Income statements are very important parts of any company’s financial statements. It is a summary of a company’s revenues and expenses over a particular period, usually one fiscal year. The statement of comprehensive income is also a part of the income statement, but it includes both standard net income and …

Most business entities prepare financial statements that focus on profitability. The accounting systems these businesses use also reflect this focus. However, the same does not apply to nonprofits and government organizations where profitability is not the emphasis. For these entities, other accounting systems exist, including fund accounting. What is Fund …

In accounting, expenses refer to the outflow of economic benefits during a financial period. This definition is crucial in setting apart various spending during that period. Usually, companies write off an expense in the same period as the settlement occurs. However, it may not apply in every case, like for …

Costs are crucial to the operations and business of a company. They help create assets that help in generating revenues. However, not all expenditure falls under costs. On top of that, companies may also categorize these costs to understand their operations better. One such categorization includes the cost of sales, …

Companies require assets to operate. An essential of these includes a physical location, such as a building. Usually, companies acquire their property and work from it directly. However, some companies may use a leased property for their operations. Companies may also need to modify this property to ensure it suits …

A budget is a monetary plan for an upcoming period. It can also help forecast financial performance and position. Usually, companies prepare a budget for every financial period. Once created, companies can use it as a tool to control performance. Companies can use various types of budgets for different areas …

Companies can choose between various forms of finance. The two most common ones include equity and debt. However, each source comes with its costs. While equity is more expensive, it is easier to obtain. The primary expense associated with equity finance is dividends paid to shareholders. In contrast, debt finance …

Companies that offer credit sales accumulate accounts receivable. These are balances that they expect their debtors to pay before a set credit term. Usually, debtors repay their debts before the defined period. However, some may also go beyond that or not settle those debts at all. Companies must analyze their …

A company records transactions in its accounting systems throughout the year. These transactions come from various sources. At the end of each financial year, it summarizes these transactions in a general ledger and then a trial balance. The next step within this process is preparing financial statements. However, companies must …

A loan is a form of debt to finance various needs and operations. Companies often obtain these from financial institutions. In exchange, the lender receives interest income. Accounting standards do not allow companies to account for loans in the same accounting period. Since this finance spreads over several periods, the …