What is the Average Collection Period? Definition: The average collection period refers to the timeframe that a company takes to receive or convert its accounts receivables (credit sales) into cash. Usually, businesses determine the average collection period so that they can know their cash position to enable them to meet obligations. Normally the average collection
What Is Purchase In Accounting? Definition: Purchase in accounting refers to the taking control of a given item or service by paying a set amount of money. Conversely, it is the exchange of money for a particular good or service. The process is usually undertaken by individuals or corporations in need of items or services.
What is a Proprietor? Definition: A proprietor is a person who creates and runs a business intending to make consistent profit from the business activities of that business. That is why such a business is usually described as a sole proprietorship. A sole proprietorship can thus be described as a single, unincorporated business operation that
What is Profit? Definition: Profit, also known as net income, is simply what is left behind when all expenses are deducted from earnings. It is also denoted as the financial benefit left behind whenever revenue exceeds expenses, costs, and taxes combined. In a business setting, profits can be channeled back into the business for expansion
What is a Proportional Tax? Definition: Proportional tax, also referred to as flat tax, is a tax system whereby the same percentage tax rate is levied across all income brackets. In this case, low, middle, and high-income taxpayers are often hit with the same tax rate. The tax system differs from progressive or marginal tax
What is a Purchase Requisition? Definition: Purchase requisition is a form that departments in big organizations fill to indicate they wish to purchase some materials or merchandise. The requisition form notifies relevant authorities, more so purchasing departments, that some materials or merchandise are needed for the smooth running of a given department. Understanding Purchase Requisition
What is a Production Budget? Definition: Production budget is a budgetary plan that details the total number of products that will be manufactured over a given period along with the costs. The plan is derived from sales forecast as it is an estimate of the total units a production plant intends to produce. A production
What Is Pro-rata share? Definition: Pro-rata, share is an accounting term used to denote sharing in equal proportions. Originating from a Latin term, the methodology is used to assign a proportionate amount on whatever is being shared, depending on ownership percentages or stakes. Pro-Rata Share Example Explained Likewise, the Pro-rata share can denote the equal
What Is Principal Payment? Definition: Principal payment refers to the payment of a principal amount of a loan, in a bid to reduce the outstanding debt. In this case, payment is made to reduce the amount due on a loan rather than the accumulated interest. In most cases, individuals and corporations make a minimum payment
What Are Product Costs? Definition: Product cost is a term used to denote the total costs or expenses necessary to produce a good. The costs, in this case, can be direct labor costs, raw material costs as well as factory overhead costs. These costs are essential if a factory or a manufacturer is to turn