As with liabilities, assets as well are spread into two major groups. Within assets on your balance sheet you can have two types of assets, both current and non-current. Continue reading
Author Archives: Karl
Distinction between short term and long term liabilities
Liabilities are normally divided into two subgroups on the balance sheet. There are other subgroups within those groups, but the major distinction that’s done with liabilities is dividing them into either as short term or long term liabilities.
Retained earnings on your statement of changes in owner’s equity
What’s this ‘retained earnings’ we hear often talked about? It’s retained, that is it’s kept unused for a period of time, that’s for one, but what does it comprise of? What is being retained? Continue reading
Changes within share capital account – can there be any?
One question that sometimes arises is whether there can be any changes within an entity’s share capital. Short and simple answer is that ‘yes, there can be such changes’. More so, the changes can both be negative and positive.
A positive change that can take place relates to payments being made into the equity and in full or partially into the share capital. Occasions when you’d want to increase your share capital arise when you need extra funding for your company and you’re issuing more shares for instance or you need to meet the minimum requirements there may be imposed to your equity in total (i.e. it cannot be negative) and so on. In situations like these you’d consider paying into the share capital as well. Although, it should be mentioned that due to the restrictions there may be on reducing the capital, if decided so, the payment into the capital itself should be as minimal as possible.
Capital decreases happen mostly in two cases – when there’s simply too much share capital or when the company is winding down its business and decides to pay at least some of the capital back to its owners. Note that such action may be subject to dividend regulations (meaning also additional tax expense in most countries) and should be consulted with your local auditors or other officials for tax optimization advice.
Share capital within the equity accounts
Share capital is something that you initially pay into your company. Depending on your local legislation, it can be a monetary and a non-monetary payment, or it can comprise of both. Matter of fact is that this is considered as your starting capital you can essentially buy goods, equipment for and so on to start off with your business.
A balance sheet defined
I think that there’s a really descriptive name given to an entity’s balance sheet for instance in the International Financial Reporting Standards. An entity’s balance sheet is also called as ‘statement of financial position’ and that’s exactly what a balance sheet in essence is. Continue reading
Borrowing costs included within the cost of a PPE item
The item within your property, plant and equipment where you’d use borrowing is something you’re building over time. When you buy an asset which costs a lot, you use a finance lease, however what if you’re building something an asset which evidently is also costly (hence it also takes a longer period) and you’ve actually taken a loan from the bank to finance the building?