Explanation of the Business Entity Principle
The business entity concept is the idea that the transactions of a business entity and its balances do not include the owner’s personal expenses. This is to keep the accounting organized and to avoid...
View ArticleCalculating Profitability Index Examples
The profitability index shows the potential benefit of an investment as a ratio. The index is calculated as the present value (PV) of future net cash flow divided by the first investment. Calculating...
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Cash Ratio Formula Examples
The cash ratio shows the liquidity of a business by measuring the amount of cash available in current assets to pay for current liabilities. Cash Ratio Formula Cash ratio = Cash + Cash Equivalents +...
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How To Do Closing Entries In Accounting
The closing entry is used in accounting to set the balance for temporary accounts (drawing, expense and revenue accounts) to zero at the end of an accounting period. Other accounts such as the...
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Common Stock Journal Entry Examples
When a company issues just one type of stock it is called common stock, and it includes the equity shares that the owners of a company receive. Common stockholders in a company usually receive returns...
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Compound Journal Entry Examples
Accountants and managers are responsible for recording day-to-day transactions and use both single and multiple entries to record and prepare financial statements. Journal entries are used to create...
View ArticleExplanation of the Cost Accounting System
The cost accounting system is used by many companies to establish the estimated development cost of each of their products so that they can perform a profitability analysis or other financial analysis...
View ArticleWhat is Cost Formula Accounting
Cost accountants use a wide range of formulas and tools to show a company’s management various ways in which they can increase profitability and find problems. They also use financial formulas to...
View ArticleCVP Formula Examples
The cost volume profit formula is used by cost accountants to demonstrate how much operating income that one of its products will produce at a particular volume. The formula can be used to determine...
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Debt to Equity Ratio Examples
The debt to equity ratio shows the proportion of stockholders’ equity and debt that a company uses to finance its needs. In other words, gives a measure of how much the company financially depends on...
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