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How to Learn Basics of Accounting – Getting Started Guide

Accounting is a skill every individual should be aware of, no matter what the profession. You do not have to know everything. However, understanding the basic concepts, and terminologies of accounting will prepare you to understand how business financials work. For example, let us say a small business owner had to review an income statement prepared by his accountant.  The business owner may end up wondering how come the sales are higher than the actual cash he received? understanding the accrual concept can make significant difference in improving your ability to learn accounting. My aim ...Read More

October 9, 2020|Accounting, Basics of Accounting|

Accrual vs Deferral Accounting – The Ultimate Guide

I understand that accrual and deferral entries in the financial statements seem confusing to read and record. Accrual and deferral entries are just adjusting entries. Their purpose is to make reading accounting transactions consistent and comparable. In general, any accrual transaction means that a product or service have been delivered before it is invoiced. While deferral transaction means money has been paid in advance for a product or service. Accrued means payments have not been done yet, deferred means payments were made in advance. The rest of the subject relies on how you interpret each ...Read More

September 5, 2020|Accounting|

What is an Annual Report?

Public companies are required to share their performance regularly to their investors. The way they do that is through annual reports and other fillings. An annual report is a financial and operational overview for a public company. It is prepared for investors, employees, lenders, and the general public. The annual report works as a guidance for investors and lenders to take decision. It is divided into two main sections. The cover page, and the SEC 10-K form. Let us look at each section and its sub-sections in details. First Section: Cover Page  The beginning section of ...Read More

August 29, 2020|Accounting|

4 Steps to Analyse Cash Flow Statement

You may heard experienced investors say “it is all about the cash flow”. Analysing cash flow statement is an important skill. In fact some investors do not even want to look at the income statement as a performance indicator and just analyse the cash flow statement. Before jumping into the steps to analyse cash flow statement, here is a quick recap about it. You can skip this part and dive in to the 4 steps if you already know about it.   Quick Recap A cash flow statement describes how the actual cash is moving ...Read More

August 25, 2020|Accounting, Accounting in Practice|

Common Components of Income Statements Explained

The components of income statements line items makes analysing business performance more organised. The income statement measures the business performance of its income and expense for a specific time period.   Generally, the income statement is separated into two parts which are operating, and non-operating related. We will discuss the common line items under each of these sections. You may not find  the word “operating” and “non-operating” in an income statement explicitly all the time.But it is good practice to think about it that way. Because then when analysing the components of income statements you ...Read More

August 21, 2020|Accounting, Basics of Accounting|

Recording Investment Transactions – 3 Accounting Practices

Investing has been very common nowadays;  the ease of access through the online trading and brokerage tools influenced how much we invest. Now more than ever, it became important to understand the ways of recording investment transactions for businesses and investors. To record your investment transactions, you use the equity method, available for sale, held for trading, and fair value through profit and loss. Each method will depend on the size of the investment you made.   Why are there Many Methods? The reason is because each business has different goal when holding their investments. ...Read More

August 20, 2020|Accounting, Accounting in Practice|

The 3 Components of the Balance Sheet Explained

Companies use the balance sheet to keep track of their net worth. The balance sheet is a snapshot of the company sources of the money and how they used the money. Its components are Assets, Liabilities and Owner’s Equity. below is the formula that represent the balance sheet. Assets (uses) = Liabilities + Equity (sources)     The balance sheet should always be balanced where the uses (which is what the company own) and the sources (which is from where they get money from) has to be equal.   Why is the Balance Sheet Important? ...Read More

August 11, 2020|Accounting, Basics of Accounting|

3 Types of Financial Statements Explained

To keep the financial aspect of our life under control, we have to keep track of our financial transactions. When it comes to business, the financial statements are the standard way to record and track your financial situation, performance, and money decisions. The main types of financial statements are the income statement, the balance sheet and the cash flow statement which are the three main statements required to be prepared by any business. To keep it short, balance sheet is used to record your financial position/situation. The Income statement presents your business performance. And cash ...Read More

August 7, 2020|Accounting, Basics of Accounting|