Trial balance

Trial balance

What is a trial balance? A trial balance is a list of all the General ledger account contained in the ledger of a business. This list will contain the name of the ledger account and the value of that account. The value of the ledger will hold either a debit balance value or a credit balance value. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column. The…

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Book value of equity

Book value of equity

Book value of equity: The term book value of equity refers to the net worth of a business. It consists of the total assets of the business minus the total liabilities. The book value of equity will change in the case of the following events: Changes in the company’s assets related to its liabilities. Depreciation: Equity will decrease. Issue of new equity in which the firm obtains new capital increases the total shareholders’ equity. Share repurchases in which a company gives back money to its…

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Bank Reconciliation

Bank Reconciliation

What is a bank reconciliation statement? A Bank reconciliation statement is a report which compares the bank balance as according to the company’s accounting records with the balance shown on the bank statement. Why is bank reconciliation necessary? It is normal for a company’s bank balance according to its accounting records to differ from the balance as on the bank statement due to timing differences. Certain transactions are recorded by the business that are updated in the bank’s system after a certain time lag.  Some…

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Payroll Journal

Payroll Journal

What is a payroll journal? A payroll journal is a detailed record of transactions that are related to the company’s payroll. Smaller organizations often choose to record their transactions directly in the general ledger. Larger companies will find that the numbers of these entries will fill the general ledger. In light of this, they record payroll-related transactions in the payroll journal, and then record a single entry in the general ledger that reflects all of the transactions recorded in the journal. When they use accounting…

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Cash Receipts journal

Cash Receipts journal

The Cash Receipts journal is the first place you record incoming cash for your business. The majority of cash received each day comes from daily sales. Other possible sources of cash income include deposits of capital from the company’s owner, customer bill payments, new loan proceeds, and interest from saving accounts. Each entry in the Cash Receipts journal must indicate how the cash was received but it must also show the account into which the cash will be deposited. In double-entry bookkeeping, every transaction is…

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Accounting Terminology Q-U

Accounting Terminology Q-U

Reconciliation:  It is the act of proving account balances. Your debits and credits are equal. Retained Earnings:  Accumulated earnings of the business minus the dividends. Revenue: The actual amount of money a company brings in during a particular time period; gross income. Shareholder Equity: Total assets minus total liabilities of a corporation or person. Single-Entry Bookkeeping: An accounting method in which transactions are recorded as a single entry. Statement of Account: It is a report indicating the account status of an agreement between creditors and…

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Book value of equity

Accounting Termilogy L-P

Liability: Money owed to creditors, vendors, etc. Liquid Asset: Cash or other property that can be easily converted to cash. Loan – money borrowed from a lender and usually repaid with interest Master Account:  an account on the general ledger that subtotals the “subsidiary accounts” assigned to it. Net Income: – Money remaining after all expenses and taxes have been paid. Non Cash Expense: – Recognizing the decrease in the value of an asset. Non-operating Income: Income generated from non-recurring transactions. Note:  A written agreement…

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Accounting Terminology F-J

Accounting Terminology F-J

Financial Accounting: Accounting focused on reporting an entity’s activities to an external party such as shareholders Financial Statement: A record containing the balance sheet and the income statement. Fixed Asset: It is long-term tangible property such as buildings, land, computers and vehicles. General Ledger: a record of all financial transactions within an entity Goodwill: An intangible asset reflecting the value of an entity in excess of its tangible assets Income Statement:  A summary of income and expenses. Inventory: Merchandise purchased for resale at a profit.…

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Accounting Terminology A-E

Accounting Terminolgy A-E

Accounting: The process of identifying, measuring, and reporting financial information of an entity Accounting Equation: Assets = Liabilities + Equity Accounts Payable:  Money that is owed to creditors, vendors, etc. Accounts Receivable: money owed to a business, i.e. credit sales Accrual Accounting: a method in which income is recorded when it is earned and expenses are recorded when they are incurred, all independent of cash flow Accruals: a list of expenses that have been incurred and expensed, but not paid or a list of sales that…

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IFRS

IFRS – International Financial Reporting Standards

IFRS are standards and principles that are used in the preparation of financial statements set by the International Accounting Standards Board in 2001. The IFRS uses the principle of the Accrual basis which recognizes transactions when they occur, not when funds are received or paid out for the transaction and the Going concern which assumes that an organization will continue operations in the future. The IFRS states that financial statements should consist of a Balance Sheet which is used to show the financial position of…

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