Gross & net income, revenue, and profits are all terms that are often used in business and finance but are confusing because they are sometimes used interchangeably. To make matters more confusing, they can also have different meanings depending on whether it is for an individual or business. To further confuse things, revenue and income […]
A liability is an (existing) obligation towards another party and is reported on a company’s balance sheet, like debts that small businesses owe to another business, organization, vendor, employee, or government agency.. This obligation may consist of paying money, delivering goods or rendering services. Assets, on the other hand, provide a future economic benefit. Oftentimes, liabilities
Inventory Systems There are two inventory systems, the perpetual inventory system and the periodic inventory system. With the perpetual system, a (computer) system is in place which keeps track of inventory. It is therefore possible to compare the actual inventory with the inventory according to the system. However, such a system comes at a cost.
Current Assets Versus Long-Term Assets The difference between current and a company’s long-term assets is that current assets are converted/used within a single operating cycle (inventory, work in progress, accounts receivable, etc.), whereas long-term assets have a useful life or more than a year and are used for multiple operating cycles (machines, buildings, etc.). There
Tax planning time again! I know….I know….that’s the last thing you want to think about this time of year, but time is quickly running out on your window of opportunity to save some serious money on your small business taxes. There are also some administrative responsibilities that need to be completed before the end of the
For any bookkeeeper, recording financial transactions for small business owners through journal entries, whether it is manual or with the use of accounting software, is the first step of an accounting system and accounting cycle. Journal entries use two or more accounts also known as double-entry bookkeeping or double-entry accounting and generally have the following features: Journal entry
The double-entry bookkeeping process of a small business starts with making journal entries, this is the first step of the many proceeding steps of the accounting system. Hence it is very important to act with caution while making journal entries because an error at this point goes deep into the financial system and can be hard to identify and eliminate at later stages e.g. at
The terms debit and credit are derived from Latin terminology. Debit is derived from the Latin word ‘Debere’ which means to ‘to owe. Credit is derived from the Latin word ‘Credere’ which is translated as ‘to entrust’ In a standard general ledger or ledger account, a debit entry is posted on the left side of the T
If you have spent any time preparing or learning how to prepare financial statements, even in accounting software, you have likely heard the term double entry, but exactly what is the double-entry accounting system? It may sound complex or twice the work, but it really isn’t. To help better understand the double-entry system of accounting, we first
Many different financial statements are produced for businesses to gauge the financial position of a business, showcasing the financial results e.g. Statement of Financial Position, Comprehensive Income Statement, Statement Cash Flows and Statement of Changes in Equity or Owner’s Equity Statement. The Owner’s Equity Statement shows the changes in capital/equity in a business overtime and