Business Accounting Blog

Overview

You can categorize bookkeeping accounts in a number of different ways. For example, you can categorize accounts by which financial statement they are reported on and by whether or not they are current or long-term.

Now, you will categorize your bookkeeping accounts in a new way – whether they are permanent and closed at the end of the period or temporary and not affected by the closing entries. Closed means balances are zeroed out. You would leave all Balance sheet accounts as they are; they do not change. All your revenue and expense accounts are going to be closed into your Retained earnings.

Let’s assume that you have analyzed the financial transactions, recorded them in the journals, and posted the final balances to Continue reading “Income Summary Account: Explanation and Example”

Overview

There are several key financial reports that one should be familiar with. What is a Trial Balance? It is a record of the account balances received from the ledger at one point time. It has a very immense importance in accounting. What is a Trial Balance used for?

The Trial Balance is a report that bookkeepers and business owners use to check the mathematical accuracy of the ledger accounts. Moreover, it helps the accounting specialists to prepare the other accounting reports in less time and more accurately. After all, they have totals of each account already checked and ready to be used for inputting into other reports and calculating important financial metrics.

It is prepared periodically, usually at the end of each month Continue reading “What is a Trial Balance? Definition, limitations and example”

You have already agreed with your client what services you are going to provide and the price for these services. Have you agreed, though, on the payment terms? An invoice is basically a demand for payment and it’s the most common method of requesting payment from the customer. When submitting an invoice to a customer, it is important that the invoice indicates when payment should be made.

In challenging economic times, it is more important than ever for businesses to assess and review their invoice payment terms to ensure that they do not get caught doing work for free. These are terms on which the company provides goods or services to a customer. Are you new to negotiating payment terms with suppliers and customers or have you been Continue reading “Invoice Payment Terms”

Loan Amortization

Amortization is simply a way to pay back a loan. All loans come in three parts and the first two parts are principal and interest. The principal can be thought of as what goes towards the actual asset that you get to keep. Interest is what the bank charges you to actually use the money. It is usually represented as a percentage.

Since you are making monthly payments towards the loan, the loan itself is going to have a time span, which is typically 15 to 30 years. Amortization makes the loans scheduled, so in the beginning, 90% of your payments will be interest and the remaining will go towards the principal. This way, if you default on the loan, the bakers have already made their money. Towards the end, the principal Continue reading “Loan Amortization and Amortization in Accounting”

Transactions in the real estate market always have investment content, as they are carried out with the aim of generating income and (or) acquiring capital assets. Investments are made in both the primary (new construction) and secondary (transfer of ownership) real estate markets.

Investing in real estate usually gives a higher return than lending money. Therefore, in many countries of the world, the purchase of houses and other objects is financed mainly through borrowed funds. The return on investment in real estate consists of two or three parts, depending on specific conditions:

• increase in the market value of the real estate over time and gain during resale;
• current income in the form of rent and other receivables from the Continue reading “Capitalization Rate and Its Meaning in Real Estate”

Are you an owner of a small business looking for a new payroll provider? Then, you would want to read this Intuit QuickBooks Payroll Review. QuickBooks is a very popular business solution. Today, we will would like to help you decide if their payroll service is something that would meet your business needs or if you should look elsewhere. 

This service is made specifically for small businesses and comes with an impressive list of features. Intuit It provides a way for them to pay their employees easily, on time, and without much hassle. Running payroll is fairly straightforward and reduces manual work to a minimum. Although this service has some downsides, most clients find that the benefits are worth it. 

Pros

• Trustworthiness Continue reading “Intuit QuickBooks Payroll Review 2021”

You will not be able to learn how to calculate profit and loss if you do not know the formula. It is rather very simple: Profit = Revenues – Expenses

How to calculate profit and loss: Step by step guide

1. Gather Information 

Your first step would be to prepare all the financial data necessary for the calculation. If you have a Trial balance at hand, then you are all set. Otherwise, have all your business bank transactions on hand. You will also need to have a record of transactions you made with cash. This might include your petty cash book, as well as any receipts for cash purchases. Finally, if you had income sources that were not included in your bank or cash records, then prepare a list of all your income sources. 

2. Revenue

Continue reading “Beginner’s Guide: How to Calculate Profit and Loss”

Definition 

The accounting equation is one of the most fundamental accounting concepts that underpin the entire double-entry system. All entries that are made in the debit part of the balance sheet must contain corresponding credit postings in the Balance sheet. This rule is also known as the balance sheet or accounting equation. What the accounting equation may be expressed as? 

Basic version

The basic formula of the accounting equation can be seen below. 

Let’s analyze the accounting equation formula.

• Assets: the value of all items owned by the company, they can be tangible or intangible, but they are all owned by the company.
• Liabilities: all debts that a company is obligated to pay in the short or long term.
• Equity: Continue reading “What the Accounting Equation May Be Expressed As?”

Definition

Revenue is the money generated by the sale of goods or services. It is something every business would like to see. What is unearned revenue then? Unearned revenue exists because customers pay the business in advance for services yet to be performed or products yet to be delivered. You might have heard of deferred revenue or prepaid revenue. Well, all of these are actually the same thing. They are just different ways of saying unearned revenue.  

What is unearned revenue on the company’s Balance sheet? Unearned revenue is considered a company’s liability because it received payment from a customer in advance and still needs to earn it. If the company for some reason does not fulfill its obligation before the customer, Continue reading “What is Unearned Revenue?”