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Category: Work at Home

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  • How is accounting used in business?

    It might seem obvious, but in managing a business, it’s important to understand how the business makes a profit. A company needs a good business model and a good profit model. A business sells products or services and earns a certain amount of margin on each unit sold. The number of units sold is the sales volume during the reporting period. The business subtracts the amount of fixed expenses for the period, which gives them the operating profit before interest and income tax.

    It’s important not to confuse profit with cash flow. Profit equals sales revenue minus expenses. A business manager shouldn’t assume that sales revenue equals cash inflow and that expenses equal cash outflows. In recording sales revenue, cash or another asset is increased. The asset accounts receivable is increased in recording revenue for sales made on credit.

    Many expenses are recorded by decreasing an asset other than cash. For example, cost of goods sold is recorded with a decrease to the inventory asset and depreciation expense is recorded with a decrease to the book value of fixed assets. Also, some expenses are recorded with an increase in the accounts payable liability or an increase in the accrued expenses payable liability.

    Remember that some budgeting is better than none. Budgeting provides important advantages, like understanding the profit dynamics and the financial structure of the business. It also helps for planning for changes in the upcoming reporting period. Budgeting forces a business manager to focus on the factors that need to be improved to increase profit.

    A well-designed management profit and loss report provides the essential framework for budgeting profit. It’s always a good idea to look ahead to the coming year. If nothing else, at least plug the numbers in your profit report for sales volume, sales prices, product costs and other expense and see how your projected profit looks for the coming year.




  • What is earnings per share


    Publicly traded companies must report earnings per share (EPS) below the net income line in their income statements. This is mandated by generally accepted accounting practices (GAAP). The EPS gives investors a means of determining the amount the business earned on its stock share investments. In other words, EPS tells investors how much net income the business earned for each stock share they own.

    It’s calculated by dividing net income by the total number of capital stock share. It’s important to the stockholders who want the net income of the business to be communicated to them on a per share basis so they can compare it with the market price of their shares. Private businesses don’t have to report EPS because stockholders focus more on the business’s total net income.

    Publicly-held companies actually report two EPS figures, unless they have what’s known as a simple capital structure. Most publicly-held companies though, have complex capital structures and have to report two EPS figures. One is called the basic EPS; the other is called the diluted EPS. Basic EPS is based on the number of stock shares that are outstanding. Diluted earnings are based on shares that are outstanding and shares that may be issued in the future in the form of stock options.

    Obviously this is a complicated process. An accountant has to adjust the EPS formula for any number of occurrences or changes in the business. A business might issue additional stock shares during the year and buy back some of its own shares. Or it might issue several classes of stock, which will cause net income to be divided into two or more pools – one pool for each class of stock. A merger, acquisition or divestiture will also impact the formula for EPS.

  • Making Your Accounting Principles Acceptable




    It would be very easy for an employee to expect fair treatment from professionals within the company s/he’s employed with. To expect them to act within the precepts of the Golden Rule: “Do Unto Others as You Would Have Them do Unto You” which, if company management were to engage in such honorable behavior, workers would have little or nothing to worry about. But that’s not the case and therefore principles and systems must be employed.

    If everyone involved in the process of accounting followed their own system, or no system at all, there would be no way to truly tell whether a company was profitable or not. Most companies follow what is commonly referred to as GAAP (Generally Accepted Accounting Principles), and there are huge tomes in libraries and bookstores devoted to just this one topic.

    Unless a company states otherwise, anyone reading a financial statement can make the assumption that company has used GAAP. If GAAP is not the set of principles used for preparing financial statements, then a business needs to make clear which other form of accounting they have used and are bound to avoid using titles in its financial statements that could mislead the person examining it.

    GAAP is the gold standard for preparing financial statements and/or a financial report. Not disclosing that it has used principles other than GAAP makes a company legally liable for any misleading or misunderstood data. These principles have been fine-tuned over decades and have effectively governed accounting methods and the financial reporting systems of businesses.

    Different principles have been established for different types of business entities, such as for-profit and NFP (Not For Profit) companies/organizations, governments and other enterprises. GAAP is not cut and dried, however. They’re guidelines and, as such, are often open to interpretation. Estimates have to be made at times, and they require good faith efforts towards accuracy.

    You have probably heard the phrase “creative accounting,” which is when a company pushes the envelope a little (or a lot) too far to make their business look more profitable than it might actually be. This is also known as massaging the numbers, a practice that can spiral out of control and quickly turn into accounting fraud (or cooking the books). The results of these practices can be devastating and ruinous to hundreds and thousands of lives, as in the cases of Enron, Rite Aid and others.

  • 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.

     

  • About Business Investing and Financing


    An important portion of the statement of cash flow reports the investments your company made during the reporting year. New investments are signs of growing or upgrading the production and distribution facilities and capacity of the business. Disposing of long-term assets or divesting itself of a major part of its business can be good or bad news, depending on what’s driving those activities.

    A business generally disposes of some of its fixed assets every year because they reached the end of their useful lives and will not be used any longer. These fixed assets are disposed of, sold or traded in on new fixed assets. The value of a fixed asset at the end of its useful life is called its salvage value. The proceeds from selling fixed assets are reported as a source of cash in the investing activities section of the statement of cash flows.

    Usually these are very small amounts, but like individuals, companies at times have to finance its acquisitions when its internal cash flow isn’t enough to finance business growth. financing refers to a business raising capital from debt and equity sources, by borrowing money from banks and other sources willing to loan money to the business and by its owners putting additional money in the business.

    The term also includes the other side, making payments on debt and returning capital to owners. It includes cash distributions by the business from profit to its owners. Most businesses borrow money for both short terms and long terms. Most cash flow statements report only the net increase or decrease in short-term debt, not the total amounts borrowed and total payments on the debt.

    When reporting long-term debt, however, both the total amounts and the repayments on long-term debt during a year are generally reported in the statement of cash flows. These are reported as gross figures, rather than net; but, putting aside the fact that every business needs to make investments and secure financing in order to maintain a healthy economic life, one thing that must be understood is the cash flow of a business should be fluid.

     

  • Unfiled Tax Returns in NY? Get a New York Tax Attorney!


    So you did not file your income tax returns for at least ten years, and here you come back into the country finding out that the IRS had been contacting you through your good old New York address but to no avail. Until such time that they become aware of your quiet return to the country, they will automatically send for you to pay your overdue taxes for those ten years during which you failed to file your income tax returns.

    So what you need to do is to get your documents ready, and be prepared as well to hear the shock of your life. The taxes you owe the IRS may just be high enough to make your eyes roll. But you’ve got no choice. It is either you pay your overdue tax debt or you get convicted of tax evasion or some other kind of tax crime that they can certainly charge you with. Which choice would you then opt for?

    Having failed to file your personal income tax returns can put you in real hot water with the Internal Revenue Service. If you are placed in this kind of a predicament, your best bet will probably be to hire a tax attorney. Living in New York never is one advantage you may have when it relates to availing yourself of the very best legal services.

    Being one of the world’s busiest cities, New York has a wide range of tax attorneys who are experts in dealing with these kinds of cases. Approach any New York tax attorney, you can feel instantly assured and confident that your case will be adequately and professionally handled. Your New York tax attorney will take charge of negotiating with the IRS in an attempt to reach an appropriate agreement.

    The first step your New York tax attorney will probably get busy with is to trace back the years of your back taxes. The IRS will have sent you constant reminders about the deadline of your due taxes. Without the considerable aid of a New York tax attorney, you may be head over heels in a confused state, as you will also feel harassed, and threatened.

    Do you think you can handle this kind of pressure on your own? If you feel like your head may plop like a balloon, get yourself one fine New York tax attorney or law firm now!

    Keep in mind, that if you continue to disregard the fact that you need to file your income tax returns, the IRS will be very religious in sending you the reminders. It will even get to the point that such reminders will turn unfriendly. Do not therefore be surprised that one day you may face the Notice of Intent to Levy both your wages and assets.

    This is a stressful situation. But with a New York tax attorney, you will be provided with many options and you can likely be rescued from severe penalties and / or punishment. A New York tax attorney will have nothing in mind other than representing your best interests so that you may emerge victorious or with a manageable situation in the end.

    You may not have bothered to think about this possibility. But then you know for a fact that you cannot in any way escape such a fate. You need not prolong your agony and make matters worse. To this very point, make sure to contact a reliable New York tax attorney. S/he will take care of everything.


    Your New York tax attorney will work things out for you such as reducing the punishment that the violation carries. You can trust them wholeheartedly with legal matters such as these. You really do need to face up to your tax problems because you can never run away from them. New York tax attorneys can lend a helping hand.

  • In Tax Return Preparation, Alabama Tax Attorney is a Wise Investment


    Just the mention of the word tax would send an eerie feeling to many individuals. However, every person must accept the fact that paying tax burdens is part of the duty as a citizen of a state. You are left with no choice but to pay tax liabilities. If you don’t, you are to suffer tax penalties, fines, or even imprisonment. Moreover, it is better to comply with your duties on time to preclude you from further troubles with the government.

    Before a taxpayer can pay his taxes, he must first prepare his tax return. Tax return preparation is one ordinary thing to individuals earning income. This is because all income earners are duty-bound to pay taxes to the government. Taxes are paid annually. Hence, before the scheduled time for the collection of tax contributions, the taxpayer must already be ready.

    Tax return is the official document given to taxpayers for them to list their tax contributions for a certain period. It is necessary that this document be prepared and submitted early in time so as to avoid penalties.

    Preparing a tax return can be done personally by the taxpayer. This is if he is keen in doing the task on his own. However, if you want an easier way, there are currently advanced software that are especially designed to prepare tax returns. Taxpayers can use said software to help them compute tax contributions. This software can be had online. You just have to download and install it in the computer after that you will be able to use it to ease the burden of tax return preparation.

    If you do not want the software, you can hire the services of expert tax return calculation personnel. You just have to be certain that the person you hire is the best that you can have. Better yet, hire the services of a tax attorney.

    A tax attorney guides a client to avoid future tax problems. He also defends clients in cases of criminal and civil suits regarding tax troubles. When a taxpayer has trouble with the state department of revenue or Internal Revenue Service, he may opt to remedy it himself or hire the services of a tax attorney. However, the taxpayer can be better served by a tax attorney.

    Tax attorneys specialize in solving tax problems with the IRS. They are experts in taxation issues and relief. Nonetheless, they are considered a great help in advising their clients on how to lessen their tax liabilities. They also can also give valuable advice on what exemptions are available to them. They can also give the demarcation line between legal and illegal ways of reducing or avoiding taxes.

    One important thing in hiring the services of lawyers is that they must be equipped with knowledge and expertise about the subject matter. Alabama tax attorney, for instance, is an expert in terms of Alabama taxation laws. If you are a resident of Alabama, it is better to hire the services of a good Alabama attorney to assist and defend you.

    Knowledge and expertise are boosted by the fact that the tax attorney is also a resident of your state. Hence, it can be presumed that he is updated with the laws and customs of the land than other lawyers. Bear in mind that tax return preparation is an important process in taxation. One mistake can invite criminal actions and penalties. Moreover, it is better to consult a trusted tax attorney in your territory. A good tax attorney is considered a taxpayer’s wise investment.