Who is an Accountant?
An accountant is a professional who is skilled in performing accounting tasks such as recording business transactions, preparing financial statements, and issuing invoices to clients. An accountant works under the supervision of a CPA (certified public accountant), chartered accountant, or other management accountant.
What Accounting Terms you should know?
Here are some common accounting terms you should know:
- Cost of Goods Sold (COGS) – Refers to the costs used to produce a product. Plays an important role in determining business profits
- Inventory – This includes raw materials in storage, items in the manufacturing process, and finished goods available for sale
- Assets – Assets refer to tangible or intangible assets that help add value to your business. There are current assets and fixed assets. Current assets refer to assets that can be converted into cash within one year, and fixed assets refer to assets that cannot be converted into cash immediately.
- Accounts Payable Accounts payable refers to money that you owe. Current liabilities and long-term liabilities may exist, where current liabilities are those that are due within one year and long-term liabilities are those that are not due within one year. Equity – Refers to the enterprise value after deducting liabilities from assets
- Revenue – refers to the amount of money your business makes through sales
What is working capital?
This refers to the capital used in day-to-day trading. Calculated by subtracting current liabilities from current assets. Working capital helps companies calculate the resources they can rely on to carry out their operations in the short term.
What is the difference between accounts payable and accounts receivable?
Debt refers to the amount a company owes to purchase goods or services on credit from a seller or supplier. it is a responsibility. Accounts receivable refers to amounts owed by a company in connection with a credit sale of goods or services. Act as a company asset.
Are inactive and dormant accounts the same?
An inactive account is an account that has been closed and can no longer be used. A dormant account is an account that is not currently in operation but can be used in the future.
What do you mean by executive accounting?
Executive Accounting is aimed at service-oriented companies. It is relevant to the finance, advertising and PR industries.
Which is better cash basis accounting or accrual accounting?
If you want to keep your account efficient, you can use cash-based accounting or accrual-based accounting. Cash basis accounting is a simple accounting system compared to accrual basis accounting. Cash accounting requires that transactions are recorded only when payments are actually made or received. Accrual accounting, on the other hand, requires you to record every transaction that occurs, even if no money is actually received or paid. Double-entry bookkeeping requires you to make two entries for each transaction. Choose accrual accounting if you want to provide credit to your customers.
Anyway, you can choose the method that suits you, but the government mandates some businesses to choose accrual accounting. If your total annual sales exceed his $5 million or your gross income from inventory sales exceeds $1 million, you should opt for accrual accounting. If your business structure is C Corporation, you must use accrual accounting.