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accounting

A collection of 17 issues

What Is a Goodwill Impairment Test?

Introduction When a company acquires another business for a price that exceeds the fair value of its identifiable net assets, the excess is recorded as goodwill on the balance sheet. Because goodwill represents expected future economic benefits rather than a tangible asset, accounting rules require companies to check periodically whether

Understanding Phantom Income: What It Is and How to Manage It

What Is Phantom Income? Phantom income is money that appears on your tax return even though you never actually received it in cash. This mysterious form of profit often surprises investors, partners, and employees, because it inflates taxable income without corresponding liquidity. Understanding how phantom income arises is essential to

Owner’s Equity: Definition, Formula & Importance

What Is Owners Equity? Owners equity, also called net worth or book value, represents the residual interest a business owner has in company assets after deducting all liabilities. In other words, its the portion of the business the owner truly "owns" once debts are settled.

Understanding Off-Balance-Sheet Financing: A Complete Guide

What Is Off-Balance-Sheet? Off-balance-sheet, often abbreviated OBS, refers to assets, debts, or financing activities that do not appear on a company’s balance sheet under traditional accounting rules. Instead, they live in separate legal entities or contractual arrangements. Although they remain outside the primary statements, these transactions can still affect

Mark-to-Market Accounting: Definition, Importance & Examples

What Is Mark-to-Market? Mark-to-Market accounting, sometimes called fair value accounting, is the practice of reporting the current market value of an asset or liability instead of its historical cost. The method ensures that a company’s balance sheet reflects real-time economic conditions, providing investors with fresher, more transparent data. Why

What Are IFRS? A Comprehensive Guide to International Financial Reporting Standards

Understanding IFRS International Financial Reporting Standards (IFRS) are a set of globally recognized accounting rules issued by the International Accounting Standards Board (IASB). Designed to bring transparency, accountability, and efficiency to financial markets, IFRS dictate how companies prepare and present their financial statements. More than 140 jurisdictions, including the European

Understanding Gross Margin: Formula, Importance, and Optimization

What Is Gross Margin? Gross margin is one of the clearest indicators of a company’s financial health, yet many entrepreneurs overlook its strategic power. By revealing how much money remains after covering the direct cost of goods sold, this metric highlights pricing strength, production efficiency, and overall profitability potential.

Understanding Goodwill: A Comprehensive Guide

Goodwill is a word that surfaces in boardrooms, balance sheets, and community meetings alike. Despite its frequent use, few people pause to explore what goodwill truly means or why it matters. This concise guide unpacks the financial and social dimensions of goodwill so you can leverage it wisely. What Is

Going Concern: Definition, Importance, and Audit Implications

Understanding the Going Concern Principle The going concern principle underpins modern financial reporting. It assumes that a business will continue operating for the foreseeable future, generally at least twelve months after the balance-sheet date. When this assumption holds, assets and liabilities are valued on a normal, non-liquidation basis, allowing investors

GAAP (Generally Accepted Accounting Principles): A 300-Word Guide

Introduction to GAAP Generally Accepted Accounting Principles (GAAP) form the standardized framework of guidelines for financial accounting in the United States. Created by the Financial Accounting Standards Board (FASB), these rules dictate how companies record, summarize, and present financial data. Whether you are a small startup or a Fortune 500