In financial accounting, costs usually appear as account balances on the balance sheet or as expenses in the income statement. Companies classify these costs based on accounting conventions and standards. However, the same does not apply to managerial accounting. In that branch, companies may divide costs based on other factors. …

Companies maintain an accounting system to record and report their financial transactions. Journal entries are the essence of that system. These are a system of recording transactions by creating an impact on the related accounts. However, journal entries follow the double-entry system of accounting. Before discussing these entries, it is …

Companies report their account balances on the balance sheet. These balances come from an underlying accounting or accumulation of accounts from the financial systems. However, some items may also reduce the total reported amount on these accounts. These items are known as contra accounts in financial accounting. They may relate …

Company’s assets are the sum of all the things they own. This includes cash, investments, property, inventory, and equipment. Every company needs to track its assets so it can make informed decisions and stay solvent. The Net Book Value or NBV is the record that a company keeps of its …

Some companies offer their customers the option to purchase goods or services for credit. It allows those companies to sell more items while allowing customers the facility to defer the payment. After a company delivers its goods or services, it will send the customer an invoice. The customer can pay …

Contra Asset is a term used in business to describe an asset that is used to offset another asset on the balance sheet. Contra assets are used to reduce the value of an asset, such as accounts receivable or inventory, that will eventually be sold or otherwise converted into cash. …

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 …