Usually, when selling both goods and services, you are bound to sell them together within one package at some point. Normally, provided you sell both separately, you would have a price for each of them and recognizing them in revenue isn’t at least an issue when it comes to determining the sum to be recognized. Continue reading
Category Archives: 1 Basic Accounting
Recognizing revenue when you’re selling goods and services within one package
Selling goods and services both together means that you need to consider their treatment separately.
First and foremost you must understand that provided this service is just setting up the goods (i.e. a machine), it’s recognized alongside with the revenue from the sale of the item itself. Now provided though that this service is something else than just setting the item up, it needs to be recognized separately from the revenue of the item itself. Continue reading
Incorporation expenses
When establishing your company, incorporating it by all relevant regulations etc., paying registration and whatnot fees, you encounter expenses.
Something that seems natural is to capitalize those expenses into your intangible assets and then amortize them into expenses over a period in time. Another method I’ve noticed is capitalizing them and bluntly leaving them there with an indefinite life. Continue reading
What is inventory?
Your inventory is an amount of goods and / or materials you own in your business. An item of inventory is a physical, tradable and / or usable item. The general purpose of an inventory item and obviously inventory total is always to make business.
Items of inventory are such that you use for either production, sales (that is you’re selling those items) or for your own use in running your business. The latter is something that’s rather not common, but happens nonetheless. Continue reading
Owning a building versus renting
You’re in need of a office space and let’s presume you have two options – whether to buy a small place or rent another. They are equally suitable both in terms of interior and their place in the neighbourhood. Which one would you go for?
On one hand you could buy a place, which in return would be yours. You’d have full rights deriving from ownership over the place, i.e. refurnishing, remodelling etc. You’d have all the rights to use the place as you see fit and as the neighbours allow obviously. A downside of an ownership is that you’re tied to various obligations to maintain the premises not just clean but also fixed and renovated. Yes, if it’s part of a bigger building, it’s not just you alone, but still. You’d be part of all the other owners who face that obligation. Continue reading
Necessary parts of a loan agreement
Forming loan agreements is something you normally are involved with when you’re giving out loans. Rarely it’s something someone getting a loan needs to do because it’s the risks of the loan giver that need to be covered. Whilst it’s a communication and agreement between parties, there’s still one party that’s in a driver’s seat sort of say.
Now, if you ever find yourself in this seat, there are a few things you need to make sure are set out in the formal agreement. And yes, the agreement needs to be formal or at least written because how else would you prove you ever gave a loan? Continue reading
Expenses and purchases
Expenses in your business can be of various types (or for various purposes) – cost of goods sold, administrative and other operations related charges, payroll expenses, depreciation of assets etc. Those are the general types of expenses a business can have as a part of their income statement. They support the business in one way or another and are part of generating revenue at the end of the day. Continue reading