What is the Cost to Income Ratio? Definition, Formula, Calculation, and Interpretation

Finance

Financial managers perform various calculations and activities to analyze a company’s yearly and quarterly performance. The cost-to-income ratio is one of the efficiency ratios used in financial management through the relationship between the cost and income of an entity. It is used to evaluate a company’s performance and the fundamental role is to validate the profitability …

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Accounting for Mortgage Payable: Definition, Journal Entries, Example and More

Accounting

The liability of an owner to pay the fixed loan that is acquired by a company within the timeline is known as mortgage payable. As there are different types of liabilities i.e., the short-term liability and the long-term liability. Similarly, mortgage payable is considered a long-term liability. Accounting for mortgage payable is made in the …

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What is a Walkthrough In An Audit? And Why Is It Important?

Audit

Overview A walkthrough test is an auditing technique that examines a process from initiation to completion. The purpose is to observe the effective implementation of internal controls devised by an organization. An auditing team can evaluate any accounting and non-accounting process. The test should include recording, analyzing, and reporting the outcomes of the walkthrough effectively. …

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Vouching Vs. Tracing in Auditing – Key Differences and Similarities

Audit

Overview Vouching and tracing are two important auditing techniques. Auditors use these techniques to verify the effectiveness of internal controls put in place for the accounting standards followed by an entity. Tracing and vouching serve similar objectives to auditors with different approaches. Vouching is often considered the foundation of an accounting system. Tracing also plays …

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How to Record Depreciation Journal Entries? – Accounting for Depreciation with Examples

Accounting

Overview Depreciation expense is a non-cash accounting practice that is used to spread the cost of an asset over its useful life. A firm can use one of the many depreciation calculation methods available. However, each method calculates the depreciation charge differently. The accounting treatment for the depreciation cost remains the same. Let us discuss …

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What is Performance Materiality? (Definition, Example, and More)

Audit

Overview Audit materiality is a concept to quantify the misstatements, omissions, and errors in financial statements that auditors couldn’t specify. Performance materiality is a lower threshold than materiality that allows an aggregate review of misstatements in the company’s financial statements. Material and performance materiality are important concepts to make auditors’ opinions of financial statements fair …

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Inherent Limitations of Auditing: 7 Limitations You Should Know

Audit

In accordance with the framework laid out in the International Standards of Accounting (ISA), the main objective of auditors is to ensure that they are able to provide reasonable assurance regarding the financial statements not being materially misstated. This requires the auditors to go through stringent audit processes, which ensure that they are able to …

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Salaries and Wages Payable – A credit or a debit? All you need to know!

Accounting

Salaries and Wages are considered as the expenses that are incurred as a result of human capital that is hired by the company for purposes of the operation of the company. Therefore, salaries and wages are considered to be fixed operating expenses, that are incurred by the company regularly. Normally, these expenses are paid on …

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Full IFRS vs IFRS for Small and Medium Enterprises (SMEs): A Comprehensive Guide

Accounting

International Financial Reporting Standards (IFRS) are considered to be universal accounting standards, which are used by organizations to prepare their financial statements, such that they can be presented in a unified manner. IFRS includes a detailed guide and a breakdown regarding the accounting treatment for all the state of affairs of the company. In this …

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