Category Archives: Accounting & Finance Certifications

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U.S. GAAP (Generally Accepted Accounting Principles)

Generally Accepted Accounting Principles (GAAP) are a set of common and widely accepted standards used by accountants and organizations in preparing financial information about a business entity. GAAP is borne out of some clearly defined objectives which include the necessity for business organizations to provide financial information that are useful for evaluation by external parties like creditors and investors. Consistency in the approach, format and presentation derived from the accounting framework and applicable laws makes the provided information very helpful in the decision making process for outside parties.

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Difference Between Financial & Management Accounting

Accounting as we know it can be separated into two distinct branches. Although both involve heavy analysis and interpretation of performance data, use of assumptions and reporting in some form or fashion, they are very different in terms of approach and ultimate purpose. For starters, one of the two deals with information that is prepared specifically for external users of the economic information pertaining to a company’s ongoing operations (financial accounting) and the other prepared specifically for a corporation’s internal users enabling them to make better operating decisions (management accounting).

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Cost Volume Profit – Breakeven Analysis

Cost-Volume-Profit analysis is used in the planning process by looking at the effects caused by varying levels of units sold, unit pricing, fixed costs and variable costs on bottom line profit. The primary objective from a managerial perspective is to maximize contribution margin (revenue less variable costs) and minimize fixed costs. In the process of planning, key stakeholders within an organization are likely to ask some very important questions such as “What’s the effect on profit if units sold decreased 3%?” “How much of an impact will a 10% price hike have on profit?” or “what’s the impact to the bottom line if variable cost per unit increased 8%?”

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How To Calculate Depreciation

Looking for a step by step tutorial on how to calculate depreciation? You’ve come to the right place! In this tutorial, we will explore how to calculate depreciation using [1] the straight line method, [2] double declining balance method, [3] units of production method and finally [4] sum of the years digits method. Not only that, you will also see how accounting journal entries correspond to each method also.

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The Accounting Equation

Under U.S. GAAP (generally accepted accounting principles) financial accounting revolves more or less around one very important but simple equation. And that is: