Internal sources of finance refers to the process of raising finance from It’s important to note that all of these sources are internal. So, the business has more power to raise funds. Let’s discuss the above financing sources. Raising finance via business owners Raising finance via business owners is about adding share capital. It’s the … Read more
Ex-factory price refers to the price charged by the seller at the factory gate. It’s the price the customer needs to pay for buying and taking the goods out of the factory. It does not include the cost of transportation, customs clearance, export duties, import duties, or any other cost related to goods. As the … Read more
Controllable cost Controllable cost is the discretionary expense incurred by a business. As the name suggests, this expense can be controlled by avoiding additional features and related luxuries. For instance, the airline can avoid entertainment expenses by cutting refreshments for the passengers. Additional discretionary expenses include marketing, training, bonuses, refreshments, utilities, materials, etc. The manager’s … Read more
Target costing refers to developing/manufacturing the specific product, keeping cost under a set threshold. This mechanism of production keeping cost under set boundaries /limits is called Target costing. It helps ensure the product is developed under the desired/target cost. It’s a smart costing technique that starts with market research and involves following steps. Steps of … Read more
The throughput accounting ratio compares Throughput with factory costs. For this purpose, Throughput is calculated by deducting direct material cost from the sales/revenue, the business earns by selling this product. Let’s understand this ratio using the following example. Description Product-A Sales price (A) $20 Direct material cost (B) $10 Throughput per unit =(A-B) $10 Scarce … Read more
Throughput accounting is a managerial accounting tool designed to optimize production plans so that profit is maximized. Profit is maximized by planning product mix so that it generates maximum output by least utilizing limited/scarce resources, which is based on the theory of constraint. Throughput accounting works when we have the the following 2 factors in … Read more
The delivery note lists the product description and quantity dispatched to the customers. It may be placed inside the shipment or sent by delivery staff. This note’s purpose is to facilitate customers’ verification of the description and quantity of the goods dispatched by the seller. This note is not expected to list the product price … Read more
Broadly, there are three types of accounts where accounting transactions are posted. These accounts include assets, liabilities, and equity. Assets in the financial statement Assets are economic resources controlled by an entity. They are valuable items with current and future economic value. Depending on their nature and use, assets may or may not generate cash … Read more
This article provides logical guidance and detailed accounting for property, plant, and equipment recorded and to be recorded in the accounting books. Let’s have a detailed accounting perspective for the PPE. Buying property plant & equipment The following journal entry is posted when buying property, plant, and equipment. Let’s understand with the example. Example: ABC … Read more
The budgeted balance sheet is a statement of forecasted/predicted balance movement. It contains expected numbers and financial information related to forecasted business performance. Forecasting is applied to balance sheet items like assets, liabilities, and equity. These balances are adjusted in line with expected business activities, changes in capacity, capital expenditure budget, cash budget, inflation, factoring, … Read more