Accounting Category: Accounting principles

Accounting Articles

May 16, 2015

Should a reasonable investor be influenced by a 5% error in net income? Or would a 10% variation make a difference to the investor? The answer is related to the concept of materiality.†In this accounting article we define materiality, list a few possible approaches to calculating materiality, and provide examples of the application of the materiality concept in accounting.

April 11, 2015

Financial statements and other financial information may include uncertainties.†Impact of such uncertainties may be assessed using sensitivity analysis. In this article, we will describe the nature of sensitivity analysis and how it can be performed.

May 4, 2014

Some business plans just donít seem to pan out. Perhaps a product line underperforms or a subsidiary posts major losses due to a shift in consumer demand. Special rules apply whenever a company decides to sell off or otherwise dispose of a business segment.

June 21, 2013

External financing often represents a significant or important part of a companyís capital structure. Companies obtain such financing to fund working capital, acquire a business, etc. The process of obtaining a loan or issuing debt securities involves costs. In this article, we will look at accounting requirements for debt issuance costs under US GAAP and an example of accounting for such costs using the effective interest rate method and the straight-line method.

November 29, 2012

Declining balance methods of depreciation, specifically the double-declining balance method, do not take into consideration the salvage value of an asset when determining the depreciable basis. Some people wonder why that is the case. This article provides the answer.

November 2, 2012

US GAAP allows application of alternative accounting principles to certain types of accounting transactions or balances. Investors, creditors, and other users of financial information need to understand which accounting principles are utilized by a company. Such principles are to be described in the summary of significant accounting policies.

October 11, 2012

To record and manage an asset, an organization should be able not only to identify the asset but also to measure it. This is especially important in the case of intangible assets, which can substantially increase the value of the organization.†In this article we will discuss the three major valuation approaches used to measure intangible assets.

September 26, 2012

If you ever worked in an accounting department, you are probably familiar with reversing entries. However, for non-accountants reversing entries represent an accounting term which may sound technical and confusing. In this article we will talk about reversing entries and why they are used.

August 20, 2012

What are operational obligations? What are financing obligations? How is a bond different from a note payable? How to define long-term liabilities? Find answers in this accounting article.

August 14, 2012

Why isn't managerial accounting used for external financial reporting? Why isn't financial accounting sufficient to run a company? Find answers to these and other questions in this article.

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