Assets and liabilities

Make a profit in a company that originates in different areas. It can get a bit complicated because as well as our personal lives, as well as business runs on credit. Many companies sell their products to their customers on credit. Accountants use an asset account called accounts receivable to be included in the total amount due to the activities of their customers who have the balance that has not been paid in full yet. Much of the time, a company has not collected his claim completely at the end of a fiscal year, and in particular for the sale of such credits can be sold near the end of the accounting period.

The auditor will record sales revenue and cost of goods sold for these sales in the year in which sales were made, and the products that are shipped to the customer. This is called accrual accounting, records income if there is a sales and costs when they are created as well. On the sale on credit, receivables increased asset account. When money is received from the customer, then the cash account and accounts receivables account is reduced.

Cost of goods sold is one of the major costs of firms to goods, products or services to sell. Also a service will cost. It means exactly what it says it is the costs which a company pays for the products it sells to customers. A company makes their profits by selling their products at prices high enough cost of producing them, the cost of running the company, interest on the money they have borrowed, and income taxes, with the money left over for profit.

When the company acquires the products, the costs for them in what is called an inventory asset account. The cost is deducted from the cash account or added to the account in accounts payable liability, depending on whether the company has paid with cash or credit.

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