Inventory Write-Down: An Essential Guide for Businesses
An inventory write-down is a reduction in the value of a company’s inventory due to a decrease in its net realizable value (NRV), which is the estimated selling price of the inventory minus any costs associated with its sale. It reflects a loss in the value of the company’s inventory and is a non-cash expense that […]
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Profit Margin vs Markup: Differences & Calculations
Margin and markup are both important concepts in business and finance that are used to determine profitability and set prices. Margin refers to the percentage of profit a business makes on the sale of a product or service. It is calculated by subtracting the cost of the product or service from its selling price, and […]
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Profit Ratio: Definition, Calculation, and Best Practices
Profit ratio, also known as profit margin ratio, is a financial metric used to measure the profitability of a business. It represents the percentage of each dollar of sales that is kept as profit after deducting all expenses, including operating expenses, taxes, interest, and depreciation. The profit ratio is calculated by dividing the net profit […]
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Budgetary Control System: An Overview and Key Features
A budgetary control system is a process of monitoring and managing an organization’s financial resources through the creation of a budget, setting targets, and comparing actual performance against budgeted performance. The aim of the system is to ensure that the organization’s financial resources are used efficiently and effectively to achieve its objectives. The system involves […]
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Profit Volume(PV) Ratio: Definition, Formula, and Interpreting
The Profit Volume (PV) Ratio is a financial metric that measures the relationship between a company’s profits and its sales volume. It is expressed as a percentage and is calculated by dividing the company’s profit by its sales revenue. The PV ratio provides valuable insights into a company’s financial performance, particularly its ability to generate […]
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Understanding Beginning Inventory and Its Role in Accounting
Beginning inventory refers to the total value of inventory that a business has on hand at the beginning of a specific accounting period, such as a day, week, month, or year. This includes all of the products or materials that a business has purchased but not yet sold or used in production. The importance of […]
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Assets vs. Inventory: Understanding the Difference
Assets refer to all the resources that a company owns or controls that can provide future economic benefits. These resources can be tangible or intangible, and they are reported on the company’s balance sheet. Inventory, on the other hand, refers specifically to the goods a company has on hand that it intends to sell in […]
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How to Keep Track of Expenses and Profit?
As a business owner, keeping track of your expenses and profit is essential to understand your financial performance and make informed decisions about your business. Properly tracking your finances can help you identify areas for improvement, stay compliant with tax laws and regulations, and avoid cash flow problems. In this article, we will discuss the […]
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Inventory Journal Entries: Importance and Best Practices
An inventory journal entry is a type of accounting entry that is used to record transactions related to a company’s inventory. It is a record of the movement of inventory items in and out of the company’s possession, as well as any adjustments made to the inventory account. Inventory journal entries are essential for keeping […]
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Marginal Costing for Profit Planning
Marginal costing is a method of accounting for costs that focuses on the change in costs that results from a change in the number of units produced. It is a more accurate way of determining the cost of a product or service than traditional costing methods, which allocate all costs, both variable and fixed, to […]
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