The analysis of semi-variable costs and its components is a managerial accounting function, for internal use only. For example, if a company pays $1,000 in rent and $400 in utilities monthly, the total mixed cost is $1,400. In this case, rent is the fixed component, and utilities are variable (Bragg, 2019). Mixed costs, also known […]
Conversely, retail stores tend to have low fixed costs and large variable costs, especially for merchandise. Because retailers sell a large volume of items and pay upfront for each unit sold, COGS increases as sales increase. The degree of operating leverage (DOL) is a financial ratio that measures the sensitivity of a company’s operating income […]
The current ratio provides the most information when it is used to compare companies of similar sizes within the same industry. Since assets and liabilities change over time, it is also helpful to calculate a company’s current ratio from year to year to analyze whether it shows a positive or negative trend. If a company’s […]
The business has paid $250 cash (asset) to repay some of the loan (liability) resulting in both the cash and loan liability reducing by $250. We will now consider an example with various transactions within a business to see how each has a dual aspect and to demonstrate the cumulative effect on the accounting equation. […]
While the chart of accounts is customized to your law firm’s size, jurisdiction, and practice area, it typically includes five core categories in addition to numerous subcategories. Accounting for law firms lets you collect and analyze information, and make data-driven decisions based on what money comes in and leaves your firm, so it’s worth it […]
It aligns with the matching principle in accounting, which ensures that expenses are recognized in the same period as the related revenue or benefits. When a company makes a prepayment, such as paying insurance premiums or amortization of prepaid expenses rent in advance, it is classified as a prepaid expense. In this scenario, we would […]
