Accounting

5 Accounting Equation Methods Catered For Corporations

With the ever thriving plethora of corporate accounting services in Singapore, it is not uncommon for companies to consider the option to outsource accounting to professional accounting firms. While that may be so, business owners are still highly encouraged to familiarise themselves with the basics of accounting so as to double-check and minimise the occurrence of subtle errors. For starters, here are 5 basic accounting equation examples catered for corporations:

  1. Basic

As a general practice, the basic accounting equation for corporations is denoted with assets being the sum of liabilities as well as Stockholders’ equity (Assets = Stockholders’ Equity + Liabilities). Different transactions will affect the corporation’s accounting equation, balance sheet and income statement in differing ways. Pay attention to the cash amount, accounts receivable, equipment, common stock, notes payable, retained earnings, treasury, service revenues, advertising expense, accounts payable and temp service expense amongst other factors.

  1. Stock

When stocks contain no par value and no stated value, the assets of the corporation as well as stockholders’ equity would increase in an equivalent amount, thereby balancing out the accounting equation. This accounting equation reveals that the source of the corporation assets are from the stockholders. Stocks that have been purchased from the stockholders by the corporation would be stored in the Treasury stock. In situations where corporations purchase their own stock for cash, the corporation’s total assets as well as stockholders’ equity decreases equivalently.

  1. Equipment

Another factor that affects the way the accounting equation is applied would be the purchase of equipment. Equipment purchasing is typically not treated as an immediate expense- the purchase only serves to become a form of depreciation expense only when the equipment has been placed into service. Pay attention to the date where the equipment is placed into service. If it hasn’t been done so, then there would be no expenses in the particular transaction, or earlier transactions when reported in the corporation’s income statement.

  1. Service Revenues (Earned Revenues)

Payment and billing methods differ from case to case. However, most corporations choose to bill their clients and offer a 30 day leeway before the payment amount is due. Once the corporation has performed and completed the service for their clients, this automatically means that the corporation has earned revenues, and reserves the right to receive the agreed upon amount from their clients. In situations like these, the stockholders’ equity in the accounting equation will increase. However, one must take care to note that the revenue transaction is instead recorded in the Service revenues section instead of directly into the Stockholders’ Equity account.

This is usually to provide corporations with the opportunity to report the revenues account through it’s income statement at any given time. The amount located in the revenues accounts will only be transferred into the retained earnings account after the year end.

  1. Temporary Service Expense

If corporations outsource work to temporary help services, the invoice can be recorded immediately while the amount is paid only after a certain amount of days. The accounting equation will then be amended to reveal that the corporation’s liabilities increase whereas the stockholders’ equity decreases by the amount of payment that is owed to the temporary help services. The liabilities incurred should be recorded under the Accounts Payable section whereas expenses should be recorded in Temporary Service Expenses.

5 Step Beginner Guide to MYOB Purchase Orders- What You Need to Know

MYOB purchase orders are important to get right as they contribute to data accuracy and workflow. If you are a beginner, there are certain functions you have to know in order to fully utilise and benefit from using MYOB. Here’s a 5 step beginner guide to MYOB purchase orders to get you started:

  1. Recording Purchase Orders

In order to start recording the purchase orders you have received, open up your Purchases command centre and look for the enter purchases option. Look for the top left corner and choose the arrow next to the field so that you can choose ORDER instead if it has not been chosen by default. You will then be prompted to fill in information so make sure to do that as concisely as you are able, according to the information you have currently at hand. Choose the supplier you need, the area it is shipped to, make sure the terms are correct and tweak the purchase number if you are required. Confirm data accuracy before clicking on record.  

  1. Credit Purchase Conversion

Convert your purchase order into credit purchases by looking for the Purchases Register in your MYOB software. Select the Orders tab so that you can view the purchase orders list you have created and choose the suppliers you want to display. Select the supplier you want and look for the specific purchase order you need from the supplier. After which, select it and choose the change to bill option so that it can be converted. You can then record according to what you need and make sure the information input is right.

  1. Accounts Payable Settlement

For accounts payable, look under the purchases command centre again and choose the Pay Bills option. This will allow you to record supplier payment- choose the account you want your payment to be recorded on. If it is a direct payment from your bank account (payment through credit cards or cheques), you can choose the pay from account option. If you want your payment to be grouped with a group of electronic payments, look for the Prepare electronic payment option under the Banking Command centre instead.

  1. Create Supplier Note

When it comes to purchase returns, you will first have to create a supplier note/debit note. To begin doing so, look for your Purchases Command Centre on your MYOB software. Choose enter purchases and look for the BILL field option. Make sure to enter the details of your purchase return and indicate negative amounts under the Bill section of the window that pops up for you. Once you are done with it, check to make sure everything is in order and record it.

  1. Apply Supplier Note

After creating your purchase return supplier note, you will now have to apply it to a purchase invoice that is still outstanding.  Look under the Purchases Command Centre and choose Purchases Register. Choose the tab that states returns and debits so that you can access your supplier note and choose the relevant supplier. You can then be able to locate the supplier you want to use and look for the PO# that you want to apply. Choose it and click apply to purchase so that you can apply it. You will then have to finalise it by choosing record.

These are some of the most crucial things to know about MYOB purchase orders. Make sure to practise and get acquainted with the procedures so that you can easily maintain data accuracy in your everyday projects!