Account i

ngi nv olv est r

acki ngandkeepi ngar ecor doft hef i
nanci al transact ionsofan
organi zat ion.Mul tipl ef unct i
onsbui ldaccount ingi nt owhati tis, whi char ecl assi fy ing,
summar i
si ng, ver ifying, i
nt erpr et i
ng, recor ding, etc.dat ar elat edt ot hef inancesoft hatpar t
icul ar
i
nst i
tut i
on.Fr om t hev iewpoi ntofanor gani zat i
on, itshoul dbenot edt hataccount ingal sodeal s
withpr of itsandl ossesi ncur redduet ot het r
adi ngofgoodsandser vices.Addi tional ly, italso
keepsr ecor dsofasset sandl iabi li
tiesf oracompany .Nat ur ally,thedat ar elatingt oaccount ing
i
sr epr esent edi nnumber s, andder ivingt her ightconcl usi onf r
om ani nt erpr etat ionr equi rest he
properuseoft heaccount ingf or mul a.Youshoul dnot et hatt hesef or mul asar et hef oundat ions
ofaccount ing.Tobui ldast ronghol donaccount i
ngandi ndul gei nhi gherst udi esr elatingt o
account s, y ouneedt ogr aspt hemet hodsr i
ghtf rom t heirgr assr oot s.Her ei sadet ailedanal ysis
ofaccount ingandi tsf or mul ast hatar ei mpor tanti nst udy ingaccount i
ng. Whati sanAccount ing
Formul a? Toassesst hef unct ioni ngofasmal lbusi nessorev enal argeone, ther ei sasetof
speci f
icaccount ingequat ionf or mul ast hati smosthandy .Theycanbeusedasf irst-hand
solutionst oder i
v eaconcl usi ondependi ngont hebusi nessneeds. Thef or mul asar el i
st edbel ow
fory ourconv enience. Cur rentRat i
o=Cur rentAsset s/Cur rentLi abi li
tiesNetI ncome=I ncome-
ExpensesCostofGoodsSol d=Openi ngi nv ent oryv alue+Pur chasesofi nv ent or y–Cl osing
i
nv entor yv alueGr ossPr ofit=Sal es-CostofGoodsSol dGr osspr ofitMar gin=Gr ossPr of it
/
SalesBr eak- Ev enPoi nt=Fi xedcost s/( Sal esperuni tcost-Fi xedcostperuni t) I
nv ent or y
Turnov erRat i
o=Cost sofGoodsSol d/I nv ent or y
Account sRecei vabl eTur nov erRat io=Sal eson
Credi t
/Account sRecei vabl eQui ckRat i
o=( Cur rentAsset s-I nvent or y)/Cur rentLi abi l
itiesRet urn
onAsset s=NetI ncome/Av er ageTot al Asset sRet urnonEqui ty=NetI ncome/Av er age
Shar ehol der ’
sEqui tyMer el ylear ningt hesef or mul asi sl essl ikel yt obeef fect ivei ndeal i
ngwi th
numer ical thatar ei ncl udedundert hist opi c.Ther ef or e,ast udenthast obui ldt hebasi csofal l
theset er mi nologi est ot ackl enumer ical andadv ancedconcept s.Under standi ngt he
Concept sLetusunder st andsomeessent ial ter msi ncl udedi nt heaccount ingf or mul at hati s
givenbel ow. IncomeorRev enueThecashi nfl
owst oacompanyorbusi nessar econsi der ed
underr ev enue. ExpensesTheexpendi turet hati sr elat edt oconduct i
ngpr oduct ionandsal es
activit
iesi scat egor isedunderexpenses.Fi xedCost sRegul arexpensest hatar ei ncur redi na
businesst okeepi tf unct i
oni ngdespi tet hepr oduct iv i
tyl ev el,suchasbui ldingr entand
war ehousemai nt enance. Var iabl eCost Cost sorexpensest hatdi fferbasedont hesal esv olume
orpr oduct iv i
tyofbusi nessar ev ar iabl e.Sal esPr iceI tist her etailpr iceatwhi chacompanyor
businesssel lsitspr oduct sorser vicest ot hepubl i
c. Cur rentAsset sAsset st hatar el i
kel yt obe
conv ertedi nt ocashorpr obabl yconsumedorexhaust edwi thinaf inanci al yearar et er medas
currentasset s.Cur rentLi abi li
tiesThedebt sorl iabiliti
est hatacompanyi sexpect edt omake
goodwi thinay earar ecl assi fiedascur rentl i
abi l
iti
es. Tot al Equi t
y Tot al equi tyr ef er st ot he
ownedcapi talofanor gani zat ionhel dbyt heshar ehol der sorpr i
v ateowner s.I tist hedi fference
betweent het ot al asset sandt ot al li
abi liti
esofacompany .Inv entor y I
nv ent or yr ef erst ot hev alue
ofgoods( rawmat erials, semi -f
ini shedandf inishedpr oduct s)hel dbyanor gani zat i
on.Hence, it
i
scr uci al tounder standal l theset ermsbef oredel vingdeeperi ntot het opi csofaccount ing.You
musthav eahol ist i
cunder standi ngofal ltheset ost rengt heny ourf oundat i
onsot haty oucan
nav i
gat et hr ought headv ancedt opi csmor econv eni ent ly.Whati st heBasi cAccount i
ng
Equat ion? Thebasi caccount i
ngequat ioni sAsset s=Equi ty+Li abi l
ity.Itisal soknownast he
bal ancesheetequat ion.Thedoubl e- ent rybookkeepi ngsy stem i sf oundedont hisv er yequat ion,
asi tr epr esent st hatt het ot al cr edi tbal anceequat est oat ot al debtbal ance.Whati st he
Compr ehensi v eAccount i
ngEquat ion? Acompr ehensi v ef ormul af ort hebasi caccount i
ng
equat ioni si tsexpandedf or m.Commer cest udent shav et onot et hatmul tipledi f
f erentf act ors
arei ncl udedi naf irm, propr iet or shi p, orcompany .Hence, whi lecal culati
onsar ecar ri
edout ,
ther emi ghtbeasl ightchangei nt hepar amet er st hatar econsi der ed.Fori nst ance, Int hecaseof
acor por at i
on, Asset s=Li abi l
ities+Pai d- i
nCapi tal +Rev enues–Expenses–Di vidends–
Treasur ySt ockSi mi l
ar ly ,i
nt hecaseofasol epr opr ietor shi pis: Asset s=Li abi li
ties+Owner '
s
Capi tal +Rev enues–Expenses–Owner 'sDr awsHence, itisev identt hatcer tainpar amet ers
differbasedont heent ityf orwhi cht hev aluat ionofasset si sbei ngdone. Toknowmor eabout
account ingact iv i
tiesandt hei rf or mul asi ncal cul at i
ngt hose, looki nt oouronl inel ear ning
progr ammesf oracl earunder standi ng.Wepr ov idehi gh- qual ityst udymat erialspr epar edby
subj ectpr of essi onal st ogui dey ouont her i
ghtpat ht owar dsef fect iveexam pr epar ation.So, get
yournot esnowandj umpst ar ty ourexam
prepar ation. {"
@cont ext ":"
ht tp:/ /schema. org" ,
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"next I
tem" :
[{"posi tion" :
0,"@t ype" :
"
List I
tem" ,"i
tem" :{"name" :
"Cur rentRat io=Cur r
entAsset s/Cur r ent
Liabilities" }
},{"posi ti
on" :1,"
@t y pe" :"
Li stItem" ,"i
tem" :{"name" :"
NetI ncome=I ncome-
Expenses" }
},{"posi tion" :
2,"@t ype" :"
Li stItem" ,"i
tem" :{"name" :"
CostofGoodsSol d=Openi ng
i
nv ent or yv alue+Pur chasesofi nv ent or y–Cl osi ngi nv ent or y
value" }},{"posi ti
on" :3,"@t ype" :"Li st I
tem" ,"item" :
{"name" :"Gr ossPr of it=Sal es-CostofGoods
Sol d"}},{"posi t
ion" :4,"@t ype" :"Li stItem" ,"item" :
{"name" :"Gr osspr of itMar gin=Gr ossPr of i
t/
Sal es" }},
{"posi tion" :5, "@t ype" :
"Li st Item" ,
"item" :{
"name" :
"Br eak- Ev enPoi nt=Fi xedcost s/( Sales
peruni tcost-Fi xedcostperuni t)"}},{"
posi tion" :
6, "@t ype" :
"List Item" ,"i
tem" :{"name" :"
Inv entor y
Tur nov erRat i
o=Cost sofGoodsSol d/
Invent or y"}},
{ "
posi tion" :7,"
@t ype" :"List It
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"item" :{
"name" :"Account sRecei vabl eTur nov erRat io
=Sal esonCr edi t/Account sRecei vabl e"} },
{"posi tion" :8,"@t ype" :"List It
em" ,"item" :
{"name" :
"Qui ck
Rat io=( Cur rentAsset s-I nv ent or y)/Cur r ent
Liabilities" }
},{"posi ti
on" :9,"
@t y pe" :"
Li stItem" ,"i
tem" :{"name" :"
Ret ur nonAsset s=NetI ncome/
Av erageTot al Asset s" }},
{"posi tion" :10, "@t ype" :
"Li stItem" ,
"item" :{"name" :
"Ret urnonEqui ty=Net
Income/Av erageShar ehol der ’
sEqui ty"}}]}Ist hispagehel pf ul? Booky ourFr eeDemosessi onGet
af lavourofLI VEcl assesher eatVedant uSel ecty ourCl assBookaf reedemoVedant u
Impr ov ementPr omi seWepr omi sei mpr ov ementi nmar ksorgety ourf eesback.T&C
Appl y *Recent lyUpdat edPagesBanki ngandE- Banki ng–Def i
ni tion, Types, Funct i
onsand
FAQsBusi nessEnv i
r onment-Def inition, Component s,Di mensi ons&Exampl esPl anni ng
Premi ses-I nt roduct iont oPl anni ngPr emi ses, Impor tance, andTy pesRev enueDef icit-
Differ ences, Cal cul at i
ons, For mul aandDi sadv ant agesOr gani zing-Meani ng, Pr ocess, andI n
Ev eryAspectofLi feImpor tanceofConsumerPr ot ect ion-Expl anat ionandFAQsBanki ngandE-
Banki ng–Def ini ti
on, Ty pes, Funct i
onsandFAQsBusi nessEnv i
ronment-Def initi
on,
Component s, Di mensi ons&Exampl esPl anni ngPr emi ses-I nt roduct i
ont oPl anni ngPr emi ses,
Impor tance, andTy pesRev enueDef i
cit-Di ffer ences, Cal cul ations, Formul aand
Disadv ant agesOr gani zing-Meani ng, Process, andI nEv eryAspectofLi feI mpor tanceof
ConsumerPr ot ect ion-Expl anat ionandFAQs12Tr endi ngt opi csNat i
onal IncomeDi fference
Bet weenMi croeconomi csandMacr oeconomi csSust ainableDev el
opment Barr i
ersin
Communi cationConsumerRi ghtsandResponsi bil
it
iesAccount i
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Number sCent r alProblemsofanEconomy Kar lPear son’ sCoef f
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entofCor relationNat i
onal
IncomeDi fferenceBet weenMi croeconomi csandMacr oeconomi csSustainable
Dev elopment Bar ri
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Concept sIndexNumber sCent ral ProblemsofanEconomy KarlPearson’sCoef fici
entof
Cor relati
on123FAQsonAccount ingFor mul as1.Whati st hebasicaccount ingequat i
on? The
basi caccount i
ngequat ioni sthatasset sar eacombi nationofequi t
iesandl i
abi li
ti
est ogether.
Her ein,asset si ncl
udepr operty,cash, equipment ,etc.Li abil
it
iesaretheexpensest obepai dby
thebusi nesssuchasl easepay ment s,debt s,etc.Equi tyistheowner 'sshar einabusi ness.2.
Whati saccount i
ng?Theactofkeepi ngar ecor doff inanci alt
ransactionsinabusi nessor
companyi scal ledaccount i
ng.Anaccount anthast oi ndul geinactivi
tiessuchascol lecting,
i
nt erpreting, classifyi
ng, andsummar i
singt hef inanci aldat acoll
ectedandr epr esent edi n
repor tsforf ut ureassessment .
3.Whati sthesi gnifi
canceofaccount ing?Account i
ngi naf i
rm or
busi nessal l
owsi ncompr ehendingt hef inanci al positionofacompanyorbusi ness.I thelpsin
anal yzingt hepastper for mancesi nsal esandmar ket ingandal solooksi ntoar east hatcanbe
furtheri mpr ov edt ogar nermor esal esandt hereby ,increaset heprofitmar gin.Comment Post
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