Category: Equipment and furniture

Equipment and furniture encompasses desks,. chairs, lamps, carpeting, tables, racks, couches, and items designed to make the home/office environment professional but comfortable as possible.

You’ve Heard Of a Corporation What Exactly is it?


Most businesses start out as a small company, owned by one person or by a partnership. The most common type of business when there are multiple owners is a corporation. The law sees a corporation as a real, live person. Like an adult, a corporation is treated as a distinct and independent individual who has rights and responsibilities.

A corporation’s “birth certificate” is the legal form (filing certificate) that is filed with the Secretary of State of the state in which the corporation is created, or incorporated. It must have a legal name, just like a person. A corporation is separate from its owners and it is responsible for its own debts. The bank can’t come after the stockholders if a corporation goes bankrupt.

A corporation issues ownership shares to persons who invest money in the business. These ownership shares are documented by stock certificates, which state the name of the owner and how many shares are owned. The corporation has to keep a register, or list, of how many shares each share holder owns. Owners of a corporation are called stockholders because they own shares of stock issued by the corporation.

One share of stock is one unit of ownership; how much one share is worth depends on the total number of shares that the business issues. The more shares a business issues, the smaller the percentage of total owners’ equity each share represents.

Stock shares come in different classes of stock. Preferred stockholders are promised a certain amount of cash dividends each year. Common stockholders have the most risk. If a corporation ends up in financial trouble, it’s required to pay off its liabilities first. If any money is left over, then that money goes first to the preferred stockholders. If anything is left over after that, then that money is distributed to the common stockholders.

 

Can Financial Window Dressing Help Your Business?


 

Financial managers can do certain things to increase or decrease net income that’s recorded in the year. This is called profit smoothing, income smoothing or just plain old window dressing. This isn’t the same as fraud, or cooking the books, though, just in case that thought had crossed your mind.

Most profit smoothing involves pushing some amount of revenue and/or expenses into other years than they would normally be recorded. A common technique for profit smoothing is to delay normal maintenance and repairs. This is referred to as deferred maintenance. Many routine and recurring maintenance costs required for autos, trucks, machines, equipment and buildings can be delayed, or deferred until later.

A business that spends a significant amount of money for employee training and development may delay these programs until the next year so the expense in the current year is lower. A company can also cut back on its current year’s outlays for market research and product development.

Some businesses might ease up on their rules regarding when slow-paying customers are written off to expense as bad debts or uncollectible accounts receivable. These businesses can put off recording some of their bad debts expense until the next reporting year.

A fixed asset that is not being actively used may have very little current or future value to a business. Instead of writing off the un-depreciated cost of the impaired asset as a loss in the current year, the business might delay the write-off until the next year.

You can see how manipulating the timing of certain expenses can make an impact on net income. This isn’t illegal although companies can go too far in massaging the numbers so that its financial statements are misleading. For the most part though, profit smoothing isn’t much more than robbing Peter to pay Paul.

Accountants refer to these as compensatory effects. The effects next year offset and cancel out the effects in the current year. Less expense this year is balanced by more expense the next year. The important thing is knowing how far to push the envelope in these kinds of maneuvers and keep yourself and your company out of trouble with the IRS, ’cause that kind of a problem you just don’t need.