Asset Turnover Ratio

Asset turnover ratio calculates the value of sales revenue to the available assets during the sales period.

Asset turnover= Sales revenue/ Total assets

Accelerated Depreciation

Accelerated depreciation is a method to calculate the book value of a fixed asset over the years. In this method, the relative asset incurred higher expenses than last remaining years, unlike straight-line method.

There are two methods two calculate accelerated depreciation i.e. double declining balance method and Sum of the years’ digits method.

Double declining balance method formula

Annual Depreciation Expenses = Net Book Value x 2/Useful life in years

Sum of the years’ digits method formula

Depreciation Expense = Remaining useful life of asset / Sum of the years digits x Depreciable Cost

Accounting Equation

The accounting equation is a rule or you can say formula to calculate the total asset of a company/entity. There are there accounting equations.

  • Assets = Liabilities + Owner’s Equity
  • Assets = Liabilities + Shareholder’s Equity (For Corporation )
  • Assets = Liabilities + Net assets (For Non-Profit Organizations like NGO)

The Balance sheet prepared using this rule. Double entry bookkeeping system formed on the basis of the accounting equation.

Accrued Liabilities

Accrued liabilities usually referred to those transactions which are incurred by an entity but yet not have been paid or receive an invoice.

There are two types of accrued liabilities i.e. short-term accrued liability and long-term accrued liability. Short term accrued liabilities are daily basis transactions which happen on a regular basis. Long-term accrued liabilities which happen very rarely but for a longer period of time.

Examples: Accrued wages, accrued pension liability, accrued interest on loan payable etc.

Balance Sheet

A balance sheet is an important financial statement prepared by a company at a specific date on a regular basis to showcase its financial situation.

The balance sheet includes cash-flow statement, income & expense statement, asset and liability details. In short, it shows all transaction details.

A balance sheet is the main point interest for a shareholder, company advisor, business partner etc.

The Balance sheet abides by the following rule:

Assets = Liability + Shareholder’s Equity

Financial Accounting

Financial accounting is the process of preparing financial reports for both internal and external use of a business. Financial report includes balance sheet, cash flow & income & expense, equity & liability statement.

This kind of report needs at the time of tax filing, company valuation etc.

Trial Balance

Trial balance is a way of bookkeeping to ensure all ledger inputs are correct. In trail balance all credit balances entry under credit balance head and debit inputs under ledger balance head. If credit and debit balance found to be identical then we could conclude that there is no error in accounting entries.

Trail balance prepared in a regular period to minimise accounting error. In companies point of view, it’s an important task needs to do regularly. It would help to prepare company’s financial statements with zero error.

Factory overhead costs

Factory overhead is also named as manufacturing overhead. Factory overhead cost is the total operational cost used for production or manufacturing in a factory. It’s not the direct cost associated with raw material and labor. Its also called an indirect cost.

Factory overhead includes in manufacturing cost category.

Bank Reconciliation

Accounting software, Small business accounting software

Bank reconciliation is a process of comparing company’s own financial record with bank record to maintain the accurate figure.

Bank reconciliation is very necessary as it helps to avoid any overdraft payments, duplicate charges etc. Double entry bookkeeping is one way to perform reconciliation. Bank reconciliation needs to be prepared for every month. Bank reconciliation is a way of finding errors in bank account and company’s ledger account.

Endowment Fund

Endowment fund is always held by a non-profit organization as invested capital in this fund need to use for only non-profit works. In endowment fund the principal amount must be retained and earnings from this fund only can use for operational works.

This fund integrated with non-profit organizations like collage, universities, NGO, hospitals, church etc.