What is Amortization?
Amortization is an accounting method for spreading out the costs for the use of a long-term asset (such as intellectual property) over the lifetime of this long-term asset. Amortization expenses account for the cost of long-term assets (like computers and vehicles) over the lifetime of their use. Also called depreciation… Read more »
What are Accrued Expenses?
Accrued Expenses are expenses that a business incurred for which there is no invoice or documentation issued yet available for its payment. It classified on the Balance Sheet as Current Liabilities so it is expected to be repaid within 12 months. Examples of Accrued Expenses A common example of an… Read more »
What is the Acid-Test Ratio?
The acid-test ratio compares the Quick Assets of a business to its Current Liabilities. Quick Assets are the business assets that can be converted into cash quickly; this generally means within 90 days. Quick Assets include Cash, short-term liquid marketable securities, and Accounts Receivable. It is a metric that is… Read more »
What is the Difference Between Accrual Accounting and Cash-based Accounting?
Accrual and Cash-based accounting are two different accounting methods that accountants use to prepare financial statements. They are both perfectly legal and acceptable within International Financial Reporting Standards (IFRS). So, What’s the Difference? The major difference between the methods is when Revenues and Expenses are recognized. Accrual Accounting In Accrual… Read more »
Managing Accounts Receivable in a Business
What is Accounts Receivable? Accounts Receivable is money that is owed to a business after the business has sold its product to a customer. The business is waiting to receive payment for its sale. As with Accounts Payable, it is crucial for a business to manage its Accounts Receivable correctly… Read more »
The Importance of Managing Accounts Payable
Accounts Payable is the money a business owes its suppliers for goods and services that have been delivered to the business. The supplier would have also provided an invoice for the delivery. Managing accounts payable is incredibly important as it directly affects the cash flow of the business. Cash flow… Read more »