The inventory turnover ratio is an efficiency ratio that measures the number of times a company sells and replaces stock during a set period, generally one year. While you shouldn’t base decisions solely on it, a high inventory turnover is generally positive and means you have good inventory control, while a low ratio typically indicates…
What is
What Is a Chart of Accounts & a Sample Numbering System
A chart of accounts is a list of all of your company’s accounts together in one place. Similar to a filing cabinet for your company’s accounting system, it’s used to organize transactions into groups. This is one of the many concepts discussed in our Accounting 101 article. Please see our example below for a better…
What Is a Keogh Plan: Contribution Limits, Rules & Deadlines
A Keogh plan, also known as an HR-10 or qualified retirement plan, is a retirement plan that allows self-employed individuals up to $61,000 per year in tax-deductible contributions. It used to be very popular among high-income earning self-employed workers, but this was before they were eligible for more common retirement plans. How a Keogh Plan…
How To Do a Bank Reconciliation in 5 Easy Steps
There are two main components of a bank statement reconciliation. First, you need to ensure that all transactions on your bank statement appear on your check register. Then, see to it that the remaining transactions in your check register are recorded properly, even though they haven’t cleared the bank. We’ll break these two components into…
What Is a Balance Sheet? Definition & Illustration
A balance sheet displays a company’s assets, liabilities, and owner’s equity at any given point in time. It provides a snapshot of what a company owns and owes as of the balance sheet date and the amount invested by its owners, so note that the owner’s equity isn’t equal to the company’s fair market value….
Internal Cash Controls for Small Businesses: 19 Best Practices
Internal controls, in general, are procedures used to safeguard assets and implement financial and operational objectives. Creating internal cash controls for small businesses involves setting policies for handling physical cash and checking accounts and delegating responsibilities in keeping it. Cash controls are a crucial component of cash management best practices because cash, being the most…
What Is Owner’s Equity in Accounting?
The owner’s equity of a business is the residual amount left after deducting all liabilities from book value of company assets. It isn’t a measure of the value of a company, but rather a way to track both paid-in capital and retained earnings. Paid-in capital or contributed capital are contributions of the business owners while…
What Are Assets in Accounting? Types & Examples
Assets are resources that you own, control, and expect to provide a future economic benefit. For example, cash is an asset because it can be used to pay for future expenses. Other common assets are equipment, buildings, and investments. Assets are classified based on three criteria: Current vs noncurrent: An asset can be classified based…