What is a Periodicity Assumption? Definition, Advantage, and Example

Accounting Principle

Definition: Periodicity assumption is the accounting concept used to prepare and present Financial Statements into the artificial period of time required by internal management, shareholders, or investors. What does an artificial period mean? Well, most of the financial statements are prepared based on fiscal years. Sometimes, based on tax years for the tax purpose or […]

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What Is the Historical Cost Principle (Definition and Example)

Accounting Principle

Definition: The concept of the historical cost principle is that the assets are recorded based on the price at the time they are purchased, and the liabilities are recorded based on the values expected to pay at the original value rather than market value or inflation-adjusted value. The Historical cost accounting principles are used mainly

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What is Fraud? Definition, Types, Reasons, and Managing

Fraud

Definition: Fraud is the intentional activity to gain personal benefit directly or indirectly illegally, against organization or entity policy. It is ultimately different from error and corruption. An elementary example of fraud is that the accounting staff pay salary to fake employee’s account that creates by himself is also called fraud. In such a case, accounting

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Ultimate Guide of Transfer Pricing: Concepts, Purpose, and Types.

Business Strategy

The Concept of Transfer Pricing: Transfer pricing (TP) is the price of goods or services sold or bought between divisions in the same group or entity. For the divisions that operate in the same jurisdiction, transfer pricing is set for performance management and motivation of division from the group or entity level. Sometimes it is set

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What is the Cash Ratio? (Definition: Using, Formula, Example, and Explanation)

Financial Ratios

A current asset ratio or a current ratio measures a company’s liquidity. It reveals the ability of a business to manage its current liabilities through highly liquid assets. Creditors and analysts can use this metric to assess short-term solvency. However, critics argue that it overstates a business’s short-term risks by excluding some critical components of

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Accounts Receivable Turnover: Formula, Definition, Using, Example, Explanation

Financial Ratios

Definition: Accounts Receivable Turnover is one of the most used efficiency ratios and activities ratios. This ratio is used to measure how efficiently the company’s assets and resources are managed and used. For example, how well the company turns its accounts receivable into cash? This ratio answers this question in time (like 15 times or

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Fixed Assets Turnover Ratio: Definition, Using, Formula and Example

Financial Ratios

Definition: Fixed Assets Turnover is one of the efficiency ratios used to measure how efficiently of entity’s fixed assets are being used to generate sales. Like its formula, the main idea of Fixed Assets Turnover is to assess the number of a dollar that fixed assets contribute to generating sales and revenues. This ratio is usually

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Return on Investment (ROI): Definition, Usage, Formula, and Example

Financial Ratios

Definition: Return on investment is one of the profitability ratios used to measure the percentage of investing profits over the invested fund. Return on investment is popularly used for assessing the performance of investment centers, profit centers, investment projects, and companies. The main principle of return on investment is how much profit that investments project

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