Assets for economy-part 3.
We continue in the discussion of Assets for economy-part 3.
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Definition of supplies as assets for the economy.
Supplies are defined as:
a) Materials not used directly in the manufacture of your products (e.g. envelopes, packaging) or
b) Materials used in the production of your products that are not able to be inventoried due to an inability to accurately measure the material (e.g. thread)
If you think your material is a supply, it should generally be entered as an expense rather than a material.
This is because supplies are typically claimable only within the year that they were purchased (materials used to produce your products are on the other hand treated as an “asset until sold”).
For your record keeping, you can optionally add a non-inventoriable material into Craftybase and then create a material expense to record the purchase. Craftybase will recognize that the material is non-inventoriable and will assign the expense cost directly to your expenses tally to ensure it does not get included in COGS. This is good for situations where you’d like to keep a photo or a description of the supply item purchased. To keep these costs further separated, you can also consider adding a new material category called SUPPLIES to handle these cases.
Definition of inventory as assets for the economy.
Inventory is the term for the goods available for sale and raw materials used to produce goods available for sale.
The definition is quoted from the Investopedia site
Inventory represents one of the most important assets of a business because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders.
What is prepaid rent accounting?
The following definition is quoted from https://www.temenos.com/
A prepaid account is any of the following:
1. Any account marketed or labeled as “prepaid” that is redeemable at multiple, unaffiliated merchants for goods or services, at ATMs, or for P2P transfers
Any account issued on a prepaid basis in a specific amount – or not issued on a prepaid basis but capable of being loaded with funds thereafter – with the primary function of conducting transfers with multiple, unaffiliated merchants for goods and services at ATMs or for P2P transfers that is not a checking, share draft or NOW account
3. A payroll card account
4. A government benefit account
What is prepaid rent accounting?
The definition is quoted from Accounting tools.
Prepaid rent is rent paid prior to the rental period to which it relates. Rent is commonly paid in advance, being due on the first day of that month covered by the rent payment. The landlord typically sends an invoice several weeks early, so the tenant issues a check payment at the end of the preceding month in order to mail it to the landlord and have it arrive by the due date.
This presents a problem for the tenant since the payment would normally appear in its income statement as rent expense in the period in which the invoice was entered in the accounting software – however, since the payment was recorded and the check was cut in the month before the period to which the payment relates, it is actually prepaid rent. Therefore, a tenant should record on its balance sheet the amount of rent paid that has not yet been used.
What is prepaid Insurance as an asset to the economy?
The term prepaid insurance refers to payments that are made by individuals and businesses to their insurers in advance for insurance services or coverage. Premiums are normally paid a full year in advance
But in some cases, they may cover more than 12 months. When they aren’t used up or expired, these payments show up on an insurance company’s balance sheet as a current asset.
This is a link for the pdf used for illustration for the assets posts.
Engineering Economy. This is a great link that illustrated different types of economies, how to make economic decisions? the Time value of money, Applying Theory to Practice.
This is a link to the next post which contains the definition of depreciation and book value, depreciation, book value.