When a company decides to terminate (either partially or completely) the business, it liquidates all of its financial and non-financial assets including inventory, buildings, and machines. The sole purpose is accumulating enough funds to pay back liabilities to all the secured and unsecured creditors. The remaining amount is then paid to the shareholders as liquidating […]

No doubt, selling products and services is the mainstream of revenue for businesses of all sizes. These businesses allow their customers to avail of discounts if they make early payments or pay the full amount upfront. Discounts allowed work like a charm in order to boost their sales, increase brand awareness, receive quick & early

Overview of Discounts Allowed A company may offer clients a discount if they pay their bills on time in business. When clients take advantage of the discount by making an early payment, the company must account for it with an appropriate journal entry. Because the company records the total amount as sales income when a

Overview Bank overdrafts is a popular feature of bank facilities that allow you to spend more than you have in your account. This is known as an “overdraft facility” and can be helpful if you need to make an urgent purchase that isn’t covered by your current balance. However, overdrafts come with fees and interest

Discounts are persistent in today’s corporate world. They are usually given in exchange for some consideration, ranging from prompt payment to market rivalry. The “Discount Allowed Account” is debited when a journal entry for a discount is posted. The discount allowed is a business expense that is recorded on the debit side of the profit

Freight-In When a company, as the buyer, is required to pay for the transportation of products purchased from suppliers, freight-in costs are incurred. Similarly, suppose the firm utilizes the perpetual inventory system. In that case, the company must record a journal entry for freight-in by recognizing this expense as a component of goods inventory or

What is a Warranty? A warranty is a promise from the product’s maker that the product will perform as promised. If it doesn’t, the manufacturer will fix it at no charge to the consumer. The majority of warranties are restricted since they do not cover damage caused by accidents, abuse, or other non-defective issues. Some

Rent received in advance is the amount of rent received before it was due, but the landlord has yet to get the connected benefits equal to the advance obtained. The amount the landlord received from the tenant could not be fully recognized as rental income since the service is not provided yet. Because it is

One significant type of expense that an entity often incurs is the prepaid expense. To keep the accounting books accurate and up-to-date it is important to know how to record such expenses. This article is all about prepaid expenses, common examples, and most importantly, the steps to record them. Prepaid expenses are the future expenses

Apart from different financial sources, the owner of the company also invests to either start-up or expand the operations at the stage of maturity. The owner’s contribution is what the owner invests to cover the business expenses either through personal funds or by transferring funds to a business account. In the world of accounting, the