All monetary transactions that occur while running a business must have accurate, accessible and periodically updated records. Monetary transactions include the payment of a supplier’s invoice, payment to an employee and receipt of payment from a customer. For easy transaction recording, it is advisable to use a company’s chart of accounts. This chart provides codes [...]
Continue reading → A common business conundrum is whether to purchase equipment outright or to lease it. To make such a decision, you figure the present value of both options and then compare the results, with the preferable option being the one that provides the lower present value. Assume that the purchased equipment has no market value at [...]
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Continue reading → The business transactions can be grouped under three types of accounts : Personal accounts Real accounts Nominal accounts Personal Accounts Personal accounts are the accounts of persons or firms that the business deals with. These are primarily of three types : Natural person’s account : These are accounts of real persons who transact with the [...]
Continue reading → The accounting cycle defines the sequence of the stages to be followed in financial accounting. It starts from identifying the financial transactions and ends with the preparation of financial statements. Thereafter, the statements are analyzed and interpreted by different users to meet their requirements. The stages of the accounting cycle are : Identifying financial transactions [...]
Continue reading → Accounting is a business language used to communicate the various financial accounting information of the business to the people concerned. Accounting is based on certain assumptions or conditions, which are called concepts in financial accounting. The accounting concepts can be listed as: Entity Concept Dual Aspect Concept Money Measurement Concept Realization Concept Going Concern Concept [...]
Continue reading → The prime motive for doing a business is to earn profit. It is necessary to record the financial transactions to know the profit earned or loss incurred. Financial accounting is an effective tool to record, classify and summarize transactions. According to the definition given by the American Institute of Certified Public Accountants, “ Accounting is [...]
Continue reading → Conventions are the customs and traditions that act as a guide to the preparation of the financial statements. Following these conventions leads to clear and meaningful financial statements. The conventions followed to prepare accounting statements are the : Convention of Full Disclosure Convention of Materiality Convention of Consistency Convention of Conservatism Convention of Full Disclosure [...]
Continue reading → Business decisions are a set of results arrived at after studying a set of comprehensive business reports generated by considering all financial transactions. Thus, automating the finance and accounting system ensures accurate calculation and analyses for the organization. The numbers generated by the automated system will help with better management of the financial process and [...]
Continue reading → As business evolve and business decisions become complex, the necessity to devise strategies and their implementation requires a higher level of data nitration and organizational collaboration. Historically, a finance departments were often the only departments with access to accurate information about a company’s financial results. However, this information was usually at an aggregated level and [...]
Continue reading → The accounts payable system helps an organization to increase its control over purchases, improve cash flow and provide effective management of its current liabilities. Important outputs of the accounts payable system are the checks to suppliers for materials and services. Input from the purchase order system provides a record to the accounts payable application that [...]
Continue reading → The account receivable system allows organizations to manage each flow by keeping track of the money owed on charges for gods sold and services delivered. For example, when goods are shipped to a customer, the company’s account in the accounts receivable system is updated to reflect the entry of the customer’s purchase order. Next, the [...]
Continue reading → Budgeting and Asset Management form the focus areas of an organization’s finance department. Planning the budget that needs to be allocated for each process requires detailed budget and time. It is essential to understand the role of budgeting and asset management to ensure that the organization is able to meet its goals. Budget A Budget [...]
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Continue reading → Organization structure provides a framework for working but business ethics and values create a suitable work environment, which is reflected in the image the organization presents to the outside world. Business ethics and values refer to principles and standards that determine acceptable conduct in business. Ideally,a business organization must reap its benefits while maintaining honest [...]
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