Accounting Theory

There are various types of accounts accustomed to record equity. Each is used to store divers information regarding the interests of owners in the business.…

An accounting method is a set of rules under which revenues and expenses are reported in financial statements. The choice of accounting method can result…

ABC analysis is used to categorize items into three classifications, based on activity levels. The concept is most commonly applied to inventory, where the “A”…

Acquisition integration is the process of combining the operations and systems of an acquired business with those of the acquirer. This is needed so that…

Analytical procedures are a type of evidence used during an audit. These procedures can indicate possible problems with the financial records of a client, which…

The iron curtain method is a technique for determining whether a financial misstatement is material. Under this method, the cumulative effect of a misstatement in…

The acid test ratio compares the most short-term assets to short-term liabilities. The intent of this ratio is to evaluate whether a business has sufficient…

The percentage of receivables method is used to derive the bad debt percentage that a business expects to experience. The technique is used to populate…

Definition: Accounting Convention is a guidelines that arise from the practical application of accounting principles. An accounting convention is not a legally-binding practice; rather, it…