Category: Bookkeeping

Bookkeeping

How to Calculate the Carrying Value of Assets?

The carrying value refers to the reported cost of the assets that a company owns. This means that the carrying value is the value of the assets shown in the company’s balance sheet or books of accounts, less the sum of depreciation (Also see Straight-line Depreciation and Accelerated Depreciation) based on the assets’ useful life. […]

Bookkeeping

Do You Think Dividend is an Expense?

Dividend refers to the portion of profits the company has generated which is distributed to the company’s shareholders. Most people would think that this is an expense from the company’s perspective because the company spends money to pay the investors. This is one of the common misconceptions among people who do not know accounting treatments […]

Bookkeeping

Why Do We Need to Generate Financial Statements?

One of the crucial facts that you should know before you start running a business is that you need to generate financial statements of your company for every financial year. This is what every business should do as the financial statements can portray the financial position and business performance of the company. With the help […]

Bookkeeping

Can You Differentiate Net Income and Net Sales?

All the for-profit organisations have the same objective, that is to generate profit. To earn a profit, the company needs to make sales. Thus, we can see that there is a close relationship between sales and profit.  If a company wants to earn more profit, it needs to increase its sales. However, income and sales […]

Bookkeeping

First in, First out (FIFO) and Last in, First out (LIFO)

Managing the inventories of a company is never an easy task for companies which are entirely stock oriented. Business owners may use various ways to maintain the inventories they own (Also see Periodic Inventory System and Perpetual Inventory System). Some of the examples are first-in, first-out (FIFO), last-in, first-out (LIFO), weighted average, as well as […]

Bookkeeping

What Do Market Value and Book Value Mean?

An asset’s market value shows its actual market price, where people would trade it at that price at the marketplace. On the other hand, an asset’s book value indicates its accounting value, which is calculated by subtracting accumulated depreciation or amortisation (Also see What is Goodwill Amortisation?) from the asset’s historical cost. This means that […]

Bookkeeping

An Overview of Bank Reconciliation

The bank reconciliation refers to the process of matching up the information on a company’s bank statement with the corresponding balances in its accounting records for cash accounts. This process aims to find out the differences between them and record the changes to the company’s accounting records (Also see How Do Accountants Record Transactions?). On […]

Bookkeeping

What is Goodwill Amortisation?

Goodwill amortisation is the systematic and gradual reduction of the value of a company’s goodwill asset. A company may calculate the reduction by recording amortisation charge regularly. Based on the accounting standards, companies may choose to conduct the amortisation over ten years on a straight-line basis (Also see Straight-line Depreciation and Accelerated Depreciation). If a […]

Bookkeeping

Differences Between Period Costs and Product Costs

Period costs are the costs that you are unable to capitalise into fixed assets, inventories or prepaid expenses. On the other hand, product costs are the costs that you have spent on manufacturing a product. You probably have heard of these terms, and you may wonder what their differences are, and you may mix them […]