Most medium to large scale manufacturing and trading businesses engage a chain of distribution for the sale of their goods. This chain begins from the production factory and ends with sale of goods to the end consumer. Manufacturers sell goods to wholesalers/distributors who in turn sell to retailers who in turn sell to individual end … Read moreWholesale sales vs retail sales
Financial reporting is an important aspect of every business entity as it is essential to gauge the financial performance and position of the entity. One of the important financial statements is the profit and loss account. Each profit and loss account reports amongst others two important parameters, what are popularly termed as ‘top line’ and … Read moreTurnover vs profit
Most businesses operate in a competitive environment today. This necessitates that they offer their products and services at competitive prices, to be able to sustain good sales volume. This is why vendors are often seen offering discounts to their customers. Any reduction in price offered by vendors to their customers is termed as ‘discount’. Discounts … Read moreTrade discount vs cash discount
Every business incurs expenses at each stage of its business operations. Right from establishment of a business to its day to day operations and even winding up of a business, expenses are incurred at each stage. Measuring, recording and analyzing expenditure is essential for every business as it impacts cash flows and profitability of the … Read moreRevenue expenditures vs capital expenditures
Depreciation is the depletion in the book value of fixed assets due to wear and tear that occurs during their use. Depreciation is accounted as a charge against profit in each accounting period. This is essential to reflect the true value of fixed assets in the books. There are several methods prescribed to measure and … Read moreStraight line vs written down value (WDV) method of depreciation
Current Assets: A business asset which is likely to be consumed within a financial year or a 12 months period is referred to as current asset. Liquid Assets: An asset that can be readily or quickly sold for cash proceeds is known as a liquid asset. All assets can be sold for cash but liquid … Read moreDifference between current and liquid assets
Definitions and meanings: Accounting: The practice of keeping a systematic record of transactions of a business, summarizing them and presenting them in meaningful manner is known as accounting. The data obtained is also used for reporting purposes. Economics: Economics is a study of social sciences that is related to the production, consumption and/or distribution of … Read moreDifference between accounting and economics
Inventory accounting and management are key functions in manufacturing and trading companies. Inventory consists of everything from raw material, production consumables to work in progress and finished goods. Large manufacturing and trading companies have considerable amounts invested in their inventories and thus its accounting and management assumes an even more important role. Inventory accounting involves … Read moreFIFO vs LIFO
Fixed assets are resources that generate economic benefit for a business over a long duration, often across several accounting periods. Fixed assets are thus initially capitalized and subsequently a part of its cost is expensed out in each accounting period. This is also in line with the ‘matching concept’ in accounts which provides that expenses … Read moreDepreciation vs amortization
Operating Expenses: Those expenses which a business incurs to run its day-to-day business operations but are not related to the production process directly are known as operating expenses. These expenses can be categorized as selling, admin, marketing, advertising expenses etc. Non-operating Expenses: Such expenses that are neither related to normal course of activities of a … Read moreDifference between operating and non-operating expenses