As cash. When understanding financial accounting its vital to

 As a junior
marketing agency executive it’s important to consider all possibilities and
develop a good understanding of all principles required with relation to
financial and management accounting. Initially the understanding of general definitions
is vital such as a current liability or current asset. A current liability is
an amount due to be paid to creditors within twelve months an example of this
is short term borrowings, whereas a current asset is an asset which can be
converted to cash within one year or within operating cycle of the business. An
example of a current asset is cash. When understanding financial accounting its
vital to then understand investment, a lot of businesses purchase equipment on
a finance scheme with that will then let them know if investments are worth
investing into, the lifespan and depreciation of an item will provide a further
indication of if it’s worth putting your money into. There are several ways of
calculating depreciation, these are named straight line depreciation and
reducing balance depreciation. Straight line depreciation is generally based around
the original cost of the item, furthermore the price of the asset never changes
so the amount will be the same every year. The formula used is cost – residual
value / useful economic life. Reducing balance involves a depreciated value
every time, this is based on the netbook value left over the depreciated amount
is taken out. Non-current assets are usually depreciated in costs as they cost
too much to purchase in one, so their cost is spread over the lifetime or an
amount of years so it’s cheaper for the business. Break even analysis is
usually adopted by management teams to then separate costs of production into
those that are “variable” (costs that change when production volume changes)
and “fixed” costs (costs that are no linked to volume produced). The total
variable and fixed costs are compared with sales revenue in order to determine the
level of sales volume, sales