Basic Accounting And Working Capital Accounting Essay

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Working Capital: Current assets minus current liabilities. Working capital can be used to build the business liquid assets are measured at many companies. The two companies have numbers for how much debt people can be positive or negative, depending. In general, working capital, many companies because they can further extend the success of their operations will improve. Negative working capital and capital for growth companies may lack. In addition, net current assets or current capital has.

Current Assets: Current assets and other fixed assets within a year (sales or consumption) is expected to be used are those assets. Current Assets are displayed on the balance sheet are listed in order of increasing liquidity (ie how to convert them to cash, easy). Finally, the common stock for cash, the debtor will be listed first, followed.

Current liabilities: Liabilities short time (less than one year) will be due within the current debt that is paid out of current assets. In this group the most common debt notes payable and accounts payable

(C) capital projects, and if there is enough that you could face financial difficulties are the biggest problem. Appropriate funds out of a job and a business can not meet. All business of buying raw materials, some amount is required. Rate of return on investment is also a lack of capital and fall. More than overtime inefficiencies in all organizational capital may occur. Also benefit from working overtime, but means idle funds. If there is interest in the business for a long time it can not run a business. May not work well enough if the owner can face unlimited liability, it is difficult to obtain external financing

(D) to increase their current assets and little cash in the bank, including cash and hands and put more money into the business of working capital to increase their sole traders. And to increase working capital within 1-3 years for them to repay the section headings, or they pay back the loan completely loan reverts O, the contract can take a secured loan you can get a bank loan. It is usually the repayment period is usually more than five years and is a long-term loans. In addition, long-term debt can be considered.

Q: 2

(A) in cash based on (a) distinction earned - Basic Accounting

How is cash.

Cash and cash basis revenues received will be reported to the terms of the cost reporting period that is paid in cash, and will be used. For example, the sale only if the cash received from the customers pay the cost of salaries to employees is recorded when the pad is recorded. Net income is the difference between cash receipts and cash expenditures will be.

Is the easy way. Depending on how you earn revenue recognized in the period earned and expenses arising from the process of income generation are recognized as the period


 (B) What is the footnote as an example the meaning of Prepayments and accruals (b) the description


Costs or revenues to the passage of time gradually increased. This account many accounts, payments, accounts receivable, goodwill, future tax liability and future interest costs are included in.

Actually paid in cash

- All earned the previous period to bring it forward

 Earned at the end of the period

Earn For example, ('incurred').

Martin, John, on 1 April 2008, started his welding business in financial year end March 31, 2009 will be used. Years following the first electric bill was paid:

Covering the pay period dates

30th June 2008 18 July ë…„ê¹Œì€ ë…„ë¶€° 2008 $ 66 April 1

16 October 2008 30 September 2008 $ 96 July 1

20 January 2009 31 December 2008 $ 56 October 1

31 March 2009 Free $ 98 January 1

Following the end of the year (after the profit and loss account is drawn up), electricity accounts may seem:


Direct debit, credit, $ Date Date U.S. dollars

18.07.08 Bank 66

16.10.08 Bank 96

20.01.09 31.03.09 56 bank in the C / D one trillion 218

 218 218

31.03.09 balanced breakfast / D for one trillion 218 316 Income 31.03.09

31.03.09 Balance C / D Article 98 ___

 316 316

 04/09/2001 balanced breakfast / D Article 98


Prepayments on the debtor's assets are included within the balance sheet.

This money paid for a place in the period before

Costs are related. In other words, it is something that has been paid to



The total amount includes the cost doelsigie:

Actually paid in cash

  Get ahead of the previous era of all prepaid

- End of period prepaid

Examples of prepaid

 Agencies in advance to an April X2 $ 120,000 (GST exclusive to) six months for software licenses and support services to pay. The deal initially (and incorrectly) been paid in full month in which the costs were recorded. The initial cost of journals, and support services to the six months to record the license:

DR of the license fee cost

(Cost increase - Operating Statement)

$ 120,000

Cash at Bank of life (reduction of assets - balance sheet) $ 120,000

With the decrease in the journal, well aware of prepaid processing


Disasters and other prepaid expenses (an increase of assets - balance sheet) $ 120,000

Cost of the license fee, CR

(Cost reduction - Operating Statement)

$ 120,000

Reduced monthly journal, and be aware in advance of payment:

DR of the license fee cost

Cost (increase - Operating


$ 20,000

Prepaid expenses and other organisms (reduction of assets - balance sheet) $ 20,000

 (C) descriptions and historical cost concepts and matching concepts are described with examples.

Matching concept

Under this concept, coast coast to sell products or services rendered to match the earnings of these things are related. Likewise, the cost of any revenue earned during the period are related. Accrual Basis of Accounting The concept is very important to


Manager or management employee's salary: - For example. The best course is, they occur in the income statement of the accounting period that these costs will be charged. These costs can be associated with the product, known as cost of products from these charges, costs are specified in separate periods.


A justification for the concept of matching concepts are derived from the accounting period. Profit during the same period of the accounting period the period of the revenue is calculated after deducting the cost of. As they occur can not be associated with future revenue costs will be written off.

Historical cost

Historical cost is suitable for economic decisions. Managers make decisions about the future, as promised, they have historical data is required for the transaction. They should be able to review the past efforts of this effort is a measure of historical cost.

For example, 2009at the cost of land and $ 90,000 is still present in the purchase cost, replacement cost, inflation adjusted cost is much higher today, even if that cost or historical cost of $ 90,000 buyers will be reported on the balance sheet of the purchaser owns .

The principle of exchange of money or assets and the cost of transactions (cash or cash equivalent) for all costs to be high Evo assets in place and ready for use should include the need to state the historical cost principle.

(D), the concept of money: money for financial reporting is used as the default measurement unit. Implicit assumption made in the dollar is accurate and reliable as the accounting unit will be. The company's goodwill and intangible assets are not measured, such as

      Prudence concept: a statement on a conservative basis that the case needs to have to make sense of financial principles used in the preparation of the state. The basic principle is committed to, or caused to be careful to recognize all the coast, but one that does occur will not be recognized until the revenue or profit

(E) the concept of objectivity: all the information which it is subject to verification bias free and that means that, objectively, should be maintained. Objectivity is closely tied to reliability. Objective physical evidence invoices, checks, invoices, bank statements or anything, as you can see is made. The event that something might not be supported by objective, subjective methods used to develop estimates of the number is. Doubt account for depreciation costs and benefits of items such as the decision is based on subjective factors. Still too subjective factors such as past experiences are influenced by objective evidence.

   Consistency concept: the notion of consistency is a particular accounting method, once adopted, will not change from era means. It's a change from any other payment method better reflects the company's activities, if not banned from the company, but it does not prohibit a change often, or the opportunity