In simplified terms, inventory consists of items which the company owns but has not yet sold and/or consumed. Inventory is shown under the head current asset on the balance sheet because in the normal operating cycle, the company usually converts the goods into cash. Inventory for a manufacturing company consist of: Raw materialsWork-in-progressFinished goods Raw … [Read more...] about Inventory on the balance sheet
Beginners guide to financial statements
Understanding Current liabilities on the balance sheet
Balance sheet has three components, assets, liabilities and owner's equity. One of the section under the component liability is “current liability”. Current liabilities are obligations that is due and payable within 12 months from the date of balance sheet or within one operating cycle, whichever is longer. In balance sheet, under the current liability section company … [Read more...] about Understanding Current liabilities on the balance sheet
what is Retained Earnings and how its calculated
Company's profit can be distributed as dividend or retained for reinvestment within the organisation. Based on management's plan, companies in general distribute a portion of the profit as dividend and the balance left out reinvested for future growth. Retained earnings is the accumulated profit that the company earns and retain for reinvestment purpose after paying dividend … [Read more...] about what is Retained Earnings and how its calculated
Beginner’s guide to Bookkeeping and Accounting Process
In an organization, financial transactions are recorded timely and accurately in the books of accounts. With that recorded information, the accountant analyze, review and prepare various reports. The entire process is known as accounting of which bookkeeping is a very important part. Bookkeeping is generally defined as the process of accumulating, classifying, recording … [Read more...] about Beginner’s guide to Bookkeeping and Accounting Process
Current asset on the balance sheet
When you look at the asset side of company’s balance sheet, you will find a category at the end of the balance sheet called current asset. It will let you know the liquid capital the company has to pay its current liabilities. This means, it will tell you how much money is available with the company for business immediately. Under current assets, you will find those assets … [Read more...] about Current asset on the balance sheet
Single entry or double entry bookkeeping – What is best
Bookkeeping is the process of accumulating, classifying, recording and organizing a financial transaction to facilitate day-to-day transaction of an entity for preparing financial statement. We have two systems of bookkeeping to consider: single-entry and double-entry. Based on your business size and complexity, you can use either single-entry or double-entry bookkeeping … [Read more...] about Single entry or double entry bookkeeping – What is best
Balance sheet: A beginners guide to understand company’s financial position
Balance sheet is prepared by accountants to present the balances of company's asset, liabilities and owner's equity on the last day of the profit period. Therefore, Balance Sheet can be defined as a snapshot statement that shows what a company’s assets are, what its liabilities are, and what its equity is at a specific point in time. Balance sheet show the financial … [Read more...] about Balance sheet: A beginners guide to understand company’s financial position
A Beginner’s Guide to Financial Statements
In a company, shareholders provide funds to buy equipment, inventory and other assets to get started the business. Managers, in conjunction with shareholders, run the business for profit. The business can be anything either buying and selling goods or rendering services to customers. In a business, revenue comes from the sale of goods and services. After deducting the cost … [Read more...] about A Beginner’s Guide to Financial Statements