Definition: A contra account is a ledger account related to another specific ledger account. In fact, as the name “contra” suggests, it is the opposite of a specific class of account. A contra account is used to reduce the value of the opposite related account. This means if the associated account is a debit, the […]
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Accounts receivable is the amount owed to the entity by the customers that have bought goods from the entity on credit i.e. the sale has been made but the payment has not been received yet at the end of the accounting period. Month or year. Even though the payment is not collected, the entity still
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The main purpose of a business entity is to earn a profit, and the international accounting standards require every business entity to report its financial gains and losses. Most small businesses are relying on the operating cash inflow for their day-to-day operations. Therefore, more sales mean more cash inflow. But it is also true that
Overview: Any company that has a policy of selling goods on credit has to deal with the problem of bad debts. Bad debts are uncollectible invoices that are written-off from the accounts receivable after all attempts of recovery have been made. This loss of revenue is referred to as a bad debt expense. As per
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Bad debt expense: A bad debt expense is a loss that the company incurs related to the accounts receivable. It is an invoice that is uncollectible since the customer is unable to pay or not willing to pay back the amount for some reason and all attempts of recovery have been made by the company.
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Accounts receivable: Accounts receivable of a company represent the amount that customers owe to the company in respect of the purchase of goods or services on credit. Sales on credit means that the revenue has been earned and recognized in the financial statements in the accounting period, but the payment for it will be received
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Introduction: The decrease in the value of an asset due to wear and tear is called depreciation. According to International Accounting standards, all the Fixed Assets should have an estimated useful life. And the firms should divide the cost of an asset on its life cycle. Accounting standards do not allow you to expense all
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Overview: According to International Accounting Standards, the cost of a long-term asset should not be expense out in a single year profit & loss. It states that this cost should be capitalizing on its estimated useful life. The depreciation is an expense allowed to deduct from the company’s profit. This is a non-monetary expense. And
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Depreciation Rate: The rate or percentage at which the value of a fixed asset is depreciated using any method is called the depreciation rate. In other words, the depreciation rate is the rate that we use to charge fixed assets as depreciation expenses that report periodically in the income statement. The result value that comes
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Depreciation reflects the pattern of the benefit flowing from the tangible asset(s) – property plant & equipment (PPE) – to the entity holding it. There are many types/categories of PPE like building, machinery, plant, equipment, fixtures, leasehold assets, vehicles. The deprecation begins when the asset is available for use as intended by management until the
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