| A key skill a business manager must learn is | | | | machinery, stock or accounts receivable which |
| basic accounting. Understanding accounting will give | | | | represents debtors who owe the company |
| you a better understanding of how your | | | | money. |
| organisation works. This has many benefits as it | | | | Assets are divided up into two categories as |
| gives you greater control and confidence over | | | | follows: |
| your budgets and your own destiny. | | | | Current assets |
| As they say money makes the world go around | | | | Current assets represent assets that can be |
| and accounting ensures that money is controlled in | | | | converted into cash quickly. These types of |
| a way that it enables business and commerce to | | | | assets can also be referred to as liquid assets. A |
| happen. Accounting is necessary to track all the | | | | company should always have a reserve or back |
| different financial transactions that happen with in | | | | up of current assets in case a crisis occurs. If a |
| an organisation whether it is a small shop or a | | | | major bill needs to be paid urgently then, current |
| Fortune 500 company. The transactions can be | | | | assets can be converted into cash quickly to pay |
| formalised into financial reports for analysis. | | | | it off. |
| Business accounting provides a framework that | | | | Fixed assets |
| monitors and controls the financial health of an | | | | These are assets that cannot be converted in to |
| organisation. Through accounting methods and | | | | cash quickly. Fixed assets include equipment and |
| reporting management can make decisions on | | | | machinery. |
| whether there is potential to expand or cut back. | | | | Liabilities |
| Accounting can also provide financial reports that | | | | Liabilities are accounting terminology to mean that |
| can be used by top management and | | | | your company owes money. Liabilities can come in |
| shareholders to determine the profitability and | | | | different forms that include bank loans, |
| worth of an organisation. This can be determined | | | | mortgages, and business expenses. |
| by analysing the company's assets and liabilities. | | | | As with assets there are also current and fixed |
| These two components are the foundation that | | | | liabilities. Current liabilities are categorised as having |
| accounting is built upon. As a manager you should | | | | to be settled or paid within one year for example, |
| have at the very least a basic understanding of | | | | a short-term loan or accrued expensed are |
| each. | | | | current liabilities. Long term liabilities require |
| Assets | | | | settlement after one year. These can include |
| The tern asset refers to something that has | | | | long-term loans such as a mortgage on a factory |
| value. There are many different types of assets | | | | building. |
| that a company can own such as cash, property, | | | | |