Difference between NPV and IRR

A company that is going to invest money into a new project would certainly want to know the viability or profitability of that project. To appraise the potential performance of an investment project, companies mostly use four techniques – payback method, accounting rate of return method, net present value method and internal rate of return … Read moreDifference between NPV and IRR

Difference between overtrading and overcapitalization

Definitions and meanings Overtrading: Overtrading is an accounting term used to describe a situation where a business entity engages in business activities more than it can actively support from its available funds. This shortage of available funds occurs due to increased capital rationing which results in undercapitalization. Overcapitalization: When the net worth of share and … Read moreDifference between overtrading and overcapitalization

Difference between activity based costing and traditional costing

Definitions and meanings: Activity based costing: Activity based costing is a method of cost allocation of overhead costs such that, for each different activity, a different cost driver is applied which is best suited for that activity. The cost driver is specifically selected for each activity. Traditional Costing: Traditional costing is a costing method used … Read moreDifference between activity based costing and traditional costing

Difference between integrated reporting and traditional financial reporting

Definitions and meanings: Integrated reporting: Integrated reporting is a new domain in accountancy that aims to enhance the scope of corporate reporting. Unlike traditional approach, integrated reporting attempts to report the value creation process of an organization. It refers that both financial as well as non-financial factors are responsible for development of sustainable value addition … Read moreDifference between integrated reporting and traditional financial reporting

Difference between debt and equity

Selling equity and debt instruments are two popular methods that companies mostly adopt to raise funds for starting and/or continuing their business operations. The individuals and organizations to whom equity instruments are sold and funds are collected from them are known as stockholders or shareholders. The individuals and organizations to whom debt instruments are sold … Read moreDifference between debt and equity