The delivery note lists the product description and quantity dispatched to the customers. It may be placed inside the shipment or sent by delivery staff. This note’s purpose is to facilitate customers’ verification of the description and quantity of the goods dispatched by the seller. This note is not expected to list the product price…

Broadly, there are three types of accounts where accounting transactions are posted. These accounts include assets, liabilities, and equity. Assets in the financial statement Assets are economic resources controlled by an entity. They are valuable items with current and future economic value. Depending on their nature and use, assets may or may not generate cash…

This article provides logical guidance and detailed accounting for property, plant, and equipment recorded and to be recorded in the accounting books. Let’s have a detailed accounting perspective for the PPE. Buying property plant & equipment The following journal entry is posted when buying property, plant, and equipment. Let’s understand with the example. Example: ABC…

The budgeted balance sheet is a statement of forecasted/predicted balance movement. It contains expected numbers and financial information related to forecasted business performance. Forecasting is applied to balance sheet items like assets, liabilities, and equity. These balances are adjusted in line with expected business activities, changes in capacity, capital expenditure budget, cash budget, inflation, factoring,…

Market penetration is a pricing strategy in which businesses lower their product/service price to enter/penetrate the market. This strategy is usually adopted to enter a new market or tackle competition. Adopting this strategy can reduce profitability, but lower prices are expected to increase market share. Further, the business may need to compromise on per-unit profit,…

Recurring expenses are the ones repeated from time to time. These are the forecasted expenses/cash outflows reflected in the budget. On the other hand, non-recurring expenses are one-time or in-frequent expenses (may not be in the budget), which may be challenging to predict. Please note that the only difference between recurring and non-recurring expenses is…

Financial gearing measures the proportion of debt compared to equity. It’s a tool for determining whether business operations are financed by debt or equity. So, if a large proportion of the business finance comes via debt, the business is considered financially geared, and vice versa. It’s important to note that higher financial gearing drives higher…

Operational gearing seeks to measure the proportion of fixed cost to total operating cost. If the proportion of fixed cost is higher, it signals the business is operationally geared, which is not considered the desired cost structure from a financial performance perspective. Why higher operational gearing is not desirable? Increased business risk—The higher proportion of…

Drawings in accounting refers to funds/money taken by the owner out of the business. This can be taking funds out of business or incurring personal expenses using business resources. It’s important to note that transactions with the owner are recorded in the equity section. Whether funds are deposited or taken out, all transactions with the…

Service rendered means the intangible value provided to customers against a sales invoice. Service sector businesses earn revenue by rendering/providing services to their customers. This term is generally associated with services rendered/provided but not billed to customers. So, the accountant obtains details related to services rendered and sends invoices/bills by copying the details for the…