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Tax profit

Tax profit is profit serving as the basis for calculating income tax under the provisions applicable tax law. Tax profit calculation is usually based on the accounting profit that is transformed to tax base.

Division of costs to various categories

Costs can be divided into different categories according to their drivers or behavior. The main reason for the costs breakdown is their understanding and subsequent optimization / reduction.   According to traceability to cost object (most often product or service): direct costs direc

How to classify costs and the reasons for it

Cost classification is the process of sorting the costs into categories according their similar or common features. Different cost classifications may by relevant for different reasons. For example division between direct and indirect is required for inventory valuations, classification between fix

Difference between direct and indirect costs, their division and accounting

According to the traceability to cost object (usually a specific type of product or service) the costs can be divided into DIRECT COSTS (PRIME COSTS) and INDIRECT COSTS (OVERHEADS). The reason for such classification is especially appropriate inventory (and possibly other assets as well) valuation.

Variable costs

Variable costs are costs that change with the production volume. If the level of production decreases, total variable costs decrease as well and vice versa.  But unit variable costs remain unchanged with the changed production volume. Opposite to variable costs are fixed costs.   Behavi

Internal (secondary) costs

Internal (secondary) costs arise from inside of the entity and they may consist of a number of previously incurred external costs and intercompany turnover.   TOTAL COSTS ARE THUS USUALLY NOT THE SUM OF EXTERNAL AND INTERNAL COSTS (external costs would then be included multiple times and inte

Difference between profit and cash-flow

Profit is usually not equal to cash flow because profit is defined as the difference between income and expenses, while cash flow as the difference between receipts and expenditures. Accounting profit is the final line in the income statement, while cash flow is the final line in the statement of c

Forms of accounting profit used in practice

Above in other articles were mentioned forms of profit that are somehow clearly defined. Nevertheless, the economic world is fond of other indicators and some of them can be usually found in the reporting system of nearly any company. They are often not based on any GAAP (not mentioned even in IFRS)

Fixed costs

Fixed costs are costs that do not relatively change with the level production over the short term and are incurred even if there is no production. So if the level of production decreases, fixed costs remain unchanged and fixed cost per unit increases, and vice versa. Examples: CFO salary; rent

Explicit costs

Explicit costs are costs that are really incurred by the entity. Opposite to explicit costs are implicit (opportunity) costs.

Indirect labor costs (Labor overheads)

Indirect labor costs (labor overheads) are together with indirect material costs and possibly indirect expenses part of indirect (overhead) production costs. As being their part, they are NOT directly and clearly identifiable with cost object (usually product or service). Indirect labor costs incl

Indirect costs (overheads)

Indirect costs are costs not directly and clearly identifiable with cost object (usually product or service). Together with direct (prime) costs they form total costs of the entity. Indirect costs can be both fixed and variable, production and non-production or external and internal. They are oft

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