knowledge

The Financial Accounting Standards Board (FASB) is a nonprofit group that operates independently, and its main job is to set the rules for accounting and financial reporting for both businesses and nonprofits in the U.S., all in line with generally accepted accounting principles (GAAP). Established in 1973, the FASB took over from the Accounting Principles

Generally accepted accounting principles, or GAAP, are a collection of rules and standards for accounting that are regularly updated by the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB). These principles help maintain consistency, accuracy, and transparency in financial reporting across different sectors in the U.S. Public companies are required to

Accumulated depreciation is a way to track how much an asset’s value decreases over time until it reaches the end of its useful life. You can figure this out using one of six different methods: straight line, declining balance, double-declining balance, sum-of-the-years’ digits, units of production, or half-year recognition. When you buy an asset for

Gross profit (GP) is what a company makes after taking out the costs of making and selling its products or services. You might also hear it called sales profit or gross income. To figure out gross profit, you look at the income statement and subtract the cost of goods sold (COGS) from the total revenue.

Cost of goods sold (COGS) is all about the direct expenses tied to making the products a company sells. This includes the costs for materials and labor that go straight into producing those goods. It doesn’t cover indirect costs like shipping or sales team expenses. You might also hear cost of goods sold called “cost

Gross income (GI) for a person, often referred to as gross pay on a paycheck, is the total amount they earn before any taxes or deductions are taken out. This encompasses earnings from various sources, not just from a job, and it can include non-cash income like property or services as well. For businesses, gross

Net income (NI), often referred to as net earnings, is a key figure for investors to evaluate how much revenue surpasses a company’s expenses. To calculate net income, you take sales and subtract costs like goods sold, selling and administrative expenses, operating costs, depreciation, interest, taxes, and any other expenses. You can find net income

Operating cash flow (OCF) refers to the cash a company brings in from its regular business activities. It’s a key indicator of whether a company can generate enough cash to keep its operations running and even expand, all without needing outside funding. In a company’s cash flow statement, you’ll find three categories of cash flows:

Cash flow, CF refers to how money comes in and goes out of a business over a specific timeframe. When a company brings in more cash than it spends, it has a positive net cash flow. Conversely, if it spends more than it earns, the cash flow is negative. Publicly traded companies are required to