Category Archives: 1 Basic Accounting

Entity’s equity

As we have discussed earlier, an entity’s capital or equity is something that the owners have effectively invested into the entity in the form of paying in capital and later on leaving profits undistributed – share capital, reserves and retained earnings comprise the most significant part of equity under normal conditions. An entity’s equity is also labelled as ‘net assets’ of a company reflecting the portion of what’s left of the company once it uses up all its assets to settle its liabilities.  Continue reading

Change in residual value

Whilst we have discussed the term ‘residual value’, we haven’t really approached the matter of this being changed.

An asset’s residual value is an estimate the management makes using it’s best knowledge of the asset, it’s condition, it’s possible market at the end of it’s useful life, how extensively it will be used and so on. It’s not just the value the management believes they can get for the asset, but the conditions and inputs for determining the price.  Continue reading

Accounting for crediting sales revenue

Crediting sales is something that happens no matter how hard you try and have your invoices correct, your goods shipped in correct amounts and items. There’s a factor you cannot monitor and that’s you customer for instance. They may decide they want something else, something additional and so on. Thus it’s important to understand that crediting sales is absolutely normal and it’s even more important to understand how one should do it instead of avoiding it.   Continue reading

Collection of a previously written down receivable

So there was a receivable you once considered was partly uncollectable. Be the reasons what they are, as it happens, you’ve accounted for the write down (note that you haven’t written the receivable off, but just merely down; that is you’ve accounted for an allowance against the positive asset thus diminishing your assets in total by the amount you considered you will not collect from your customer).   Continue reading

Controls over production and inventory

Why do you think it’s important to have controls over inventory?

Inventory is related to your company’s operations. They are what you sell to generate revenues, they are your assets you sell regularly to earn profits. Note here that earning profits requires that your goods are priced accurately so as to cover for all kinds of expenses your company incurs.  Continue reading