Accounts Receivable

Difference between accounting and bookkeeping

A very common question is whether or not there is any difference between accounting and bookkeeping. Our explanation will start with bookkeeping because it is a subset of the larger topic of accounting. Bookkeeping Bookkeeping is the recording of basic accounting transactions such as: Invoicing customers. Recording invoices from suppliers. Recording cash receipts from customers. Paying suppliers. Recording changes in inventory. Processing payroll. Processing petty cash transactions. These transactions are mechanical because the bookkeeper follows a prescribed set of procedures on a repetitive basis to…

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Accounting Research

Accounting research

Accounting research is research on the effects of economic events on the progress on accounting. It also includes the effects of the reported information on economic events. A broad range of research areas includes financial accounting, management accounting, auditing and taxation. Overview Accounting research is carried out by academic researchers and practicing accountants. Academic accounting research addresses all areas of the accounting profession. It examines issues by using the scientific method and it uses evidence from a variety of sources that includes financial information, experiments,…

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Net Profit

Net Profit

Net profit is also called the bottom line, net income or net earnings. It is the measurement of profitability of a venture after accounting for all costs. Net profit is equal to the gross profits minus overheads minus interest payable for the accounting period. A common synonym fir net profit when discussing financial statements is the bottom line. This term comes from the traditional appearance of an income statements which shows the net profit o the bottom line of the report. Put simply, net profit…

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Social Accounting

Social Accounting

What is social accounting? Social accounting is the process of communicating the social and environmental effects due to the business’ economic actions to the society and to people who find a huge interest in the business. It is mostly used in the aspect of business or corporate social responsibility. Any organization such as a NGO, charity or the government may use it. This method may also be used with Community-Based Monitoring. The emphasis is put on corporate accountability but the term is also used an…

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Net Profit

Capital Surplus

What is Capital Surplus Capital surplus is the additional paid-in excess of par value that investors pay when they are buying shares from the issuing entity. The term is not commonly used because people use additional paid-in capital in the accounting literature. Explanation of Capital Surplus A par value was originally the price at which a company’s shares were offered for sale, so that investors would know that the company will not sell their shares for under the par value. In some stated in the…

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Job Costing

Job Costing

Job costing involves the accumulation of the costs of materials, labor, and overhead for a specific job. It is an invaluable tool for tracing jobs and examining them to see if their costs can be reduced in later jobs. An alternative use would be to determine if any excess costs can be billed to the client. These costs are recorded in ledger accounts throughout the lifetime of the job or batch. It is then summarized in the final trial balance fore the job cost or…

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Social Accounting

Variance Analysis

What is a variance analysis? The variance analysis is present in managerial accounting. It refers to the investigations of differences from financial performance from the standards defined in their organizational budgets. Explanation Variance analysis typically involved the isolation of different causes for the variation in income and expenses over a given period from the budgeted standards. Types of variances These are the main types of variances in use: Purchase price variance: It is the actual price paid for the materials used in production minus the…

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Chart of accounts

Chart of accounts

A chart of accounts is a list of the accounts identified and made available for recording transactions in the general ledger. The company has the flexibility to change the chart of accounts to suit its needs the best, including adding or removing accounts where needed. Which accounts are used? Within the chart of accounts, you will find that the accounts are generally listed in the following order. Balance sheet accounts Income statement accounts Assets Liabilities Owner’s equity Operating revenues Operating expenses Non-operating revenues and gains…

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Theory of Constraints

Theory of Constraints

The Theory of Constraints is a methodology for identifying the most important limiting factor that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. In manufacturing the restraint can be referred to as a bottleneck. The Theory of Constraint uses a scientific approach to improvement. It hypothesizes that every complex system, consists of multiple linked activities. Each one of them acts as a constraint on the entire system. Which methods does the…

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Job Costing

Throughput Accounting

Throughput accounting is a principle-based and simplified version of management accounting. It provides management with decision support information to improve the enterprise’s profitability. It is relatively new in management account. Throughput accounting uses an approach that identifies factors that limit an organization from reaching its goal, then focuses on simple but effective measures that drive behavior in key areas towards reaching certain organization goals. This form of accounting was proposed by Eliyahu M. Goldratt as an alternative to the traditional cost accounting. Due to this,…

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