Other Basic Accounting
In practice for financial accounting, we ever knew cost of goods sold ( for merchandising company) or cost of products sold ( for manufacturing company) that are shown in income statement, but we rare saw cost of service ( for service company) in income statement. Below are forms of income statement for each company: Example 1-Income Statement for Merchandising Company
Continue reading Cost of Fixed asset may occur via two ways : buying and self construction. 1.Buying Fixed Asset Cost of fixed asset = purchase price-trade discount-sale return and allowance+ freight + insurance + import taxation + Specific tax (if any) + VAT Input ( if we cannot claim VAT input)+port fee + clearance cost + handling cost + other relevant costs
Continue reading Cost of service can be applied to an individual customer or as an average cost of service for a group of similar customers. Each customer has each cost of service but similar customers & services we should use average cost for each customer for management purpose. Cost of service = material + labour + overhead Example ABC Company is research
Continue reading Cost of Inventory-Products for manufacturing company Cost of Inventory for manufacturing company The examples of manufacturing company are as follows. Company manufactures and sells phones, computers, scanners, LDC Company manufactures and sells cars, motor Company manufactures and sells furniture Company manufactures and sells TV Cost of finished goods = cost of material + conversion cost Cost of material = purchase
Continue reading Accounting for Returns, Discounts and Sales Tax Learning Objectives I. Recording sales and purchases returns II. Accounting for Trade Discounts III. Accounting for Settlement /Cash Discounts IV. Accounting for Sale Tax ——————————————————————————- I. Recording sales and purchases returns It is normal for customers to return unwanted goods to a business; equally the business will occasionally have cause to return unwanted
Continue reading Accounting for Account Receivable | Trade Receivable Learning Objectives I. Cash and credit sales II. Accounting for irrecoverable debts III. Allowance for receivables ———————————————————- I. Cash and credit sales Cash Sales If a sale is for cash, the customer pays for the goods/services at the point of sale. The double entry for cash sales is: Dr Cash……………..xx Cr Sales revenue…………xx
Continue reading Cost of Inventory- Merchandise/Goods Cost of Inventory for merchandising company The examples of merchandising company are as follows. Company purchases and sells phones, computers, scanners, LDC Company purchases and sells cars, motor Company purchases and sells furniture Company purchases and sells TV Cost of inventory = purchase price-trade discount-sale return and allowance+ freight + insurance + import taxation + Specific
Continue reading Methods of Calculating the Cost of Inventory We will explain three main methods of calculating cost of inventory: specific cost, FIFO (First in, First out) and AVCO (average cost). Specific cost: When items of inventory are individually distinguishable and of high value, so we will use unit cost (actual cost or specific cost). FIFO or AVCO (average cost) : Where
Continue reading 
How to Record Account Receivable (AR) Account Receivable (Trade receivables) arise when a business makes sales or provides a service on credit. Recording Account Receivable as follows: Credit Sale If company made sale on credit, the entries are as follow. Dr. AR…………………xx Cr. Sale…………………..xx (Merchandising or manufacturing company normally use word “Sale”) Dr. AR……………….xx Cr. Service Revenue…….xx (Service Company normally uses
Continue reading
Accrued Expense | Accrual An accrual Expense ( accrual) is an expense that has been incurred, but we have not received an invoice. We will receive invoice next accounting period. Accounting standard required company recognize expenses incurred even if invoice are not received or payment. Accrual is liability. For simple example, your company use electricity for December 2017, but electricity
Continue reading