What is incremental cash flow?

Incremental cash flow isn’t a term you regularly hear unless you’re getting deep into your business’s accounting. But it’s a crucial piece of information that you should consider any time you take on order. Incremental cash flows are the net additional cash flows generated by a company by undertaking a project. Capital budgeting decisions are … Read more

What is Income Smoothing? Explained with Example

Income smoothing is a term used to refer to the different strategies and approaches used by accountants and financial analysts to monitor or control the impact of high rises and sudden drops in corporate income. What is Income Smoothing? Income smoothing is the shifting of revenue and expenses among different reporting periods in order to … Read more

What Is Hobby Loss?

There’s no question about it: hobby loss can mean major tax savings for your clients. But, it can also spell trouble if used incorrectly and challenged by the IRS. That’s why having a thorough understanding of how it works is so important. You could be a client’s hero when you save them thousands of dollars … Read more

What is an Impaired Asset? Explained

What is an Impaired Asset? Asset impairment is often confused with asset depreciation, which is a predictable and expected occurrence as an asset ages or incurs wear and tears over the course of normal use. In contrast, asset impairment reflects a more dramatic drop in asset value due to extenuating circumstances, such as changes in … Read more

What is Impairment?

Impairment describes a reduction in the value of a company asset, either fixed or intangible, so as to reflect a decline in the quality, quantity, or market value of the asset. It’s an accounting concept based on the idea that an asset shouldn’t be carried in your business’s financial statements at more than the highest amount … Read more

How to Prepare for an Audit?

How to prepare for an Audit? Preparation of an audit report can be intimidating for most companies. But it doesn’t have to be. When preparing for an audit report it’s important to understand the audit report format, spend time looking for good audit report examples, and understand the purpose of an audit report as well … Read more

What is a Homogeneous Cost Pool?

A homogeneous Cost Pool is a cost pool in which each activity whose costs are included in it has the same or a similar cause and effect relationship between the cost driver and the costs at that activity. What Does Homogeneous Cost Pool Mean? A homogeneous cost pool is a managerial accounting term for a group … Read more

What are Held to Maturity Securities?

Held to maturity securities (HTM) are debt securities that you intend to hold until maturity and that have a specified maturity date. A common example of a debt security is a corporate bond. If you purchase a $10,000 bond with five years remaining until its maturity, you must intend to hold that bond until it … Read more

What is Hedge Accounting? Accounting and Types Explained

Hedge accounting or hedging is an accounting practice that is used in companies that deal with components on their financial statements that have very fluctuating values. It is a practice that lets the accountant summarize and present the value of the specific asset or liability on the balance sheet simply and easily. It helps offset … Read more

What are Headline Earnings? Explained

Headline earnings are a restatement of a company’s profit that removes the effect of one-time charges, write-downs, cost-cutting, and other extraordinary items like tax liabilities. Another way of looking at headline earnings is that it is the part of a company’s earnings that pertains to its core business activities. What are Headline Earnings? Headline Earnings … Read more