![]() Although this doesn’t apply to all businesses it is a fantastic example of how accounting principles are applied to transactions and why. The bookkeeping equation is also helpful in understanding debits and credits. This concept is most relevant for businesses which buy and hold stock and then sell it to customers and give them credit terms to pay. The bookkeeping equation (or accounting equation) for a corporation is: This equation must always be in balance under the double-entry bookkeeping method. Again, it’s covered in Bookkeeping Basics absolutely free. The introduction of the GST made all of this a little more complicated, as the tax codes associated with primary produce (FRE) and financial transactions are not taxed like contributions to Super (N-T). Getting a little lost already? Don’t worry, we cover all of this in our free Bookkeeping Basics Guide. Debit-Credit and Income and Expenses relates to whether an account increases or decreases, but will vary depending on whether it is a credit account or an asset account. What’s Cash vs Accrual, Debit-Credit, Income and Expenses?įind terms like these a little confusing, or don’t really know what they mean? Cash and Accrual relates to the paying of your taxes this can be on the date you invoiced for the services or the date you received the money in your bank account.
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