In business it often happens that you’re either asked or you’re willingly making a prepayment to your supplier. You will receive goods or services at a later date compared to when you pay for them. Continue reading
Initial recognition of assets, i.e. property, plant and equipment items or intangible assets like software etc. doesn’t differ much from when you recognize inventory for an example. It’s the subsequent measurement that’s more complicated when it comes to accounting those types of assets. Continue reading
Buying services or goods for your own use – the accounting treatment is the same.
Essentially something you must realize is that you’re making an expense for your business. Even if it’s buying goods that you will use for your own business, i.e. office supplies or some such, it’s an expense for your accounting. Continue reading
When buying goods there are two types of goods you can buy – ones you use yourself in your business or the ones you sell to your customers. Since first are treated as buying services really, we’re not going to focus on those in this post, but the second one. Continue reading
When we’re talking about “making an accounting entry” what we mean is a two-sided entry you’re making into your accounts with one side being debit and the other credit. Obviously there can be more than one debit or credit, but each entry must always have its debit and credit side. Continue reading
The accounting for receiving services doesn’t differ much from the entry made when purchasing something. You essentially still bought something, but this something isn’t an item and you shouldn’t put it into your inventory hence there’s just one place to charge it – into expenses as you got the service or split over the period the service is received (i.e. if it’s a commercial that’s shown two months in a row, the expense should be accounted 50% in one month and 50% in another month making it a prepaid expense on your balance sheet at the end of the first month). Continue reading
You bought something for your own business and now you know you should account for it. You’re not running a shop in some small village like 100 years ago where you could just get cash from the till, go buy something and be done with it. No.
The way we do things is quite the opposite. I mean we still take money if we are going to pay by cash, but there’s more to it. Yes, we also pay via bank transfers, but that’s not what I’m on about. Continue reading