Month: October 2017

Bookkeeping – Percentage of Completion Method (Lesson 74)

Percentage of Completion

In project accounting there are two different methods of accounting used. The first is the completed contract method which is explained in more detail in Lesson 75. The second and the focus of this lesson is the percentage of completion method of accounting. This method is an advanced skill for accountants and requires knowledge of its proper application along with a new type of control account called work in process or work in progress.

Bookkeeping – Phase Costing (Lesson 73)

Phase Costing

Phase costing takes accounting to the next level. Phase accounting (costing and accounting are interchangeable at this level of detail) can only be used with job costing. It is designed to break a job down into distinct functions (stages) for analysis. It is a tool to identify discrepancies from estimates.

Operating Profit Margin – Formula and Understanding

Operating Profit Margin - Formula and Understanding

Operating profit margin refers to the value earned as a percentage of net sales. The operating profit is often referred to as earnings before interest, taxes, depreciation and amortization, (EBITDA). This is a misleading reference as operating profit is actually defined differently by industry sector. EBITDA is used primarily in valuing businesses.

Total Assets Turnover Rate – Formula and Analysis

Total Assets Turnover Rate

Within the group of activity ratios, the total assets turnover rate is the broadest in scope. Similar to other activity ratios, it utilizes net sales as the numerator. However the denominator doesn’t focus in on a single balance sheet asset group like the working capital turnover or fixed assets turnover rates, it includes all assets.

Basis in Business

Basis in Business

Basis is a business term used to identify the value of an individual or entity’s investment in an entrepreneurial endeavor. It is customarily linked to taxation as this term is used by the Internal Revenue Code to determine gain or loss. To further compound its meaning  ‘basis’ is sometimes substituted for the term ‘equity’.