The two important parts of the construction financial statement are the Balance Sheet and Profit & Loss account. Without the preparation of these two entities the financial statement cannot be reported, even the readers of the statement are not able to clearly understand the construction company’s position. Hence, a due regard is to be given by every company in the preparation of the two. However, people don’t understand them very clearly and notice problems in distinguishing
A Balance Sheet gives you a financial snapshot of the construction company as of the specific date. It calculates how much the company worth (its equity) by subtracting all money it owes (Liability) from the money it owns (Asset). Balance Sheet complies the accounting equation: ASSET = EQUITY + LIABILITY Liability is an obligation toward another party to pay money, delivery goods and render service. In this blog, we discuss about 2 common situations of Negative Liability. 1.
What is Accounts Payable (AP)? Account Payable refers to the list of company’s liability and debt owed due to the purchased of goods or services. Taking delivery of ordered products without paying, purchasing on credit is recorded as account payable. The Account Payable (AP) is an account that represents the company’s obligation to pay off its short-term debts to suppliers and creditors. It is also accountable for making payments by the company. Understanding the Account Paya