Invest In Accounting

Courses : Intermediate Macroeconomics Lecturer : Frischa Adellia Semester : 4th Semester, 2022/2023 Sesion INVEST IN ACCOUNTING Investment is an activity of buying assets in order to obtain income in the future. Investments can be made by companies in the form of ownership of shares, bonds, or other financial instruments. Investments can also be made by companies in the form of ownership of physical assets, such as land, buildings, or machinery and equipment. In accounting, investments are reported in a company's financial statements as assets. Investment assets are divided into two categories, namely short-term investments and long-term investments. Short-term investments are investments that are expected to sell within one year or less. Examples of short-term investments are stocks and bonds that are traded on the stock exchange. Some examples of common short-term investments made by companies include: 1. Time deposit Time deposits are investments made in banks with a predetermined period of time and preagreed interest. Time deposits generally have a term of less than one year and provide relatively high interest. 2. Short Term Bonds Short-term bonds are debt securities issued by companies or governments with a maturity of less than one year. Short-term bonds generally provide higher interest than time deposits, but also carry a higher risk. 3. Commercial Papers Commercial Papers are bonds issued by companies to obtain funds from investors. Commercial papers have maturities of less than one year and generally pay higher interest rates than time deposits or short-term bonds. 4. Short Term Stocks Short-term shares are shares that are purchased with the intention of reselling in a relatively short period of time, usually less than one year. Short-term stocks have high profit potential but also carry high risks. 5. Money Market Investment Money market investments are investments made in financial instruments with maturities of less than one year, such as certificates of deposit, money market mutual funds, and others. Money market investments provide relatively stable and secure returns but the resulting returns are relatively low. Short-term investments are usually made by companies to meet temporary cash needs or to obtain short profits in a relatively short period of time. While long-term investments are investments that are expected to be held for more than one year. An example of a long-term investment is majority ownership in a company. Some examples of common long-term investments made by companies include: 1. Share Stocks are one of the most common types of long-term investments made by companies. Investment in stocks can provide relatively high returns in the long term, but also carries high risks. 2. Long Term Bonds Long-term bonds are bonds issued by companies or governments with a maturity of more than one year. Long-term bonds generally pay higher interest than short-term bonds, but also carry a higher risk. 3. Mutual Fund Investment Mutual funds are a place to collect funds from many investors and invest these funds in various types of financial instruments, such as stocks, bonds and money markets. Mutual fund investments are generally made for a long period of time and can provide relatively stable returns. 4. Property Investments in property such as buildings, land or commercial buildings can provide high returns in the long term, but also carry high risks. 5. Investment in Projects Companies can invest in large projects, such as building toll roads, building factories, or other infrastructure projects. Investments in projects generally have a long term and require large capital investments, but also have high profit potential. Long-term investments are usually made by companies to gain profits over a longer period of time and require a careful investment strategy to minimize risk and maximize profits. Investment recognition is carried out based on the applicable accounting standards. Short-term investments are recognized at cost and measured each reporting period at fair value. Meanwhile, long-term investments are recognized using the equity method or the cost method. The equity method is a method of recognizing long-term investments in which the value of assets is measured based on the share ownership. Under this method, the company recognizes gains or losses on long-term investments as income or expenses shown in the income statement. While the cost method is a long-term investment recognition method in which the value of assets is measured at cost. Under this method, the company does not recognize gains or losses on long-term investments except when the assets are sold. Companies must also pay attention to the risks of investments made. Investment risk includes market risk, credit risk and liquidity risk. The company must ensure that the investments made are in accordance with the established investment policies and take into account the existing risks. In the face of rapid business development, investment is becoming more and more important. Companies must ensure that investments are made appropriately and accurately in order to reflect the true value of investment assets and provide relevant information for users of the company's financial statements. In addition, companies must also pay attention to the effect of taxes on investments made. Companies must understand the impact of taxes on investment returns and consider appropriate tax strategies to maximize investment value. The company must also consider the fair value of the investment. Fair value is the price that could be received to sell an asset or pay a liability under normal market conditions. Fair value is very important to determine the true value of the investment and ensure that the value of the investment is properly recognized. Finally, the company must develop a clear and detailed investment policy. The investment policy must pay attention to the company's objectives and investment risks that may occur. Investment policies must be monitored and evaluated regularly to ensure that investments are made in accordance with established policies. In conclusion, investment is important for companies in order to obtain income in the future. In accounting, investments are recognized as assets and must be properly reported in the company's financial statements. Companies must pay attention to investment risks, tax effects, fair values, and develop clear and detailed investment policies to ensure that investments made are in accordance with company objectives and provide optimal value to shareholders.