FIN4001 Introduction To Finance

The primary contrast among, the method of accounting such as cash and accrual basis of accounting lies on when costs and incomes are perceived in a particular manner. The term cash basis of accounting represents incomes just when the money is received and for cost just when the money is paid out. On the other hand the accrual basis of accounting represents income when earned and for costs of products and enterprises when acquired. Accrual basis of accounting is most favoured in light of the fact that it gives a decent proportion of association's productivity in some random time (Bushman, Lerman & Zhang, 2016).

The general ledger is the foundation of the system which is used by the accountants and it is used so that the transactions can be stored and recorded in the financial statements. The journal entries on the other hand are the base which is used to make posting in the ledger accounts specifically.

A case of a contra resource is provision for the doubtful assets. For it be recorded in the form of ledger, it must be matched with exchange receivables request to show the net measure of money expected to be gotten and the sum is entered in to the record.

A prepaid cost depicts itself as expenses that are paid for the accounting period and the same will not be used until a future date is decided. A typical prepaid cost is the half year insurance premium that is paid ahead of time for protection inclusion on an organization's vehicles. The sum paid is frequently recorded in the present resource account Prepaid Insurance. On the off chance that the organization gives month to month budget summaries, its salary articulation will report Insurance expense which is one-6th of the half year premium (Bailey & Samuels, 2018).

One of the major differences between the recording of the transactions in case of the profit as well as non-profit organization is observed in case of the recording of the expenses. The profitable organizations are required to pay the amount of the tax hence, the treatment of tax is also included whereas in case of the non-profit organizations the tax is exempt, and hence they do not prepare incomes statement as well. Rather the statement of the activities is prepared (McNabb, 2015).

The two ratios defined in the capitals structure ratios are majorly used to answer how the assets shall be financed and whether the organization has the capacity to take the risks and the ability to pay back the liabilities as well as the contractual obligations on time or as a when they fall.

The situations of an organization are one of the parameters to that help in defining the profitability and the efficiency of the organization. One of the situations is the increase in the amount of the depreciation and the revenues stay the same. Another situation is the situation where the asset is given a base and the increase in the revenues but the expenses also increase (Hoque, Mia & Anwar, 2015).

Bailey, W. J., & Samuels, J. A. (2018). Analyzing Two Investments—An Instructional Case to Introduce Basic Financial Accounting Concepts. Issues in Accounting Education Teaching Notes, 33(4), 18-29.

Bushman, R. M., Lerman, A., & Zhang, X. F. (2016). The changing landscape of accrual accounting. Journal of Accounting Research, 54(1), 41-78.

Hoque, A., Mia, A., & Anwar, R. (2015). Working capital management and profitability: A study on cement industry in Bangladesh. Research Journal of Finance and Accounting, 6(7), 18-28.

McNabb, D. E. (2015). Research methods in public administration and nonprofit management. Routledge.