The Accounting Process


3)Working Capital
: Working Capital is considering what the best way would be in terms of a management for short-term resources and obligations. The concept of this decision focuses on if it is possible to maintain enough capital for payments of its bills including and extra money earned as interest. Current assets and current liabilities are considered as the part of this decision.

Accounts payable - The management of debt incurred and not yet paid. All invoices, statements and operational expenses are included.

An accounting cycle is a process, or a series of activities, that consists of collecting an organization’s transactions at the end of a reporting period to prepare essential financial statements of a business (Fleury, 2015). The accounting cycle is a strict, methodical set of rules used to ensure the accuracy and conformity of financial statements (Investopedia, 2017). The steps involved with an accounting cycle, the roles each of the step facilitate, the impact of omission, and what financial statements are assembled from the accounting cycle data.

Accounting is commonly described as the language of business. It is very important for all business owners to have very good understanding of their finances. Having the knowledge of your business finance, you will know where the money is going. Every business owner should have a good understanding of finance. To have a good understanding business owners needs to understand basic accounting steeps, how does accounting play a role in their business, how to define a financial statement and how the omission of any of these steps would affect the success of a business. Once you have an understanding of accounting/finance and the how it plays

Accounts Receivable, Other Receivables, Allowance for Doubtful Accounts, Bad Debt ExpenseInventories and Reserve for Inventory Obsolescence

A company could owe unpaid wages, taxes, or a commercial bank loan that is due within one accounting period.

Creditors: These are the entities who lend money to an organisation(s) with the expectation that it will be repaid.

Accounts payables are short term debts a company owes to its creditors. Notes payables are usually written contracts and long term debts companies have promises to pay its creditors. Accrued expenses are recognized by a company before they are paid for. An example of this would be a tax bill received from the town or city the company is located in. While all of these are recognized as current liabilities on a company’s financial reports they are all recorded in different time frames. Account payables are recognized when they are incurred and the payment of them is also due at the same time. Where both Notes payables and Accrued expenses are shown in the current liabilities but are due at a future date

Working capital is the key to a successful business. It is like their blood flow and the manager’s job is to help keep it flowing. Under the Generally Accepted Accounting Principles working capital is simply the difference between a company’s Current Assets, which are cash, inventory, accounts receivable and prepaid items, and Current Liabilities, accounts payable and accrued expenses.

Tax invoice These are items that you are not responsible for – the assumption is that someone else will do them.

Working capital is positive, meaning that the company has enough cash, accounts receivable, inventory, and short time investments to cover the current liabilities.

While current liabilities are liabilities which are to be settled within one accounting period or 12 months.

debt. The steady cash flow generated by the business, short-term bank loans, and the proceeds of the

Working capital is the excess of a company’s current assets over its current liabilities. Financially healthy firms have positive working capitals.

All entities that hold financial assets or commitments to extend credit that are not accounted for at fair value through profit or loss