Companies prefer using bank accounts for the safety and ease it brings to their cash systems. Companies record their transactions through their cash accounts. On the other hand, banks have internal records to track customer balances. The bank provides a bank statement to the company or customer. Usually, these records …

The terms gross and net may apply to various items. It causes some confusion about what items to include in each area. However, the difference between gross and net is straightforward. Usually, the term “gross” represents the total value of an item. It also helps calculate its “net” value, which …

Liabilities arise from an event that can cause an outflow of economic benefits in the future. For most companies, these include loans, leases, short-term borrowings, trade payables, etc. Another common item that companies may report in this category is notes payable. It is a type of liability that usually appears …

What is a Dividend? A dividend refers to the distribution of profits or earnings to shareholders. It is usually a portion of the income earned by a company over a specific period. In some cases, companies may also pay a dividend from their reserves, known as retained earnings. Some companies …

Every business has some kind of debt, and it is of the key ratios that creditors look at to determine a company’s creditworthiness. The Times Interest Earned ratio measures a company’s ability to make its interest payments on time. In other words, it indicates how well a company can cover …

Payroll refers to the expense on employees for a given period. It also includes any compensation and benefits provided to employees for their work. Usually, these payments occur at regular intervals. However, these intervals may differ from one company to another. Every company uses a different payroll system that dictates …

To make informed decisions, business owners need to track their income and expenses. Without this knowledge, it would be difficult to know whether the business is succeeding or failing. Bookkeeping involves recording all financial transactions made by a business. This can include sales, purchases, payments, and receipts. The goal is …

In business, when we refer to the “year to date,” or YTD, we are talking about the period starting from the beginning of the current year up until the present day. This calculation is important for portfolio managers to track and compare their investments against benchmarks and also measure their …

Most companies acquire goods and sell them at a profit. During this process, they may also process those goods or convert them to another form. However, purchases are crucial to the operations of these companies. Usually, companies acquire goods for credit and pay for them at a later date. During …

Understanding your company starts with an understanding of your company’s costs. To make informed decisions and to keep track of your company’s profitability, understanding the cost of goods manufactured (COGM) is essential. Mostly used by manufacturing companies, COGM includes all of the direct costs associated with making a product. These …