What Is The Importance Of Accounting Ratios

Every business can determine its profitability and efficiency based on the financial statements. Although profitability can be easily identified on financial statements, the efficiency of the organization can be understood with the help of accounting ratios.Therefore, businesses cannot neglect the importance of ratio analysis. The comparison or relationship between one accounting data-point and another helps in determining the financial condition of the company. Ratio analysis is done to compare how the company is performing with others in the industry and also to determine a company’s current performance with respect to previous years. Here are a few more reasons why accounting ratios are important.

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Why Capital Budgeting is Important for your Business

The estimation to determine whether a particular  of expenditure or investment is worth funding for a significant amount is called capital budgeting. The large amount of money spent for these investments are called capital expenditures. These investments are mainly for acquiring fixed assets such as machinery, land and building, etc. For getting accurate results to determine whether the investment is worthwhile, the process of capital budgeting needs to be carried out effectively and efficiently. Here are a few objectives of capital budgeting.


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5 Common Errors Businesses Make on Financial Statements

Having a record of your daily transactions is essential for your business. However, maintaining your financial records is not an easy task. You can do it yourself but there are chances of making certain mistakes which may cost your business. We have listed some common errors that entrepreneurs make while maintaining their financial accounts. The effects of errors on financial statement can be costly and hence, every businessman should be aware of the common errors that are made on financial statements.


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Difference between Capital and Revenue Expenditure

Classifying capital and revenue expenditures can be a difficult task. These expenditures directly affect in creating an accurate balance sheet and thus, you need to know how to classify them in the correct manner.

Examples of capital expenditure include the purchase of an asset or any repairs done to the asset in order to increase its life and productivity.

Examples of revenue expenditure include wages and salary, printing and stationery, electricity, repairs and maintenance, inventory, postage, insurance, taxes, etc.

To help you understand capital and revenue expenditure, here are a few points that distinguish the two expenses.


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