Accounting

What is an operating asset? Operating assets are the assets required by the business to execute business operations and generate revenue. Examples of operating assets include prepaid expenses, fixed assets, inventories, cash, and accounts receivables, etc. Further, intangible assets like patents, technology, and licenses are also considered operating assets if used to manufacture and generate […]

Official Definition “Warranty is an implied or expressed promise of a manufacturer/vendor to a buyer, assuring that the product’s specifications, facts, and conditions are true and valid.” A business’ warranty expense is the cost of repairing or replacing items it has sold or is expecting to incur in the future. A business’s warranty period determines

Idle time is when workers are paid for an unproductive time due to some causes that may or may not be under the control of management. Idle time is typically paid to full-time laborers rather than indirect workers compensated based on the number of hours worked. Further, the business needs to control idle time as

Inventory management is one of the important areas to run and manage your business effectively. Knowing how much inventory you have at your business premises and what level should be maintained mitigates the risk of an out-of-stock situation. So, there is a need to account for inventories properly via recording journal entries of purchasing, processing,

Definition: Goods receive notes/delivery note is prepared by business to document details of the goods received from suppliers. It’s used as a supporting document while recording liability and paying to the suppliers. It serves as evidence for the delivery of specific goods quantity. So, it can be used by both seller and buyer to compare

Inventory reserve is contra account in the business’s balance sheet, and it’s recorded in line with the prudence concept of accounting. Let’s understand the concept in detail. Ideally, the closing balance of the inventory should be equal to sales minus purchases. However, that’s not the case with most businesses around the globe. So, there is

An insurance policy is purchased to cover the risk on the assets and operations of the business. In case of a loss, an insurance claim is filed. In other words, insurance claims are received when a policyholder faces an unfortunate circumstance and requests the insurance company to compensate for his loss provided that the loss

Repair and maintenance expense is incurred to keep business assets operational, it’s a routine expenditure, and this amount is expected to be significant for the companies with intensive machinery and equipment. On the other hand, repair and maintenance are limited for the companies operating in the trading and service sectors. This expense must not be

Companies are complex structures that represent a separate legal entity. Primarily, they issue shares that allow shareholders to become part-owners. Being a separate legal entity, companies have all the rights that other legal entities have. Therefore, companies can also buy shares from other companies as a part of their investment policies. The accounting for investments

In most jurisdictions, transacting in cash may be acceptable. While paying and receiving cash is the primary source of compensation for most transactions, some may prefer other options. The most prominent of these are bank accounts and transfers. For most individuals and companies, banks have taken over cash transactions. Some jurisdictions even require entities to