Explanation

• The normal balance of a Revenue account is a Credit.
• Revenue increases owner’s equity, and equity accounts normally have credit balances.
• Revenue is credited when earned and debited when reduced or closed.
• At the end of the accounting period, revenue accounts are closed to the Income Summary/retained earnings or capital account.

Last verified on 08-08-2026

Explanation

• The normal balance of a liability account is a credit balance.
• Liabilities represent amounts owed by a business to outsiders.
• When a liability increases, it is generally credited.
• When a liability decreases, it is generally debited.
• Examples include accounts payable, loans payable, and accrued expenses.

Last verified on 08-08-2026

Explanation

• The perpetual inventory system commonly uses the moving weighted average method to value inventory.
• Under this system, inventory records are updated continuously after each purchase and sale.
• A new average cost is calculated after every purchase.
• The system provides real-time inventory information.

Last verified on 06-08-2026

Explanation

• A broker deals in the buying and selling of shares and other securities on behalf of investors.
• Brokers act as intermediaries between buyers and sellers in the stock market.
• They execute trades through a stock exchange.
• Brokers earn income through brokerage commissions or fees.
• They may also provide investment advice, depending on their services.

Last verified on 06-08-2026

Explanation

• According to IAS 23, borrowing costs are capitalized when they are directly attributable to a qualifying asset.
• A qualifying asset is one that takes a substantial period of time to get ready for its intended use or sale.
• Capitalization begins when asset expenditures, borrowing costs, and preparation activities are in progress.
• It stops when the asset is substantially ready for use or sale.

Last verified on 06-08-2026

Explanation

• Warehouse cost is generally classified as a distribution cost.
• It includes the cost of storing finished goods before they are delivered to customers.
• Warehouse expenses are incurred after production and before final delivery.
• These costs support the distribution and supply chain process.
• They are not treated as production or administrative costs.

Last verified on 06-08-2026

Explanation

• Bank Reconciliation is the process of identifying differences between the cash book and the bank statement.
• It explains why the balances in the cash book and bank statement do not match.
• The reconciliation helps ensure the accuracy of financial records.
• It detects errors, omissions, and unrecorded transactions.
• It is usually prepared at the end of an accounting period.

Last verified on 06-08-2026

Explanation

• The main purpose of an independent audit is to help detect frauds and errors by examining financial records and expressing an independent opinion.
• An audit enhances the reliability and credibility of financial statements.
• Detecting every fraud is not the primary objective, but auditors help identify material misstatements caused by fraud or error.

Last verified on 21-07-2026

Explanation

• Current assets include cash or assets expected to be converted into cash within one year.
• Examples include cash, inventory, and accounts receivable.

Last verified on 21-07-2026

Explanation

• WACC stands for Weighted Average Cost of Capital.
• It is the average rate of return a company must pay to finance its assets through debt, equity, and other capital sources.
• WACC is widely used in financial management, investment decisions, business valuation, and capital budgeting.

Additional information:

• NPV: Net Present Value
• IRR: Internal Rate of Return
• EPS: Earnings Per Share
• ROI: Return on Investment

Last verified on 21-07-2026