Accountancy

3 days of grace are allowed in case of time bills, for calculating date of maturity. Legal due date of a term/usance bill will be the last day of grace ( maturity date plus three days of grace is the legal due date).

Discount allowed is Expense of business. When the buyer receives a discount, this is recorded as a reduction in the expense (or asset) associated with the purchase, or in a separate account that tracks discounts.

Land foxed assets is not depreciated in the ordinary circumstances. Land is not depreciated, since it has an unlimited useful life.

Fresh capital introduction will increase Assets and Equity. Capital will increase the Equity. Cash at Bank will increase the Asset.

A current asset that is convertible to cash within 3 months can be referred to as Cash equivalent. Cash and cash equivalents refer to the line item on the balance sheet that reports the value of a company’s assets that are cash or can be converted into cash immediately.

Lower the Debt Equity ratio higher is the protection to creditors. Creditors usually like a low debt to equity ratio because a low ratio (less than 1) is the indication of greater protection to their money.

The expenses related to the main operations of a business are referred to as Operating expense. The operating expenses refer to the specific costs after gross revenue is defined in the income statement.

Creditor of the business is the external user of financial statements. External users are people outside the business entity (organization) who use accounting information.