World

Income Statement or Profit and Loss Account An income statement is also known as a profit and loss account, statement of income or statement of operations. Besides balance sheet and statement of cash flows, income statement is also among important financial statements which measures the financial performance of a company over a certain period. After […]

Balance Sheet Balance sheet is a financial statement which shows the net worth of a company at the end of a financial period. A Balance sheet portrays the financial position of a company, disclosing what it owes and owns. It is an important document that needs to be prepared and submitted regularly like when submitting […]

Ind AS – New Accounting Rules for Companies As per the new Accounting Standards in India (Ind AS), for companies having a net worth of Rs 500 crore or more it is mandatory to adopt the Indian Accounting Standards from April 1, 2016. In the 2009 G-20 summit, India had committed to take required steps to […]

Unified Payment Interface (UPI) – Instant and Cashless Developed by National Payments Corporation of India (NPCI) the Reserve Bank of India launched Unified Payment Interface (UPI). Money transfers will not only be easy to send but more instantaneous and secured. Unified payment interface is a common system across retail systems designed to enable all account […]

Startup India Initiative to Boost Entrepreneurship  On the Independence Day, 2015 at Red Fort, Prime Minister Mr.Narendra Modi recited the slogan, “Startup India, Stand up India”. Startup India campaign aims at promoting bank financing for start-up companies to encourage entrepreneurship and eventually leading to more In-house jobs for people of India. On 16 January 2016, Vigyan Bhavan, New […]

Proprietary Ratio This ratio shows the proportion of total assets of a company which are financed by proprietors’ funds. The proprietary ratio is also known as the equity ratio. It helps to determine the financial strength of a company & is useful for creditors to assess the ratio of shareholders’ funds employed out of the […]

Debt to Equity Ratio Debt to equity ratio shows the relationship between a company’s total debt with its owner’s capital. It reflects the comparative claims of creditors and shareholders against the total assets of the company. It is a measurement of how much the creditors have committed to the company versus what the shareholders have […]

Debt to Asset Ratio It is also called debt to total resources ratio or only debt ratio. The debt to asset ratio measures the percentage of total assets financed by creditors. It is computed by dividing the total debt of a company with its total assets. This ratio provides a quick look at the part of […]

Acid Test Ratio Acid Test Ratio/Liquid Ratio/Quick Ratio is a measure of a company’s immediate short-term liquidity. It is calculated by dividing liquid assets by current liabilities. Liquid assets can be termed as those assets which can almost immediately be converted to cash or an equivalent. Unlike the current ratio, this doesn’t take into account […]

Super Quick Ratio or Cash Ratio This ratio goes one step ahead of current ratio, liquid ratio & is calculated by dividing super quick assets by the current liabilities of a business. It is called super quick or cash ratio because unlike other liquidity ratios it only takes into account “super quick assets”. This is the […]

Ratio Analysis Ratio analysis is a process of carefully studying the relationships between different data sets inside a company’s financial statements with the help of arithmetic ratios. It helps in a meaningful understanding of a firm’s performance and its financial position. All major financial statements can act as an input to the ratio analysis, ratios […]

Accounting Ratios – Definition Accounting ratios are mathematical expressions demonstrating a relationship between two independent or related accounting figures. Such ratios are calculated on the basis of accounting information. It is usually expressed as A:B, A to B, A/B, etc. With the help of accounting ratios, a comparative study becomes possible, for example, if you have […]

Current Ratio The current ratio is a type of liquidity ratio which is established by dividing total current assets of a company with its total current liabilities. It shows the amount of current assets available with a company for every unit of current liability payable This ratio helps to determine the short-term financial liquidity of […]

Meaning of Purchase Order A purchase order (PO) is an official document generated by a buyer of goods or services as an offer for the seller. It becomes a legal document of the contract once the seller accepts the purchase order. It describes the types of products/services, quantities, and prices that a buyer agrees to pay […]

Users of Accounting Information Accounting is the language of business, it brings life to the otherwise lifeless business activities. It acts as a bridge between users of the information and the day to day transactions that occur inside a business. Users of accounting information may be inside or outside a business. Qualitative characteristics of accounting information such […]

Bookkeeping Bookkeeping is the process of recording all financial transactions of a business unit in a systematic way on a day-to-day basis. Most common examples of records are: Receipts from customers Payments to suppliers Billing for products supplied Recording invoices from suppliers Recording depreciation and other adjustments etc. Bookkeeping acts as a basis for the accounting […]

Fixed Assets – Definition and Meaning In accounting, fixed assets are assets which cannot be converted into cash immediately. They are primarily tangible assets used in production having a useful life of more than one accounting period. Unlike current assets or liquid assets, fixed assets are for the purpose of deriving long-term benefits. Generally, it […]

Revenue From Operations Revenue from operations or operating revenue can be defined as the income generated by an entity from its daily core business operations. If the entity is able to generate a steady flow of income from its operations, it is said to have been running successfully. It is also called operating revenue. Example […]

Disposal of Fixed Asset Without Asset Disposal Account When an asset is being sold a new account called “Asset Disposal Account” is created in the ledger. This account is created to ascertain profit earned or loss incurred on sale of fixed asset, alternatively, all adjustments can be done inside the asset account without opening an […]

Asset Disposal Account When an asset is being sold, a new account in the name of “Asset Disposal Account” is created in the ledger. This account is primarily created to ascertain profit on sale of fixed assets or loss on the sale of fixed assets. The difference between the amount received from sale proceeds and […]

Posting From Journal to Ledger The procedure of transferring an entry from a journal to a ledger account is known as posting. It involves transferring of debits and credits from the journal book to the ledger accounts, if an account in a journal entry has been debited it will be posted in the ledger account […]

Promissory Note A promissory note is a financial instrument, in which one party promises in writing to pay a pre-determined sum of money to the other party subject to agreed terms. It can either be payable on demand or at a specific time. It may be paid to or to the order of the authorized […]

Authorized Capital Maximum value and amount of total shares that a company is authorized to issue legally is termed as authorized capital or authorized share capital. It is the maximum amount a company can raise as capital in the form of both equity shares and preference shares during its lifetime. This amount is decided during the […]

Reserves in Accounting At the end of a financial year when a company earns a profit certain portion of it is retained in the business to meet future contingencies, growth prospects, etc. This amount of money kept aside is termed as reserves. Reserves are a component of retained earnings. They help in fortifying the financial […]

Balance Sheet Accounts While looking at a company’s financials there are 2 types of general ledger accounts which are found, Income statement (a.k.a Profit and Loss accounts) and Balance sheet accounts. Balance sheet accounts are those which are related to assets, liabilities and capital. In other words all accounts which are related to balance sheet […]