Finance

To monitor business performance, investors measure the amount of profit a company has earned as a percentage to the total capital employed. This financial ratio is known as return on capital employed or ROCE. ROCE of a company tells you whether the profit is sufficient considering the amount of equity and long-term debt invested to earn money. Formula to calculate return … [Read more...] about How to calculate return on capital employed – ROCE

Every transaction that has an economical impact on the business is recorded in minimum two accounts, once in the debit side of an account and once in the credit side of another account. Each line in it is known as an entry. Journals in the manual accounting system are known as books of first entry. In journal, you enter the transaction first and from there, you take it to … [Read more...] about How Business transactions are recorded in account

When a business makes a purchase, depending on certain factors, it's either considered as capital expenditure or revenue expenditure. To understand the concept, there are basically two areas where money is spent in an organization; To purchase items that are to be used for several years, orTo pay for items that will be used in day to day running of the business. In this … [Read more...] about Capital expenditure Vs. revenue expenditure – What is the difference

By posting adjusting entries to respective accounts, you prepare adjusted trial balance to derive income statements and balance sheets of the company. After preparing these reports, you need to post closing entries to zero out all temporary accounts and transfer their balances to permanent accounts. This entire process is known as closing of the books. In the closing … [Read more...] about What is closing entries in financial accounting system

Adjusting entries is part of the accrual concept of accounting. In general, accounting transactions are recorded by following accrual basis of accounting except in few schools, government departments and non profit organisations. In accrual accounting, following rules are followed; Revenue is recognised when earned, regardless of when cash is actually collected, andExpenses … [Read more...] about How to make adjusting entries in financial accounting

Total debit and total credit of every accounting transaction must tally while posting it to the accounting system. In an organisation, accountants across the world post transactions by debiting and crediting respective accounts. To check the equality of all the transactions of an organisation, trial balance is prepared. In other words, in a trial balance, the total of all … [Read more...] about What is Trial balance and how it’s prepared

One of the basic principles of an accrued accounting system is matching revenue with expenses. When a company buys assets such as building, plant and machinery, the cost is capitalized in an account. These assets are used over their useful life in the production of revenue. To match revenue with expenses for a period, management spread the cost of the assets over its useful … [Read more...] about What is depreciation and How its calculated

Book value of a company means the value of the entire business as per the financial statements. For instance, if you have financial statements for the year 2018-19, then from its balance sheet by deducting total liabilities out of total assets, you can get book value of the entire business. It's also termed as owners’ equity or shareholders’ equity. Total assets include all … [Read more...] about Book value Vs Market value of shareholders’ equity – What is the difference

Raising capital for a startup is one of the most important factor that promoters has to address at the initial stage of forming a company. For instance, if the legal structure of your business does not allow investors to invest money in exchange of shares, then nobody will be interest to invest. You have to address this type of issues at the time of registration. Therefore, … [Read more...] about 5 realistic ways to raise capital for your startup