Cogs type of account3/28/2024 ![]() ![]() Liability is a financial obligation on the business that needs to be settled in the future. These assets are also termed long-term assets/fixed assets examples include equipment, plant, vehicles, furniture, machinery, etc. On the other hand, it’s difficult for the non-current assets to be converted into cash/cash equivalents. Current assets are assets that are liquid enough to be converted into cash/cash equivalents-for instance, marketable securities, term deposits, accounts receivables, inventory, and short-term deposits, etc. Similarly, assets can be current assets and non-current assets. On the other hand, the value of a non-financial asset is dependent on the physical net worth. For instance, a financial asset derives its value from a contractual claim to receive the cash. However, the business must expect to have future cash in-flows with this ownership/control.Īn asset may be financial/non-financial, depending on the way the value can be derived from it. ![]() An asset may be equipment purchased/developed by the business, some patent purchased/developed by the company, or even brand value/goodwill.įurther, assets are expected to generate cash in-flows, help reduce expenses to be incurred and improve the company’s sales. AssetsĪn asset is a resource controlled by the entity it has certain economic value and may be tangible on intangible. Let’s discuss detailed aspects of these types of accounts. Sometimes, both credit and debit may be posted in the same account depending on a financial transaction. Hence, one of the accounts is debited, and one of the accounts is credited. These accounts include assets, liabilities, equity, revenue, and expenses.Īccounting transactions need to be posted considering the double impact on the accounting system. The accounting transactions need to be posted in five different accounts relevant to the nature of the transactions. An activity may be referred to as the occurrence of some business-related event that needs to be recorded as a transaction in the accounting record. When the business carries out some activity, an accounting record must be updated. The formation of a financial statement is initiated by recording a double entry in the accounting system. ![]()
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