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Difference between Depreciation, Amortisation and Depletion

Corporations own long term assets including tangible assets like buildings, intangible like copyrights, and natural resources like ore deposits. As it comes to value these assets there should be a way to devalue. To do that there are three concepts to know. Depreciation, amortisation and depletion. Depreciation is the cost reduction spread of the useful life of a tangible asset, amortisation is the deduction of the intangible assets and depletion is extracting cost of resources. Quick Recap  In accounting not all figures are actual, there are numbers that are recorded in advanced or vis a ...Read More

July 9, 2021|Accounting Terms, Uncategorized|

Pros and Cons of Common Size Analysis

One of the techniques in overall financial statement analysis is preparing a common size analysis of a business where you can compare its financial position and performance year by year (time-series) or through comparing it with other companies (cross-sectional). But the question is, how actually good is common size analysis and what are its limitations? The key benefit of common size analysis is it is easy to understand providing initial perception about the financials. While the main limitation is that there is no standard ratios to follow and the company size is not considered in ...Read More

June 21, 2021|Accounting, Accounting Terms|

What is the Difference Between General Ledger and Subledger?

The process of accounting usually appears intimidating to a lot of people, especially when they start reading terms like general ledger and subledger. They are just technical terms that could confuse someone who does not know accounting otherwise it should be straight forward. Let us take one step backward and look at where the term ledger and subledger come up. When the business does a financial transaction like a receipt for a purchase or an issued invoice to a customer, the accountant records that transaction in their books. The general ledger is that central repository ...Read More

January 23, 2021|Accounting, Accounting Terms|