Definition of working Capital and benefits of its analysis

As an accountant, you must know working the working capital and benefits of its analysis. Dear working capital means excess of current asset over current liabilities. In other word. If your current assets are more than your current liabilities.

These more current assets are known as working capital. For doing your business with better way, the business must have working capital every time. If you have more current assets than your current Liabilities , it means you can buy your stock of business , you can pay your creditors . All time when your investor or any body who want to give you loan will see you working capital . If your liquid capital is non , nobody will give you any debt or goods on credit . So it is the duty of accountant of business . To make some working capital so that your business will grow with the help of loan and debt. For this I am giving some tips. Each time when you pass the voucher entry in tally or any other computer accounting software , then see what is the position of your working capital.

If you see that there is no working capital, when current assets are equal to current liabilities , or current liabilities are more than current assets this will be very serious position when working capital is in negative. At this time, you must sell some fixed assets so that you can keep your working capital position in positive. Never give goods on credit to any body who has not good dealing with you

                   Financial accounting, cost accounting and management accounting are interrelated because without co-ordination and co- operation with each other, we will never succeed in achieving the objectives of business. Financial accounting provides different financial statements. On these statements we calculate different cost, like cost of material, cost of labour,

and cost of overheads. On the basis we calculate cost of goods sold and then we include our profit margin in it and the ascertain our product price. In management accounting, financial and cost accounting supply different useful accounting information. On these accounting data manager makes the plans of business. Organize different works. Even standard costing and budgeting is very useful toots for controlling the organization. In a business the requirement of funds has to be carefully estimated. Certain funds are required for long term purpose investment in fixed assets etc. A careful estimation of such funds depends different ratio analysis which tells us that what is rate on capital employed, if this rate is very high then we can get more fund for more production and for more production give more money. Even financial management is also part of management accounting. If system of financial accounting will complete with good way and rules and regulation, then other system of cost accounting and management accounting will gives good result.