Organizations use various performance measures to motivate managers and other employees to invest their effort and skills into decision-making and work in general. When evaluating business units that have decision making authority over activities that impact revenues, costs, and investments (assets) in those units, organizations can use various performance measures. One of them is residual income, which we will discuss in this article.

Fundamental analysis is used to estimate a true value of an asset such as a company or a stock. Financial statements prepared by accountants and tested by auditors are used extensively in fundamental analysis.

What is a flexible budget? When would management prepare and use a flexible budget? In this article, we will look for answers to these questions.

Differences between accounts payable (balance sheet) and expenses (income statement) are sometimes confusing. In this article, we will discuss such differences and show how the two types of accounts can be connected in a journal entry.

Out-of-balance items play an important role in the determination of the financial health of a company. Being harder to track, they can become hidden traps aimed to artificially improve the company’s financial position and performance. In this article we will describe the main types of out-of-balance transactions and provide approaches to accounting for the most common ones.

In the highly competitive market conditions enterprises are forced to increase their profitability. In this article we will review the impact of inventory on financial results of a company

All businesses are not created equally. Apple and Google have massive operations in multiple geographic regions across the world, while a small manufacturing company might only own a single factory in Michigan. Should these three companies produce the exact same financial statements? In this article, we’ll look at how diversified companies are required to report operating segment results.

What would happen to a corporation if the long-term CEO were to die? Some businesses carry life insurance policies for just such an event because of potential operation disruptions. In this article we’ll discuss briefly the journal entries for business-owned life insurance (BOLI) policies.

Estimates and uncertainty are both normal for companies, but sometimes an event occurs that might be considered unpredictable even by corporate standards. Should these improbable events be mixed in with the results of regular operations or should they be reported separately? U.S. GAAP and international accounting standards (IFRS) disagree on the answer to that question.

Some business plans just don’t 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.