“Can we decrease the selling price of a product and stay profitable?” “Should we purchase a component part from a supplier in Mexico, Canada, China, or the EU, or should we manufacture it locally?" “How much would it cost us to manufacturer a product?” “What is the estimated profit of our North American division next year?” “How much in advertising expenditures can we budget for the next quarter?” “How much should we bid for a federal construction project?" “What is the anticipated cost of a litigation case?" … The list of questions managers face in their daily decisions is infinite. Managers are paid to manage people and make decisions. Many decisions are forward-looking and require an estimate of future benefits and costs. This is called a cost-benefit analysis. Often the cost-benefit analysis involves the comparison of a few alternative courses of actions, but sometimes it can be used to evaluate just one scenario.

Over the years we created hundreds of accounting articles and tutorials on various accounting topics ranging from debits and credits for accrued payroll to results of interesting peer reviewed accounting research to financial analysis. These are the most popular articles and tutorials on our website for your enjoyment.

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.

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.

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.

External financing often represents a significant or important part of a company’s 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.

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.

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.

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.

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.