Understanding Accounting Principles and Practices
Accounting Principles and Practices
Assets and Liabilities
(406) Containers and packaging returnable to suppliers belong to: Assets
(407) Advances to suppliers belong to: Assets
(438) Advances to customers belong to: Assets
Group 4 accounts belong to: Current assets and current liabilities
Insurance Policy Accounting
An insurance company invoiced a customer for an annual insurance policy in November, collecting it. The closing date is December 31st every year. For that reason, at the end of the accounting
Read MoreCentral Bank Functions: Currency, Banking, and Fiscal Roles
Central Bank
1. Legal Currency Provider: The central bank is the sole issuer of a country’s legal currency. While printing may occur at mints or abroad, the central bank controls the process. Damaged notes are typically destroyed in central bank vaults.
2. Bank of Banks: The central bank acts as a lender to other banks facing temporary liquidity issues. With board approval, banks can receive short-term loans, which may be renewed. If a bank’s problems are permanent, the central bank can intervene,
Read MoreTrade Restrictions and Exchange Rates: Impact on Global Commerce
Trade Without Restrictions: Disadvantages of Restrictions
- Higher prices for consumers.
- Fewer choices for consumers.
- Protectionism often leads to retaliation, resulting in higher import prices and, consequently, higher consumer prices.
- Higher prices can lead to lower overall demand, causing job losses in other industries.
Trade With Restrictions
- Protection of national defense and citizens’ health.
- Protection against dumping.
- Potentially lower prices for consumers in specific cases.
- Protection for new and
Accounting Entries: Sales, Returns, and Adjustments
1. Credit Sale with Discount and Returnable Packaging
- A sale of goods on credit for 1,500 euros was made. The invoice includes a discount of 150 euros. The goods are contained in returnable packaging, which is billed at 200 euros.
1,798.00 | 430 | Customers [(1,350 + 200) * 1.16] | to to to | Sales of Merchandise (1,500 – 150) Packaging and Containers to be Returned by Customers Output VAT [(1,350 + 200) * 0.16] | 700 437 477 | 1,350.00 200.00 248.00 |
2. Fire Loss of Returnable Packaging
- A fire in the warehouse destroyed returnable
Financial Accounting: Principles and Practices
1. Financial Accounting Fundamentals
Financial accounting is:
B) An information system for business decision-making
Which of the following users is more interested in profitability?
A) Stockholders
Which of the following users is more interested in liquidity?
B) Creditors
Which is not a financial statement?
C) Ledger
The activity of raising funds for the company is known as:
C) Financing
The activity of purchasing the necessary assets is known as:
A) Investing
The statement which reports the economic and financial
Read MoreEffective Working Capital Management and Cash Flow Analysis
Working Capital
Accrual
- Revenue is recorded when earned (even if the money is not received)
- Expenses are recorded when the goods and services are received (even if the money is not yet paid)
- Do not rely on the income statement, but look at the cash flow statement
- Accounting profit may not reflect the cash flow reality facing the firm
- The cash flow statement helps to provide a clearer picture of where cash is coming from and where it is going
Working Capital Formula
- Current Assets – Current Liabilities
- (