VAT return filing needs to be timely and accurate. Small businesses and entrepreneurs often face challenges in terms of delayed filing, penalties, and errors.  The following tips can be helpful in terms of filing the correct VAT return. 1-Understand the VAT system/return It’s important to understand the following aspects of VAT return. 1-VAT return summarizes…

Quality control review refers to going through audit processes and the mechanics of the audit engagements. The review is designed to ensure assurance was conducted in line with applicable auditing standards and applicable policies. Let’s go through the steps involved in the QCR. Planning and analyzing the quality control review It’s important to plan and…

Unearned revenue / deferred income refers to advances received from customers. Technically, it’s not revenue but a liability recorded in the business accounting records. It’s a liability because cash was received in advance, and the business has not performed its obligations by rendering the services or delivering the products. When unearned revenue / deferred income…

These are the essential accounting concepts used in closing accounting periods. Closing these accounting entries in the real world is often more challenging and technical. Let’s review the concept and related examples for accrual and prepaid expenses. Accrual in the balance sheet We are expected to have utilized some service at the time of closing…

These terms are frequently used in the import/export business to reflect the transportation costs associated with moving goods from one place to another. Freight refers to the cost of transporting goods from vendor place to customer place. As the goods are coming into the business, this cost is referred to as freight in. On the…

Impairment in accounting means a permanent reduction of asset value recorded in the balance sheet. The test for impairment compares expected economic benefits with the current net book value. So, if the expected economic benefit is lower than the net book value, the difference is posted as an impairment in the accounting record via the…

The initial line item is operating profit when generating a cash flow statement using the indirect method. The idea behind using this amount is ‘’we need to convert accrual-based profit/loss to the cash balance’’. For this purpose, we divide the cash flow statement into three categories. Operating activities Adjustments for non-cash items We add up…

The following are considered limitations of the cash flow statement. 1-Non-cash transactions are ignored The cash flow statement does not consider non-cash transactions. For instance, depreciation, impairment, provisions, and other non-cash expenses are ignored. Hence, essential accounting concepts are ignored, leading to questions about the cash flow statement’s usability. 4-Classification may not be objective The…

Asset management ratios are designed to measure a business’s ability to use assets. They help understand whether the business has been able to efficiently utilize the assets and generate revenue/earnings for its investors and other stakeholders. In other words, it’s a measure of a business’s capacity for utilizing assets and generating revenue/earnings for its stakeholders….

In a production facility with multiple products, it’s challenging to determine production overheads for each product. So, we use the concept of overhead allocation using a predetermined overhead rate. Overhead allocation enables us to trace the cost of each product. So we can analyze product profitability and make informed decisions using absorption costing. Let’s understand…