In the normal course of business, goods are bought and sold on credit, which is not a new thing. Selling and purchasing of goods on credit change the relationship between buyer and seller into debtor and creditor. Debtors are the one, to whom goods have been sold on credit, whereas Creditors are the parties who sold the goods on credit. They both are relevant for an effective working capital management of the company. Debtors are an integral part of current liabilities and represent the … [Read more...]

Financing is the basic requirement of every big and small-sized organization. Funds can be raised by issuing debt or equity instruments. When it is about debt instruments, two major sources of raising external finance are used by the companies; are Bonds and Debentures. In many countries, they are supposed to be one but the two terms differ in many regards. Bonds are generally issued by government agencies and large corporations, but public companies issue debentures, to raise money from the … [Read more...]

A business entity can record its monetary transactions either on Single Entry System or Double Entry System of Bookkeeping. The former is less laborious as well as less time consuming while the latter completely records the transactions which need substantial effort and time. Single entry system of bookkeeping, is economical but at the same time it is unscientific because it does not records all the transactions rather only a few ones are tracked and some are recorded partially. On the other … [Read more...]

In every business, only those transactions are recorded and recognized which are related to money. There are two accounting systems, based on which the transactions are recognised, namely cash system of accounting and accrual system of accounting. The basic difference between the two approaches to bookkeeping of an entity is in timing, i.e. in cash accounting, the recording is done when there is an inflow or outflow of cash. On the other hand, in accrual accounting, it records the income and … [Read more...]

Capital is the basic requirement of every business organization, to fulfill the long term and short term financial needs. To raise capital, an enterpirse either used owned sources or borrowed ones. Owned capital can be in the form of equity, whereas borrowed capital refers to the company's owed funds or say debt. Equity refers to the stock, indicating the ownership interest in the company. On the contrary, debt is the sum of money borrowed by the company from bank or external parties, that … [Read more...]

The two major elements of working capital of a company are current assets and current liabilities. The assets which are readily converted into cash are considered as Current Assets while Current liabilities are those debts which fall due for payment within a short duration. Account receivable is a current asset account, which represents the money to be received by the company, against the goods delivered or services rendered to the customers. On the other hand, accounts payable is a current … [Read more...]

Loan is referred to a sum of money borrowed from bank or financial institution for a particular period, that requires repayment along with interest. These days, loans are considered as the best means of availing finance for any purpose like education, construction of a house, purchasing the car or any other business requirement. There are two types of loan, namely, secured loan and unsecured loan. When a loan is secured the borrower pledges some asset as security against the loan. On the … [Read more...]

The economic position of a country can be monitored, controlled and regulated by the sound economic policies. The fiscal and monetary policies of the nation are the two measures, which can help in bringing stability and developing smoothly. Fiscal policy is the policy relating to government revenues from taxes and expenditure on various projects. Monetary Policy, on the other hand, is mainly concerned with the flow of money in the economy. Fiscal policy alludes to the government's scheme of … [Read more...]

Double entry system of bookkeeping says that every transaction affects two accounts. There is a proper procedure for recording each financial transaction in this system, called as accounting process.The process starts from journal followed by ledger, trial balance, and final accounts. Journal and Ledger are the two pillars which create the base for preparing final accounts. The Journal is a book where all the transactions are recorded immediately when they take place which is then classified and … [Read more...]

The balance of payment is the record of dealings in goods, services and assets, between the citizens of the nation and the rest of the world. It is divided into two parts, i.e. Current Account and Capital Account. Current Account is an account showing the trade of merchandise, whereas the Capital Account gives place to all capital transactions. While current account is used to keep a track on the movement of money in and out the economy, during a particular period. The capital account, on the … [Read more...]