What is a liability?

 WHAT IS A LIABILITY? Liabilities are things that are owed by the business which are the obligations or debts of the business. These could be classed as: ·        Non-Current liabilities ·        Current liabilities  Non-Current liabilities are obligations that are owed by the business over a long period of time usually for longer than one year … Read More

Overhead Absorption Rates

Absorption of overheads is the process by which the total cost of a production centre is charged to the cost units within that centre. Absorption of overheads is charged to cost units based on an absorption rate and this is calculated at the beginning of the period based on budgeted activity and budgeted overheads. There … Read More

Capital vs revenue expenditure

Capital and Revenue expenses Capital expenditure occurs when a business spends money in purchasing non-current assets for the business operations or when it spends money in adding value or improving an existing non-current asset. This will include delivery and legal costs in acquiring the non-current assets. Non-current assets are items owned by the business which … Read More

The Non Current Asset Register

Non-Current Asset Register Non-current assets can turn out to be large amounts of expenditure in some businesses and these will require some control measures being put in place to ensure the costs are being monitored. In setting controls in place, many businesses maintain a non-current assets register in addition to the general ledger entries. The … Read More

Cost classification

Costs can be classified in 4 ways – by function, by element, by nature and by behaviour. Classification of costs by function: Production costs- this is also known as “cost of sales”. This category would include production labour costs, materials, factory supervisor salaries, factory rent. These are any costs which are directly linked with organisations … Read More