Most industries follow a continuous production cycle. Consequently, companies follow a process throughout the year without much modification to their work. Process costing is the primary technique to determine product or service costs in these companies. However, some industries do not follow the same continuous system to serve clients. Companies …

Accounting is a field that involves collecting, analyzing, summarizing, recording, and reporting financial transactions. It includes branches that apply to various areas. One of these branches includes public accounting, which is a prevalent field. It is one of the most prominent forms of business based on accounting services. Therefore, it …

Companies prepare financial statements to report on their finances to their stakeholders. Usually, the balance sheet and income statement get preference because they include crucial information. However, companies also prepare two other reports, including the statement of cash flows and the statement of changes in equity. Although often overlooked, the …

What is a Trial Balance? The trial balance is a part of a company’s internal records used to prepare the financial statements. It gets its information from the balances reported in the general ledger accounts. Usually, the trial balance includes both income statement and balance sheet items. However, some versions …

A balance sheet is a financial statement that includes account balances from accounting systems. It classifies those balances under three categories, assets, liabilities, and equity. Primarily, it follows the accounting equation. This equation states the total of assets should equal the total of liabilities and equity. Therefore, the balance sheet …

The accounting process involves various stages. The starting point within this process is a transaction. Once a company participates in this transaction, it must record it in the books of prime entry. Consequently, it reaches the general ledger, which helps prepare the trial balance and financial statements. The general ledger …

Most companies offer credit sales allowing customers to purchase goods and pay later. This process also involves a credit term that defines the time limit for the customer to repay their debt. Usually, customers settle these debts before that term. However, some customers may delay their payments. Companies may use …

Not all businesses operate on a cash basis. Many businesses extend credit to their customers and clients, which means they may be owed money in the form of receivables. When a business is owed money, it’s said to have an accounts receivable balance. Accounts receivable (A/R) represents the credit sales …

Shareholders, investors, and other stakeholders decide on their relationship with a company based on financial information. Usually, this information comes from financial statements. Companies ensure they provide the necessary disclosures for these users to satisfy their needs. This requirement also falls under the full disclosure principle in accounting. What is …

Insurance is a prevalent expense for businesses and individuals. It is a contract between two parties, including a policyholder and the insurer. Essentially, the policyholder receives a form of protection against a specific event or loss. In exchange, they must pay a premium to the insurance company. Both parties benefit …