Current Liabilities

Current liabilities is a section of the Liabilities and Equity side of the balance sheet. It refers to accounts payable, credit card debts, short term debts, and payroll compliance or taxes owed.

Construction Accounting – Balance Sheet Construction in Process Accounts

Construction in Process Accounts

Construction accounting consists of three major groups of accounts. The first and most understood set are the accounts found on the profit and loss statement. Customarily referred to as Cost of Goods Sold or Costs of Construction, these accounts convey the total costs of construction against the revenue earned for those contracts. The second major group is located on the balance sheet in the current assets section. This group is called the ‘Construction in Process’ (CIP) accounts. The third major group is also located on the balance sheet down in the current liabilities section and is called ‘Construction Billings’ or ‘Construction Deposits and Draws’.  

This article explains the balance sheet accounts related to Construction in Process.  I will explain how they are designed, formatted and presented.  In addition, I’ll explain the impact either the completed contract or percentage of completion method has on the corresponding project’s account balance.  Finally, I’m going to explain to you how to interpret the information presented. 

In another article I will go into detail related to Construction Billings and the corresponding deposits and draws.  This article will focus on the Construction in Process/Progress or what is commonly shortened to CIP. 

Long Term Debt – Financial Statement Presentation

Long-Term Debt

Long Term Debt is one of the multiple forms of capitalizing a business. It includes bonds, secured notes and mortgage notes. In the world of small business, the most common form of long term debt is secured notes, most likely with recourse. As an owner of a business you need to understand how this information is presented in your financial statements.

Insolvency and Bankruptcy – Know the Difference

Insolvency and Bankruptcy

Every business owner needs to know the difference between insolvency and bankruptcy. Often these two terms are misunderstood and improperly used in conversation. You need to know their correct meaning because both are used in civil law and both have different issues to address during the process. In addition, understanding these two terms builds a better comprehensive understanding of financing your business.

Quick Ratio – Definition, Explanation and Proper Use

Quick Ratio

The quick ratio is a formula used in business to identify the ability of a business to pay its current liabilities. It is also known as the ‘Acid Test’ formula (ratio). In the large markets this formula is one of the financial industry ratios used to value the stock of a corporation. In the arena of the small business, you should only use this ratio as a means to gauge ability to pay your bills right now.

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