Category: Accounting

The importance of accurate accounting in businesses cannot be overstated. Thus, the account-related courses in Ahmedabad help professionals acquire the necessary skills and knowledge.

Accounting is the backbone of all business, and a crucial aspect of it is the method used to record financial transactions. Accrual and cash basis are two popular methods of accounting, each with its advantages and disadvantages. While Accrual basis accounting records transactions when incurred, cash-basis accounting records transactions when payment has been made or received. Many businesses use accrual basis accounting, but some may switch to cash basis accounting for simplicity or tax purposes. In this article, we will explore the steps involved in converting accrual basis to cash basis accounting, focusing on the account-related courses offered in Ahmedabad that can help professionals acquire the necessary skills and knowledge for this process.

1. SUBTRACTING ACCRUED EXPENSES

One crucial step in converting from an accrual basis to a cash basis is subtracting accrued expenses.

Accrued expenses are costs that have been incurred but have yet to be paid. For example, suppose a business incurs a monthly electricity bill in January but gets paid in February. In that case, the expense is recorded as an accrued expense in January and delivered in February. When converting from an accrual basis to a cash basis, it is essential to subtract these accrued expenses to ensure that the financial statements accurately reflect the cash flow.

To correctly subtract accrued expenses, it is recommended to have a strong understanding of accounting principles and practices. Account-related courses in Ahmedabad offer comprehensive training on accounting and finance topics, including accrual basis and cash basis accounting, bookkeeping, and financial statement analysis.

2. SUBTRACTING ACCOUNTS RECEIVABLE

Another approach to convert accrual basis accounting to cash basis accounting is subtracting accounts receivable.

But what are accounts receivable? It is the amount owed to a business by its customers for goods or services on credit. By subtracting accounts receivable, a company can convert its accrual basis accounting to cash basis accounting. This is a basic conversion form to ensure that cash basis accounting provides a clearer picture of the business’s cash flow. It shows the actual cash available to the company, which is essential for making financial decisions. But converting accrual basis to cash basis via this method is a challenging feat. This is why there are many account-related courses in Ahmedabad to help those interested in learning more about accounting understand the principles and practices of the same.

3. SUBTRACTING ACCOUNTS PAYABLE

Accounts payable represent the amount a business owes to its suppliers for goods or services it has received but has yet to pay for. In accrual basis accounting, these amounts are recorded as liabilities, even if the payment has not been made. Whereas in cash basis accounting, only transactions resulting in cash exchange are recorded. Therefore to convert from accrual basis to cash basis accounting, the accounts payable must be subtracted from the accrual basis financial statements to ensure the accurate reflection of cash basis financial statements.

4. SHIFT PRIOR PERIOD SALES

An essential step in the transition from accrual to cash basis accounting is converting prior-period sales. Under accrual accounting, sales are recognized when the invoice is issued, regardless of when payment is received. This means sales from prior periods may still appear as accounts receivable in the current financial statements. For the conversion to cash accounting, these sales from previous periods must be converted from accrual accounting to cash accounting.

5. SHIFT CUSTOMER PREPAYMENTS

Customer prepayments refer to payments received from customers before the customer entails the required goods or services. For example, if a customer pays for future service, it is recorded as a customer prepayment. When converting from an accrual basis to a cash basis, it is essential to shift these customer prepayments to ensure that the financial statements accurately reflect the cash flow.

6. SHIFT PREPAYMENTS TO SUPPLIERS

To convert accrual to cash basis accounting for prepayments to suppliers, companies need to reverse the accruals and recognize the expenses of the received goods. This can be achieved through the following steps:

1. Identify the prepayments made to suppliers as accruals in the accounts payable.
2. Reverse the accruals by adjusting the accounts payable. You can do the following by recognizing the expenses in the form of a debit to the accounts payable and a credit to the expenses account.
3. Recognize the expenses of only the paid and received goods or services.

In conclusion

Converting from accrual to cash basis accounting methods can greatly benefit small business owners and individuals seeking to understand the financial health of their operations. They can understand their financial situation by shifting their focus from accruals to actual cash inflows and outflows. For those looking to expand their knowledge in this area, several account-related courses in Ahmedabad can provide them with the necessary skills and insights. Whether you want to change your accounting method or improve your understanding of finance, taking an account-related course in Ahmedabad is an excellent way to achieve your goals.

The intricacies of using SAP have confused many people for a very long time. While it might seem complicated, we are here to teach you how to work on SAP and be an expert at it. One of the most common questions while working on SAP ERP is “What are SAP Instance and SID?”

Read on to have these questions answered and learn more about using SAP with ease!

If you want to learn about how to use SAP like an expert, check out S20’s SAP course in Ahmedabad. We are sure that you will come out as a pro at SAP.

What Is SAP SID?

SAP System Identification is known as SID. Every installation of the SAP R/3 system has a unique system identification, or SID. The SAP SID is a three-digit server-specific unique identification code.

There are no specific guidelines for naming the SID other than the fact that it should be three letters and all capital. By using its SID, each system may be identified uniquely. SID may consist entirely of letters or at least one letter, then digits, and then letters. However, there are some guidelines that can help you name and identify different systems.

Logical System Names

Each system within a network must be easily distinguishable in order for data to be distributed across them. This problem is addressed by the “logical system.”

An application system known as a logical system consists of multiple apps that collaborate on a single database. The logical system is referred to as a client in SAP.

Two systems cannot share the same name if they are connected to each other as source systems or BW systems, or if there are plans to connect them in any other way. This is because the logical system name is used to uniquely identify a system within the network.

What is SAP Instance?

The time frame created while installing and configuring the SAP system is know as SAP Instance. A shared instance memory allocation and one or more concurrently running processes make up an instance. Basically, a group of system resources, including memory, processes, dispatchers, and many more, usually for a single application or database server within a SAP R/3 client-server environment. The resources that are mentioned can be used and shared with other instances.

SAP Instances have three types –

SAP System = Dialog Instance + Central Instance + Database Instance. 

1. Dialogue Instance

There is a dialogue instance in the application layer. For a given system, the application layer can have a greater number of dialogue instances. It is used to maintain and distribute the server’s load.
There may be a dialogue instance on a different host. Hardware resources, a dispatcher, and work processes make up a dialogue instance. If the number of dialogue instances rises, so do hardware resources, dispatchers, work processes, and the number of concurrent user logins.

2. Central Instance

With some additional duties, the central instance can serve as the dialogue instance. Enqueue process will identify central and dialogue instances. Enqueue process is only present in the central instance.
Enqueue and message servers can be found in the central instance. Before accessing a database through a message server, all Dialog instances first connect with the central instance. When an instance is started, the dispatcher process tries to connect to the message server. in order to announce the services (DIA, BTC, SPO, UPD, etc.). Using the enqueue service, the locking table can be handled centrally. For a single SAP system, there will only be one instance.

3. Database Instance

The database instance responds to the central instance’s requests. Based on the user’s demands, the central instance delivers the requests to the database instance. Users are served by the database instance just as the enqueue server offers the lock management system.

How To Create Instance?

If you follow along with the steps given below, you can easily create a SAP Instance –

1. The first step in creating an instance is to define the operating mode.

2. To create an instance, go to CCMS -> Configuration or RZ04.

3. Select “Instance/operation modes”.

4. You can either press F6 or click on the “Create New Instance” icon.

5. When prompted, type the hostname and select Current Settings.

• SAP System No.: The system number given during installation is the SAP system number.
• Instance profile: The name of the profile should be chosen from the list of options before running the instance. To view the profile information, click the “Input Help” button.

The system presents all pertinent information about the instance if the application server is already up and running. Use input help to display the potential entries to display the values if the application server is not active.

Changing An Instance Definition

Follow these steps to change an Instance definition.

1. To maintain an instance, go to RZ04 or CCMS -> Configuration.

2. Select “Instance/operation modes” as seen below.

3. From the “productive instances list”, select an entry.

4. Click on “Save” after you have changed the data that is required to be modified.

Deleting An Instance

Lastly, you can follow along the steps given below in case you want to delete and instance.

1. To maintain an instance, go to RZ04 or CCMS -> Configuration.

2. Select “Instance/operation modes” as seen below.

3. From the “productive instances list”, select an entry.
4. To delete an operation mode, select it specifically and then choose “operation mode -> delete.”

This eliminates the operating mode together with all instances and associated work processes.

We hope this helps you understand the intricacies of SAP Instance and SAP SID. If you want to be an expert in operating SAP, enroll into our SAP Course in Ahmedabad and be unbeatable at it. Head over to our website to learn more!

A company is a business organization or group of businesses whose individual financial statements are prepared in accordance with the applicable commercial law in that country. The company’s financial transactions are recorded in the local currency.

A five-character alphanumeric key identifies a company, known as Company Code. Company codes are a component of your organization’s financial transactions, which are viewed at the company code level. Once a company code has been defined in configuration with all of the required settings, other company codes that are later created should be copied from the existing company code and then changes can be made as per business requirements. This tutorial will teach you how to create a company code in SAP.

A company can have multiple company codes and operations in different locations, but they must all be part of the same business unit.

This article will guide you through the process of creating a new company and assigning the company code in SAP FICO.

Creating A Company

About Company

A company is an organizational unit for which a separate set of financial statements can be prepared based on business rules. A company can be made up of one or more company codes. Local currencies are used by a company to keep track of its transactions. All of a company’s company codes must use the same Chart of Accounts and Fiscal Year for transactions. SAP does not compel you to form a corporation.

Here are The Key Things You Need To Know

You can prepare financial statements that comply with the laws of the country in which the business is located.

• A company can be assigned one or more company codes.
• It is a SAP organizational unit that can be selected or deselected.
• If a company has more than one company code, they should all use the same chart of accounts.

Creation Of A Company Code

SAP IMG Path: SPRO > Implementation Guide for R/3 Customizing > Enterprise Structure > Definition > Financial Accounting > Define Company

OX15 is the code for “Define Company in SAP.”

For making a new company, enter the following information.

Define Company Code
Step #1 Enter Transaction code SPRO in the command field
Step #2 In the next screen, Select SAP reference IMG
Step #3 In the next screen, Display IMG follow the menu path

SAP Customizing Implementation Guide -> Enterprise Structure ->Definition->Financial Accounting->Edit, Copy, Delete, Check Company Code

Step #4 In the next screen, select activity – Edit Company Code Data
In the Change View Company code screen

Step #5 Select New Entries
Step #6 In the Next Screen, Enter the Following Details

• Enter your Unique Company Code Number
• Enter Company Name
• In the Additional Data section Enter City
• Enter Country for the Company
• Enter Local Currency
• Enter Default Language

Step #7 Click the Address Details button on the same screen

Step #8 Enter Address Details for the Company. This will appear in print forms

• In the Name Section Enter Title and Company Name
• In the Search Term section, Enter Search terms 1 and 2
• In the Street Address section, enter street, postal code, city, country
• In the P O Box Address section, Enter PO Box and Postal Code
• In Communication Section, Enter appropriate details

Step #9 After Completing this information, Press Save How to Create a Company Code in SAP & Assign Company Code and Enter your Change Request number.

You have successfully created a new Company code.

Assign Company Code to Company

After successfully creating a company code and a company in SAP, you must assign the company code to the SAP system. In SAP, the link between company and company code is established by assigning a company code to a company.

You can assign the company code by using either the navigation method or the transaction code.

• Navigation: – SPRO – IMG – Enterprise Structure – Assignment – Financial Accounting – Assign company code to company
• Transaction code: – OX16

Step #1 Enter Transaction code “OX16” in the SAP command field and press enter to continue.

Step #2 On change view “Assign company code -> Company”: Overview screen, click on the position button and give your company code key. Now your company code displays in the window.

Step #3 Now update your company key “SKRT” in the given field.

Step #4 After the assignment of the company code to the company, click on the save button and save the configured data.

We have successfully assigned company code “SK01” to company code “SKRT” in SAP systems.

Now that you’ve learned how to create a company code in SAP, why not look into other free lessons to further your understanding of Financial Accounting in SAP? You can take a SAP course in Ahmedabad with us and hone your skills in SAP.

Accrual-based businesses must ensure they have a complete and accurate record of all financial transactions in order to report their results in accordance with GAAP.

In preparing financial statements for year-end (i.e., the end of the fiscal year) and other accounting periods, accounts payable accruals are a special form of expense that warrants careful attention.

What Are Accruals in Accounts Receivable?

Accruals in accounts payable require familiarity with the accrual basis of accounting. Rather than waiting for the buyer or seller to send or receive money, transactions are recorded in the general ledger as soon as they occur in the cash flow.

Material orders, service fees, wages payable, and taxes are just some of the examples of assets and liabilities that are recorded immediately in an accrual accounting system. When payments are made or revenue is received, adjusting entries are made to bring the books back in sync.

Any individual or organization that has supplied products or services to your business is considered an Account Payable (AP) on your balance sheet.

Crediting Accrued Amounts to Accounts Payable

All income and all expenses incurred during an accounting period (often a fiscal year) must be shown on the balance sheet at the end of the period. Expenses that are considered “accruals” are those for which payment isn’t due until after the accounting period has ended, even though they were received or done within that time.

Supposing, for the sake of argument, that the conclusion of the fiscal year for your organization is December 31. The marketing department at your company needed new computers and you placed an order for them in November of 2019 for $12,000. Although we acquired the PCs in November, the supplier will not bill us until February of 2020, and we won’t pay the bill until March.

Although the machines weren’t paid for until March 2020, they were delivered within the preceding fiscal year. The right journal entries must be produced to reflect the actual date the item was incurred in order for your balance sheet and other financial papers to be accurate and complete.

Tips on Managing Accounts Payable Accruals

To further comprehend accounts payable accruals, let’s focus entirely on expenses recorded under the accrual approach. Some of them are persistent, recurring expenses. The cost of utilities and the salary of employees that have not been paid yet are an example of these types of expenses. Goods or services delivered by a third-party supplier may also be consistent and continuing, but they are what we are talking about when we refer to accounts payable accruals. That is to say, accounts payable refers primarily to short-term debts owed to vendors.

Like accumulated obligations such as loan payments and wages, accounts payable count as current liabilities. But typically, these types of payments might be tougher to keep up with and reconcile than something like payroll or regular loan payments. Developing an effective approach is vital for avoiding running afoul of financial restrictions. Let’s examine what measures a company might take to strengthen the reliability of its books.

Verify the Accrual Invoice, Vendor, and Goods

You must double check the Accrual Invoice, the Supplier, and the Products. Almost everyone has ordered from a drive-thru and gotten home to find that the restaurant messed up their order. It’s not just eateries that sometimes mess up customers’ orders. In the event that a supplier sends you an incorrect quantity or the wrong things, you may have to make a supplementary purchase to make up the difference. You will end up paying twice for lost or stolen items if you don’t find them right away. In addition, you’ll be keeping track of accruing costs for something that wasn’t obtained and hence didn’t result in any immediate costs.

Pay Closer Attention to Increasing Bills

If an invoice surpasses a specific amount, then further attention should be given on it. This, like the initial procedure of validating the products, should be a routine component of your accounts payable department’s routine. When there are a lot of goods on an invoice, the vendor is more likely to make a mistake. Alternatively, they are for really expensive things, which implies little inaccuracies will result in big errors on your accumulated expenses reports.

Invoices and Receipts Should be Standardized

For reliable results, it’s important to use same inputs every time. Without a system in place to ensure that each invoice and transaction is translated into some consistent form, recording accounts payable accruals can rapidly become complex. Mistakes, duplications, and omissions are more likely to occur in the absence of a reliable system. The Order platform makes this easy by providing you with a single platform from which you can monitor your incoming invoices and make payments to the vendors when the time arrives. This works with any merchant accepting payments by ACH, checking account, or credit/debit card. Mediaplanet cut costs on sourcing by 8.8 percent by consolidating all of their suppliers in Order.

Take Note, and Get Paid Later

It’s much simpler to plan for the future and pay the piper when you can see the full picture. You may avoid unpleasant surprises when it comes time to pay your suppliers if you keep close tabs on accounts payable accruals, document them accurately, and use the appropriate technological tools for management.

Keeping accurate records of your company’s short-term liabilities is critical to the reliability of your income statement. The financial projections you make at the end of the year won’t be reflective of reality if these details aren’t correctly recorded and reconciled. The accounting process is fraught with potential for error because of the presence of human error.

Clearly Define Roles

Everyone at the company hopes there are no dishonest employees among them. However, adequate segregation of duties for accumulated expenses is the most effective strategy to prevent fraud. An employee has a lot of room for misconduct if the same individual is responsible for confirming the accrued expenses, modifying the entries, and signing off on the payments. Avoid having a single employee compromise the reliability of your financial statements by dividing up these responsibilities. A robust accounts payable audit procedure will also aid in checking everyone’s work.

Conclusion

Order facilitates the automation of that process and does away with the room for error that comes with manual labor. It’s a convenient tool for managing your business’s financial records, such as accounts payable and receivable, as well as accounts owed and received. Would you like more information on how to better efficiently and accurately handle your accounts payable accruals? If so, you can sign up for a commerce course in Ahmedabad and learn all that you need to about accruals.

Learning about accounting concepts such as revenue, expenses, and assets can be a great way to get started in the field. These principles can help you manage your own money, start your own business, or teach others about this discipline.

There are two types of accounting: accounting concepts and principles. In this article, we’ll go over some basic accounting concepts and know about the After Bcom course in Ahmedabad.

What exactly are accounting concepts?

Accounting concepts are the ideas, components, and terms that comprise the accounting, finance, and economic worlds. Individuals, businesses, and organisations can use these terms to record all of their financial information, including transactions. Accountants use these ideas when preparing financial reports and other documents for individuals and businesses.

Knowing common accounting concepts and how to apply them is essential for an accountant to interpret financial situations and track money properly. Learning about these concepts can also assist business owners in organising their business records, preparing for audits, and ensuring they earn enough revenue to sustain operations. Even the average person can benefit from understanding accounting concepts because it can help them save money, avoid debt, keep accurate financial records, and make wise financial decisions.

Accounting concepts and accounting principles are not the same thing.

Accounting concepts and accounting principles are both critical components of accounting because they establish a universal framework for discussing specific financial situations, rules, documents, and theories. While some people use these terms interchangeably, accounting concepts can be thought of as what accountants do and accounting principles as how they do it.

Accounting fundamentals

Accounting principles, also known as “generally accepted accounting principles” (GAAP), are widely accepted accounting laws or standards. These rules are made by groups like the Financial Accounting Standards Board for use by accountants all over the world.

A business can ensure compliance with the law and demonstrate economic growth to external parties by adhering to accounting principles. These principles include accrual, conservatism, and consistency.

Accounting ideas

Accounting concepts are the fundamental components of accounting. Accountants may apply these topics, terms, or theories to different types of money, transactions, and economic functions.

Accounting concepts are used by accountants to understand and explain a company’s operations, cash flows, and financial performance. Accounting, like most other fields, communicates using concepts as its own kind of language.

Accounting fundamentals

Accounting encompasses a wide range of disciplines. Examine the following seven concepts to gain a basic understanding of accounting:

Revenue

Revenue is the total amount of money received or receivable from customers for services and products by a business. Income is a company’s net profit, or the money left over after deducting expenses and taxes from revenue.

Expenses

Expenses are the costs incurred by a business in order to generate revenue. Supply and material costs, rent, advertising, employee salaries, repairs, and taxes are examples of such expenses. A restaurant, for example, may purchase ingredients from a supplier on a regular basis in order to run their business. In order to earn money, a company’s expenses must be lower than its revenue to generate profit.

Assets

Assets are resources that a company owns that provide it with financial benefits. A company’s assets can be calculated by adding its liabilities to its equity. There are two types of assets: current and noncurrent:

• Current assets include cash, checks, receivables, inventory for sale, and prepaid expenses. These are examples of resources that will be used by the business within a year.
• Non-current or fixed assets include long-term assets that can provide a company with benefits for more than one year, such as stocks and bonds, land, buildings, equipment, and trademarks.

Liabilities

Liabilities are economic obligations owed by a company to other organisations, such as lenders and creditors. Liabilities, like assets can be:

• Accounts payable, short-term loans, long-term loan instalments, and tax obligations are all current liabilities, which are payments that must be made this year.
• Non-current liabilities include long-term bonds, mortgages, and deferred tax obligations, which are examples of payments that are not due within the year.

Capital

Capital is defined as anything that adds value or benefits to a business owner, such as assets, machinery, real estate, inventory, and patents. While cash is a type of capital, the term “capital” is usually used to refer to investments that generate wealth for a company. Here are a few examples of capital:

• Working capital is calculated by subtracting current liabilities from current assets. Working capital refers to liquid capital assets, or cash assets, that a company uses for day-to-day operations. In the short term, working capital is used to pay debts and bills that are due this year.
• Equity capital refers to an owner’s stake or share in a company or any asset that they own. If a company liquidated or sold all of its assets for cash and paid off all of its liabilities and debts, the value that each shareholder would receive is their equity. The money that shareholders invest in a company is referred to as its equity capital.
• Debt Capital: Businesses can obtain debt capital by obtaining loans and bonds from banks and private or public sector organisations. Debt capital, because it provides a large sum of money all at once, can allow a company to invest in its future and expand.

Accounts

An account is a type of transaction, such as a cash transaction or a sales transaction. A general ledger, an accounting book that stores and organises transactions, is used by businesses to record accounts. Customers owe money to a business in exchange for goods and services, which is referred to as accounts receivable. People and businesses who have bought goods and services from businesses have accounts payable. These are the money that the business owes them.

Financial statements

These are the documents that detail a company’s or an individual’s transactions. The following are some examples of financial statements and their definitions:

• An income statement, also known as a profit-and-loss statement, is a document that provides information about a company’s financial performance by reporting revenues, costs, and expenses over a specific time period.
• The balance sheet is a financial statement that details a company’s assets, liabilities, and equity.
• A cash flow statement is a statement that shows how much money a company earned and how much money it spent.