Explan PV Ratio and difference between accrual and prepaid expense.

Question

Accepted Answer

PV ratio is the ratio of contribution to sales. Accrual expenses are recognized but not yet paid, while prepaid expenses are paid but not yet recognized.

PV ratio is calculated by dividing contribution by sales.
It helps in determining the break-even point and the impact of changes in sales volume on profit.
Accrual expenses are expenses that have been incurred but not yet paid, such as salaries or interest.
Prepaid expenses are expenses that have been paid in advance but not yet recognized, such as insurance or rent.
Accrual expenses are recorded as liabilities on the balance sheet, while prepaid expenses are recorded as assets.
Both accrual and prepaid expenses are adjusted at the end of the accounting period to reflect the correct amount of expense for that period.

Accepted Answer

The profit volume (PV) ratio is a financial metric that measures the relationship between a company's profits and sales volume. It's expressed as a percentage and calculated by dividing a company's profit by its sales revenue. prepaid expense is a advance payment for expenses. accrual is a expense or revenue is recognized but not yet paid or received.

Explan PV Ratio and difference between accrual and prepaid expense.

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