Definition: Economic Order Quantity, popularly known as EOQ is the standard order quantity of materials which a firm should order at a given point in time with an aim of minimizing the annual inventory costs like holding/carrying cost, and order cost. It is a production scheduling model which was coined by Ford W. Harris in the year 1913 and has been updated with the passage … [Read more...] about Economic Order Quantity (EOQ)
Accounting
Bookkeeping
Definition: Bookkeeping can be defined as the system of keeping records and classifying all the financial transactions on a day-to-day basis concerning the business operations, in a sequential manner. The term "transaction" refers to the business activity, in which the exchange of money or money's worth for goods or services is involved. It is the initial step to the … [Read more...] about Bookkeeping
Revenue Expenditure
Definition: Revenue Expenditure, also known as Operating Expenses or OpEx refers to the expenditure incurred in the course of the day-to-day business activities i.e. in the production of goods and services and its sale, which facilitates revenue generation of the company. Such expenses do not increase the profit earning capacity of the business, rather it helps to maintain … [Read more...] about Revenue Expenditure
Capital Expenditure
Definition: Capital Expenditure or CapEx refers to the financial outlay made by the firm for an asset which is expected to stay in the business for a long time, so as to use the same for more than one financial year, which not only generates enduring benefits for the company but ensures the generation of revenue over the years. In finer terms, when the company uses its funds … [Read more...] about Capital Expenditure
Income Statement
Definition: Income Statement or otherwise called as statement of profit and loss, is the summary prepared by the company's management, reporting the revenues, expenses, gains and losses for the particular financial year. Simply put, it portrays the final result of the company's operations over a period. Income statement forms part of the company's financial statement along … [Read more...] about Income Statement
Budgetary Control
Definition: Budgetary control refers to a method of management control and accounting, wherein the budgets are established, by forecasting the activities beforehand to the maximum extent and a constant comparison is made between the actual results and the budgeted figures, so as calculate the variances (if any) and take corrective steps accordingly to ensure the achievement of … [Read more...] about Budgetary Control
Zero-Based Budgeting (ZBB)
Definition: Zero-based budgeting or ZBB, is an emerging budgeting technique, which is introduced with the aim of coping with the demerits of the traditional budgeting system. Zero-based budgeting is different from the incremental (conventional) budgeting system in the sense that the former begins with a zero base, i.e. from a scratch and are not based on previous trends. In … [Read more...] about Zero-Based Budgeting (ZBB)
Single Entry System
Definition: Single Entry System, is the oldest and most straightforward method of keeping records of financial transactions, which is rarely prevalent these days. In this system, only one side of the transaction is recorded, because of the absence of any prescribed rules and so the records maintained are more or less incomplete. In a nutshell, single entry system of … [Read more...] about Single Entry System
Fund Flow Statement
Definition: Fund Flow Statement implies a snapshot of the movement of funds, i.e. inflow or outflows of the firm's financial assets for a specific period. It represents, "from where the funds are received and where the funds are utilised" by the company during a particular period. The word 'fund' refers to a sum of money, which is used to finance the firm's day to day … [Read more...] about Fund Flow Statement
Liabilities
Definition: Liability, as the name suggests, is a legal obligation which reflects an amount that the company owes to outside parties, i.e. banks, financial institutions, individuals or entities, whose settlement may lead to the outflow of the firm's economic resources. In finer terms, liabilities are a company's financial debts, which indicates creditors claim on business … [Read more...] about Liabilities