Explain the terms Accounting and Accountancy

Earlier article describes the difference between accounting and bookkeeping and accounting and management accounting. Below explain the term Accountancy which normally been used loosely with Accounting Accountancy: the systematic knowledge of accounting that explains the various aspects of accounting. It explains ways how to prepare the books of accounts and why such preparation are to … Read more

What are the objectives of Accounting?

Major objectives of Accounting: maintain accounting records; calculate the result of operation; ascertain the financial position; communicate the financial information to the relevant users { click here to the Content Page on Introduction to Accounting }

Explain what is a break-even chart.

The analysis of revenues and costs in relation to the volume of production is known as break-even analysis. This relationship can be best shown in a break-even chart where the point at which total revenue equals total costs is the break-even point. This break-even point is where a company is neither making a profit or … Read more

Why is it important to understand Break-even point in Business Decisions

Break-even point is important for business decisions: As break-even point marks the very lowest level to which activity can drop without putting the life of the company in jeopardy. By understanding break-even analysis, a firm can decide on which following strategies to use in order to increase profit or decrease loss like: Increase sale volume … Read more

How to write up a full set of books up to the drawing up of the Final accounts and Balance Sheet

{ This article can be printed on pdf.format} Please read article on Accounting Cycle & the Steps involved to understand the overall process of  taking up transactions from source documents to the stage of final accounts and then the Financial Statements. Below presented in pictorial diagram with explanation on the writing up of a full … Read more

What is Administrative Overhead and how is it treated in Cost Accounting?

Administrative overhead: Costs relating to formulating policy, directing and controlling operation of an undertaking Not related directly to production activity or function. On a norm, administration overhead are all expenses incurred on policy formulation, direction, control, office administration,etc What are the methods to treat Administrative overhead in Cost Accounting: (a)    Charge to Costing Profit & … Read more

Pictorial Diagram Of Classification of Accounts

{ Print this article in pdf.format} DOUBLE ENTRY RULE: ACCOUNTS DEBIT CREDIT Personal accounts Receiver Giver Real accounts What comes In What goes Out Nominal accounts All expenses All incomes Read more details on personal and impersonal accounts Read more details on real and nominal accounts

How to do we treat Idle Capacity in Cost Accounts?(Part 2 of 2)

Idle capacity can be broadly divided into  Normal or AbnormalTreatment of NORMAL IDLE CAPACITY in the cost accounts: Due to unavoidable reasons are included in works overheads and absorbed into the cost of production either by inflating the overhead rate or  by means of a supplementary overhead rate ( see article on details of idle … Read more

What are Real Accounts & Nominal Accounts

Accounts are broadly classified into two (2) category namely: Personal Accounts and Impersonal Accounts ( see earlier article). For  Impersonal accounts, they can be sub-divided into (a) Real Accounts & (b) Nominal Accounts. Below explain: Real Accounts: Related to assets or properties which are either: Tangible real accounts-assets that can be touched, felt, measured, purchased … Read more