The sunk cost fallacy is the belief that one should continue investing in a project as long as they have already invested a large amount of money into it, regardless of whether or not it is rational to do so. This fallacy is often seen in business, where companies will continue to pour money into … Read more
An allowance for doubtful accounts is an estimate of the amount of money that a company will ultimately lose on its bad debts. This estimate is used to adjust the value of the accounts receivable on the company’s balance sheet. The allowance for doubtful accounts is a contra account to accounts receivable, which means that … Read more
Next In, First Out (NIFO) is an inventory valuation method which assumes that the most recent items to be added to inventory are the first items to be sold. This method is often used in businesses where inventory turns over quickly and it is difficult to track individual items. What is the rule of FIFO? … Read more
An accounting convention is a standard way of recording and reporting financial information. The main types of accounting conventions are generally accepted accounting principles (GAAP), international financial reporting standards (IFRS), and industry-specific standards. What are the 14 concepts of accounting? 1. Accounting is the process of recording, classifying, and summarizing financial transactions to provide information … Read more
Prime cost is the direct cost of production, consisting of raw materials, direct labor, and overhead. It excludes indirect costs, such as selling and administrative expenses. In accounting, prime cost is the total direct cost incurred in manufacturing a product. This includes the cost of raw materials, direct labor, and overhead. It excludes indirect costs, … Read more
Fixed capital refers to the physical capital used in the production of goods and services. This includes buildings, machinery, and equipment. It also includes land, if it is used for production purposes. Fixed capital is also known as “physical capital.” What are the two types of fixed assets? The two types of fixed assets are … Read more
“Business Banking” refers to the financial services provided by banks to businesses. These services can include business checking and savings accounts, loans, lines of credit, and merchant services. Businesses use these services to manage their finances, grow their businesses, and make purchases. What are basic terms? There are many basic accounting terms, but some of … Read more
Amount Realized Definition The amount realized from the sale of a security is the total cash received from the transaction, minus any brokerage fees or commissions. For example, if an investor sold 100 shares of stock for $10 per share, and the broker charged a $15 commission, the amount realized would be $950. The amount … Read more
Gross working capital refers to a company’s current assets minus its current liabilities. The term is used to describe the amount of a company’s cash and other liquid assets that are available to meet its short-term obligations. A company’s current assets include cash, accounts receivable, inventory, and other assets that can be converted into cash … Read more
Held-for-Trading. Available-for-Sale Securities vs. Held-for-Trading How are available for sale securities reported? Available for sale securities are reported on the balance sheet as assets. The balance sheet is a financial statement that reports a company’s assets, liabilities, and equity at a specific point in time. Available for sale securities are reported on the balance sheet … Read more
