...
Financial Statement Analysis: Its Objectives, Methods, Users and Limitations.
Concept Of Financial Statement Analysis
Financial statement analysis is an analysis which highlights the essential relationship in the financial statements. Normally, financial statement analysis focuses on the evaluation of past performances of the business enterprise in terms of profitability, liquidity, operational efficiency and growth potentiality. Financial statements analysis, however, includes the methods used in assessing as well as interpreting...
Hire Purchase Accounting, How It Differs From Installments system And Its Accounting Entries
Hire Purchase Accounting
Introduction
Buying and selling of goods as for the system of hire purchase is different from the cash sales and credit sales. As for cash sales, the buyer pays a sum to the seller and the ownership is immediately passed along with the goods while as for credit sale, the payment is made in future. In the two cases the ownership of goods pass on the buyer....
Taxation Part 3
If you missed the first two parts, you can read them here by clicking Part 1 and Part 2.
TYPES OF TAX
There are two major types of tax. These are direct tax and indirect tax.
DIRECT TAX
Direct tax as the simply implies refers to the type of tax imposed directly on income of individuals or organizations by the government or its agencies. Such income would include wages, salaries, profits, rents and interests. The burden of direct tax is borne by...
Taxation part 2
If you missed part 1, read it here
PROBLEMS ASSOCIATED WITH TAX COLLECTION
Some of the difficulties encountered by tax collectors include in Nigeria:
1. Failure to fulfill civic responsibilities: Many people do not fulfill their civic responsibilities of paying tax as at when due.
2. Failure to declare real income: Many workers and corporate bodies, especially those in private firms, do not declare their real incomes.
3. Failure to meet people's...
Taxation part 1
Introduction
Taxation may be defined as the act or method of imposing a compulsory levy by the government or its agency on individuals and firms or on goods and services.
Tax, on the other hand, is defined as a compulsory levy imposed by the government or its agency on individuals and firms or goods and service...
National Or Public Debt, Reason Why Government Borrow and The Terms Asscociated With Budget Debt Servicing
Introduction
National or public debt refers to to the debt a country owes to its citizens or other countries or organizations such as the International Monetary Fund (I.M.F) and the World Bank. The debt which a country owes to its citizens is know as internal debt while the debt owed to foreign governments and organizations is known as external deb...
Balanced and Unbalanced Budget, Ways of financing Budget Deficit
Definition Of Budget
A budget may be defined as a financial statement of the total estimated revenue and the proposed expenditure of a government in a given period of time, usually a year.
Importance or uses of budget
The budget of a country is used to achieve the following objectives:
1. Allocation of resources: Budget is usually use to allocate resources from one sector of the economy to anothe...
Terminologies associated with inflation and Inflation in Nigeria
TERMINOLOGIES ASSOCIATED WITH INFLATION
1. Inflationary gap: Inflationary gap refers to an economic situation in which the total demand in the economy exceeds the total supply of goods and services available to satisfy demand. Inflationary gap is calculated as the difference between the total amount of money available for spending and the total money value of goods and services available to meet the demand. The greater the inflationary gap, the...
Company Amalgamation and Revaluation Method
TERMINOLOGIES ASSOCIATED WITH INFLATION
1. Inflationary gap: Inflationary gap refers to an economic situation in which the total demand in the economy exceeds the total supply of goods and services available to satisfy demand. Inflationary gap is calculated as the difference between the total amount of money available for spending and the total money value of goods and services available to meet the demand. The greater the inflationary gap, the greater...
Efficiency of Labour
INTRODUCTION
Efficiency of labor may be defined as the ability of labor to increase output without increasing the quantity of labor. Increase in efficiency is normally expressed in terns of increase in output of labor within a shorter period of time without any fall in the quality of goods and services produced. If a labour is efficient, the quality of goods and services produced will be hig...
Concept of labour and factors affecting the size of abour force
INTRODUCTION
Labour can be defined as all human efforts of any kind, either skilled or unskilled, mental or manual, directed towards the production of goods and services.
Market, on the other hand, is defined as a place or any means of communication whereby the sellers and buyers can communicate with one another, to exchange goods and services at prices determined by the market force...
Basic Economic Problems: What to produce, how to produce, for whom to produce and effiency of Resource Use.
INTRODUCTION
Basic economic problems refer to the problems people encounter in the society while attempting to satisfy their numerous wants with the limited resources available to them. These basic economic problems of society include what to produce, how to produce, for whom to produce and efficiency of the resources used or efficient use of resource...
Effects And Control of Inflation
Inflation
has both positive and negative effects:
The
Positive effects
Reduction
in burden of debt: During
inflation, debtors gain because there is too much money in
circulation, which will enable them to pay their debts with ease.
Higher
profit margin: Because producers are selling their goods at higher
prices, this will lead to higher profits.
Higher
tax yield: As a result of high volume of money in circulation,
government is able...
Definition, Types And Causes of Inflation
INTRODUCTION
Inflation
may be defined as the persistent rise in the general price level of
goods and services. Inflation occurs when the volume of purchases is
permanently running ahead of production, with too much money in
circulation chasing too few goods.
TYPES
OF INFLATION
There
are four main types of inflation. These ar...
Limitations To The Scale of Production or To The Growth of Firms.
LIMITATIONS
There are some limitations affecting
the growth of firms or the scale of production. Some of which are:
Extent of the market: When there
is a high demand for certain products of a firm, this will motivate
the firm to produce more goods so as to expand.
Availability of capital: The
availability of adequate capital and other resources will enable a
firm to expand and produce more goods but when these resources are
no more available,...
Entrepreneur As A Factor of Production
INTRODUCTION
An entrepreneur
can be defined as the factor of production that co-ordinates and
organizes other factors of production (Land, Labour and Capital) in
order to produce goods and services. The entrepreneur bears the risks
and takes his capital in setting up the business with the aim of
obtaining maximum profi...
Capital As A Factor Of production
INTRODUCTION
Capital can be defined as man-made assets used in production. In other words, capital refers to man-made goods or wealth used in the production of other goods and services. It may also be defined as the stock of previous wealth invested in order to produce future wealth.
Capital, when properly combined with other factors of production, produces goods and service...
Labor As A Factor Of Production
LABOR
Labor as a factor of production is defined as all forms of human efforts put into or utilized in production. It also refers to man's mental and physical exertions generated in the process of production.
Human beings provide the necessary labor which combines with other factors to provide goods and service...
Land As A Factor Of Production
INTRODUCTION
Factors of production refers to agents, resources or components that are combined together to produce goods and services. We have only four factors of production which are:
Land
Labor
capital
Entrepreneur
LAND
Land can be defined in economics as a free gift of natur...
Importance And Factors That Determine The Level Of Production
FACTORS THAT DETERMINE THE LEVEL OF PRODUCTION
1. Amount of capital: The amount of capital available to a producer determines the volume of production. The greater the amount of available capital, the higher the volume of production and vice vers...
Know More About Theory Of Production
INTRODUCTION
Production can be defined as the various economic activities aimed at the creation of goods and the distribution of the goods and services to the final consumers for the satisfaction of human wants.
Production can also be defined as the creation of utility. All goods and services must possess utility. That is to say that they must be capable of satisfying certain human want...
Divisions of Subsidiary Books
This is the continuation of the the previous post. To read the Part, click here
The Subsidiary books are divided into six, which are sales day book, purchases day book, sales return, purchases return, general journal and cash book.
1. SALES DAY BOOK
It is a book of original entry in which credit sales are entered or recorded before posting to the ledgers. In the sales day book, cash transactions should and must not be recorde...
Subsidiary Books And Source Documents
INTRODUCTION
There are two books of accounts, namely:
1. Principal books.
2. Subsidiary books.
Let it be noted that the two books are very necessary in the recording of financial transactions. All transactions must must pass through the books of accounts.
The subsidiary books are explained below while you are to click here for the the principal book...
Book Keeping And Accounting
INTRODUCTION
Accounting is the process of recording, classifying, selecting, measuring, interpreting and communicating financial data of an organization to enable interested users make decisions.
Accounting as the process of recording, identifying, analyzing, classifying, summarizing, measuring and communicating economic information to allow informed decisions by the users of the informatio...
How To Prepare Income Statement Using Principles of Marginal And Absorption Costing
MARGINAL COSTING
The marginal cost of an item is its variable cost. The marginal
production cost of an item is the addition of its direct materials cost,
direct labour cost, direct expenses cost and variable
production overhead cost. The higher the volume of production, the higher will be the total variable cost of sales.
Contrarily, fixed costs are costs that remain unchanged in the short run, regardless of the quantity of production and ...
History of Accounting
There is no very correct record as to when accounts started. However, but information that is available suggests that record keeping is as old as man. We can link its starting point to the merchants in the Babylonia and Assyrian civilizations, about 4000 years B....
Depreciation of Fixed Assets
INTRODUCTION
Fixed assets are assets which are of permanent nature and they create revenue for the business. They can last for a long period of time. Fixed assets of a business lose value or are said to depreciate with usage. Depreciation can be defined as a reduction in the economic service potentials of an asset as a result of wears, tears, usage and passage of time. It can also be defined as the permanent and continuous decrease in the quality,quantity...
The Principal Book: LEDGER
The ledger is the final destination of all transactions in the subsidiary books. It is the most important book of account. It can be defined as a book which contains a permanent record of all transactions in classified and summarized form. The ledger is used for the double entry book keepin...
Accounting For Non-Profit Making Organization
Commercial and Industrial organizations are set up principally to make profit, but non-profit making organizations like societies, clubs and charitable bodies are not profit oriented, but to provide services to their members. In place of trading, profit and loss account found in the trading concerns, such associations prepare the following accounts to show the financial affairs to their member...
Money and Capital Markets
The money market is a component of the financial market for assets being used for short-term borrowing of funds by government and corporate entities. This means that the money market is used for buying and selling of financial instruments with original maturities with a period of one yea...
How To Prepare Bank Reconciliation Statement
INTRODUCTION
An organization will record money paid into the bank and the sums drawn from the bank with cheques in the cash book. Then again, the bank will record all the transactions in its own book. The book prepared by the bank showing the transactions between it and the customer is called "Bank Statement...
The Final Accounts Of A Sole Trader
The trading account is prepared to show the gross profit or gross loss for the accounting period. It is prepared to conform to the rules of double entry. Since it contains the result of operation of a company or a business over a perio...
Some Financial Ratios In Accounting You Need To Know
Financial Ratios
Financial Ratios
According to businessdictionary.com,
financial ratio is a financial analysis comparison in which certain financial
statement items are divided by one another to reveal their logical
interrelationships. Some financial ratios are called primary because they
indicate the fundamental causes underlying a company`s strengths and
weakness...
Correction Of Errors in Accounting
Errors can be defined simply as mistakes made in the preparation of accounts. Errors can be categorized into two, namely:
Errors that will affect the totals of the trial balance.
Errors that do not affect the totals of the trial balance.
For the purpose of simplicity, we shall treat the two categories differentl...
Ethics of Accounting
Ethics means morality. It deals with human conduct in relation to what is morally good and bad, right and wrong. It is applicable to values for decision making. These values include fairness, honesty, respect, responsibility, integrity and compassion.
Accounting ethics in the field of accounting means the guidelines that a professional needs to follow while practicing accounting. Or it is the distinct guidelines for a business or company...
Public Sector Accounting
Public sector accounting is the process of recording,summarizing, analyzing and interpreting the financial transactions of the government. Government accounting shows the receipts and payments of public funds in all levels of governmen...
Business: Its definition, importance, significance and classifications
Wikipedia defines business that "A business, also known as an enterprise, agency or a firm, is an entity involved in the provision of goods and/or services to consumers". It is an organized and systematized activity for profit. It deals with activities of people chasing a common goa...
Deparmental Account
In some organizations where operations are divided into separate departments, the trading result of each department must be ascertained. The criteria for identifying
the departments in an examination
question is always
the separate sales/work-done
revenu...
Accounting Concepts and Conventions
Accounting concepts and conventions
The following concepts and conventions are the principles guiding the preparation of accounting statements. If any of them is disregarded, it might affect the entire nature financial accounti...
Job and Batch costing
Job costing
According to CIMA, job costing is a form of specific order costing which applies where work is undertaken to customers` special requirements and each other is of comparatively short duration. The work is usually carried out under a roof or in a factory and moved through many processes and operations as...
Business Organization
INTRODUCTION
A business, also referred to as company, can be defined as a legal person or entity created
by the association of a number of people in accordance with the law for the
purpose of pooling their capital together in order to set up a business venture. It is a legal entity wi...
Money And Banking
(1) Money
Money can be defined as any commodity that is generally acceptable as a medium of exchange
and measure of value. It enables one to trade what he has for what he
wants. That is the conventional definition of money and it emphasizes
the basic functions of money are medium of exchange and measure of
value. However, money is highly important so as to maintain maintain good health.
...
