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How to Calculate Target Profit

As a business matures and stabilizes, it’s common for management to begin planning goals for the company, with the most common being profit. The term for this is called Target Profit and here we will discuss the planning and formulas to help you beginning this process. Target Profit Definition Target profit refers to the anticipated …

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What are Permanent Accounts?

The bookkeeping process utilizes permanent accounts to record balance sheet items, such as assets, liabilities and owners’ equity, as of a point in time. This is the opposite of temporary accounts, which are used to measure activity over a specified date range. Understanding permanent accounts is critical for month-end-close and the generation of financial statements. …

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What Is Unearned Revenue?

In accrual accounting, revenue recognition can become complicated, especially when companies sell subscription services or complete projects in installments. This is known as unearned revenue or deferred income accounting. There may be instances when payment is collected, before revenue can be recognized. In these situations, unearned revenue must be reported to remain compliant with U.S. …

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What is Contribution Margin? | Ratio Calculation

Analyzing a company’s income statement yields many insights about the efficiency and effectiveness of operations, especially as it relates to sales and variable costs. The contribution margin is a metric that illustrates profitability, before fixed expenses are factored into the equation. Below are additional details about the contribution margin, and how this important metric impacts …

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