Long-term deposit is expected to remain in the business financial statement for a longer time. From an accounting perspective, two events require accounting treatment for the long-term deposits, which include recording and disposing of long-term deposits from accounting books.
Accrued wages refer to compensation that remains payable at the end of the accounting period. The labor has been worked but was not paid for it. Hence, the business needs to show this expense in its accounting books to calculate accurate profit/loss for the accounting period. The accrued wages might include salaries, bonuses, commissions, paid … Read more
Retained earnings refer to income/profit carried forward from previous accounting periods. This balance reflects how much the business has earned since its inception (after making dividends/payout) and the current balance attributable to the business owners. Accumulated losses are losses carried forward from previous accounting periods same as retained earnings. This balance reflects the amount the … Read more
Prudence concept means the accountant needs to be pessimistic when showing business financial performance. It’s about being open-minded when recording liability/expenses but critical when recording assets/revenue. This helps ensure adequate financial performance is presented to the business stakeholders. In other words, the business must be conservative when estimating financial performance. The estimates should be … Read more
NRV stands for Net realizable value. This value is calculated by deducting all the selling and other relevant costs to execute the sales, such as the cost of marketing or modification from sales price.
Five elements of a financial statement include the following. It’s important to note that notes to the financial statement are integral parts and not separate/distinct. Let’s go through the details related to the financial statement component. 1-Balance sheet (Statement of financial position) This component of the financial statement includes details like assets, equity, and liabilities. … Read more
Source document refers to original documents supporting financial transactions in the accounting system. In other words, journal entries/transactions are posted in the accounting system by looking at source documents. For instance, a sales invoice/dispatch note is a source document when going through the sales ledger. Similarly, the purchase invoice/receiving note is considered a source document … Read more
The first important concept to understand is that VAT payment is not an expense for the manufacturer, trader, retailer, or anyone else in the supply chain. This payment is an expense only for the consumer who will consume the product/services at the end of supply chain.