How would you define net realisable value (or NRV) for inventory items? International Accounting Standards define net realisable value as ‘the net amount that an entity expects to realise from the sale of inventory in the ordinary course of business’. Continue reading
Author Archives: Karl
Monthly salary
A most regular type of salary being paid to employees is a monthly salary. Such interval, a month, is most commonly used, however there are countries where it’s expected that the salary for work done is paid each week. I would suggest you consult your local legislation and what’s customary in your country. Continue reading
Inefficiencies in production
Inefficiencies in production are in reality treated differently. There are companies who don’t even know that they’re being inefficient, there are companies who consider inefficiencies as a part of the everyday process and those who treat inefficiencies as something very serious and fight against them. Continue reading
Comparing sales orders against shipments
Why would you monitor your sales? Do know that they indeed happened to put it in short. Sales are not just about making accounting entries, but also ensuring that your customers are getting what they ordered. If you think about it, in a case where the sale hasn’t in fact taken place (that is the customer didn’t get anything) you’re not getting paid either (and you could be asked to pay back any prepayments made for the purchase by the customer if that’s the case). Continue reading
Controls over payroll expense
Why would you want controls over your payroll expense? This would depend on the number of employees you have, the work they carry out and the complexity of your payroll application. Continue reading
Importance of closing an accounting period
The importance of closing accounts for a determined period derives from understanding the importance of financial reporting in the first place. Financial reporting is for having accurate accounts about a company and it’s performance. Without those the business could possibly go into bankruptcy since it’s not in compliance with regulations (i.e. not paying taxes in due time, in required amounts), it would be unable to meet it’s creditors demands due to insufficient cash flows and liquidity problems (since the accounts didn’t reflect accurate demand of raw material for an example and the company kept purchasing more when it didn’t need this much goods). These effects in turns impact people, they would lose their jobs and so on. Continue reading
Definition of an accounting period
First and foremost it’s important to understand the definition of a period. A reporting or an accounting period is not just a year, it’s not just a quarter, but usually the shortest period measured is a month. Continue reading