Author : Stephen Covey ( Management Guru) Have you read this before? Discover the 90/10 Principle. It will change your life (at least by the way you react to situations). What is this principle? 10% of life is made up of what happens to you. 90% of life is decided by how you react. What … Read more
Author Unknown) This is an interesting parable which tells us to face our problems and respond to them positively, and refuse to give in to panic, bitterness, or self-pity. A parable is told of a farmer who owned an old mule. The mule fell into the farmer’s well. The farmer heard the mule braying – … Read more
Click here for MORE ARTICLES ON RELATED TOPIC (Bad Debts and Provision for doubtful debts) WHAT IS BAD DEBT WRITTEN OFF? Nowadays the company needs to extend credit to its customers. If the company insists on cash term, it will drive away the customers. This might be worsened if other competitors are able to extend generous … Read more
INCREASE IN PROVISION FOR DOUBTFUL DEBTS: Assuming earlier in Quarter 1, we have created a provision for doubtful debts of $100,000. Say,at end of Quarter 2, we have reviewed our trade debtors and wanting to increase the provision by an additional amount $50,000. How should we do it ? For Quarter 1, The Original Entry is: … Read more
METHOD 1: GENERAL PROVISION BASED ON AS % OF CLOSING TRADE DEBTORS BALANCE This methodology is normally called general provision for doubtful debts The term general is because there is NO SPECIFIC identification of the trade debtors who has really turn back. This estimate is based on past trend or management in-depth understanding of the industry Illustration: … Read more
MARK-UP ON COST Refers to profit expressed as a percentage of cost price. FORMULA: Mark-up = Gross profit /Cost of Goods Sold x 100 ILLUSTRATION: Company sells two type of products A & B. Due to the high techelement in product A, the company is able to mark up higher … Read more
COMPONENTS IN THE INCOME STATEMENT: Net Revenue A Cost of Goods B Gross Profit C=A-B NET REVENUE: NET REVENUE are the list prices of the goods and/services less any discounts offered to the customer to induce purchase. Don’t forget that these revenue is recognized in the period in which goods and services are sold, not … Read more
WHAT IS AN INCOME STATEMENT? The Income Statement reports ONLY the PROFITABILITY of a business Unlike a Balance Sheet, which is a snapshot of a point of time, Income Statement reflects the profitability of a business FOR A SPECIFIC PERIOD OF TIME (monthly, quarterly or yearly). In the Income Statement, MATCHING & ACCRUALS concepts prevails: … Read more
ACCOUNTING: Accounting is a four stage process of recording, classifying, summarizing and the interpretation of the financial statements. The four stage process are defined below: Recording- transactions being recorded in the books of the business Classifying- sorting and categorizing into meaningful and orderly types or manners Summarizing- the accounting data are summarized Interpreting- financial data … Read more
In my earlier article, I have explained the needs to understand the Cash Flow Statements. SO WHAT IS IN A CASH FLOW STATEMENT? Basically comprise the following: Closing Cash Balance (a) Opening Cash Balance (b) Net Change of Cash Balance ( c ) = (a-b) ( Cash balance also includes cash equivalent(refer to my earlier … Read more