When we’re talking about goods, we can either talk about purchasing or producing them. Purchasing is a process where you buy something and resell the item to your customer with adding no or little value to the item. Producing however means that you buy materials and your produce an item out of those materials buy […]
There are often times when you need to pay to your suppliers in advance. The reasons for why you’d need to do this may be what they are, but what matters to you, is recognizing those prepayments properly on your financial statements and treating them properly in your accounting.
Payments into equity are made to two types of accounts – share capital and reserves. No payments are to be made to retained earnings. Retained earnings account can only be changed in two circumstances – for paying dividends (that is payment is done from retained earnings) or changed when dealing with restructuring, i.e. merging or […]
Capital of an entity is divided into two – internal and external capital. An internal capital is owner’s equity and external capital is what third party has “paid into the entity”. Normally loans given and not supplier payables are defined as external capital. The reason for that lies behind the subject matter – supplier payables […]
With loans you’ll be taking, often times the transaction costs are a significant part of the loan, i.e. like in our example of lending 100,000 a contract fee of 2,000 would be considered as significant. Now in case the cost is less significant, say 500, this would be charged to expenses right away and you’d […]
When selling your goods to a distance, it’s crucial to set the transfer or delivery terms. It’s not so much for understanding who has the rewards from the ownership but the risks. If something were to happen with the goods while in transfer, someone has to bear the costs.
Sale of goods is seemingly simple – you have goods, you have a customer who wants to buy them and you sell them. As you sell them, you recognize the sale in your accounts and that’s all really.