What is ERP ( Enterprise Resource Planning)

ERP is a business process management software that allows the the organisation to use set of integrated applications to manage the business and automate back office functions.

Different Methods of Capital Budgeting

When there are various Investment proposals, Capital budgeting helps us to find out the BEST Investment proposal using various techniques. They are,

1. Payback period.
2. Discounting payback period.
3.Accounting Rate of Return (ARR).
4.Net present Value (NPV).
5.Internal Rate of Return (IRR).

What is Capital Budgeting ?

When there are various Investment proposals, Capital budgeting helps us to find out the BEST Investment proposal using various techniques. They are,

1. Payback period.
2. Discounting payback period.
3.Accounting Rate of Return (ARR).
4.Net present Value (NPV).
5.Internal Rate of Return (IRR).

What is Cash flow statement

Cash flow statement is a financial statement which shows cash inflows and outflows resulting from Operating , Investing and Financial activities.

What is Letter of Credit-Meaning-Explanation

It is the bank’s guarantee that the buyer will make his payment to the seller. The bank will have to make the payment if the buyer defaults to pay. It is a deal between buyer’s bank and the seller’s bank.

What is Appreciation of Asset

Appreciation is increase in value of asset. In current economic condition the value of land and buildings are going up high so in accounting term it is known as Appreciation. This is opposite of Depreciation. This term can be used in any assets like stock, real estate etc.

Depreciation-Meaning-Explanation-Journal Entry for Depreciation

Depreciation is Decrease in value of an Tangible Asset for certain reasons like Wear and Tear, old Technology, misuse, Obsolescence etc. It is a non cash expense. The asset should be replaced once the end of their useful life is reached. There are several methods to find depreciation like Straight line method, Written down Value method, Annuity method etc.

Journal Entry For Depreciation:

1.       Depreciation a/c                             Dr                              XXX
            To Asset a/c                                                                            XXX

2.      P & L a/c                                 Dr                             XXX
            To Depreciation a/c                                                             XXX

Break Even Point (BEP) - Meaning - Explanation

It is a point at which there is No Loss or No Profit. The cost/expenses equals with revenue/gains. Anything above the BEP is gain and anything less than BEP is loss. In other words, BEP is where there is ZERO return on investment.

BEP in units  =          Fixed Cost           

                           Contribution (Per unit)

BEP in Sales  =         Fixed Cost     

                              Contribution %

Retained Earnings - Meaning and Explanation

Retained Earnings is the undistributed profit of the firm. Usually, the firm will distribute certain percent of its profit to Shareholders in the form of “Dividend” but some companies will retain some of its profit for certain reasons like  reinvestment by the management, increase the assets or reductions of liabilities. Retained Earnings are reported in the shareholders Equity section of the company’s Balance Sheet.

what is EPS ( Earning Per Share)

It is the profit of the firm per outstanding share. It is said higher the value of EPS, the more profitable is the company.

Different Methods of Calculations:

Method 1

    EPS =   Profit Available To Equity Shareholders (PAES)

                              No of outstanding shares

 Method 2

    EPS =   Market price per share (MPS)

                    Price earnings ratio (PE)