Wednesday, December 5, 2012

How To Be A Good Accountant

-Bookkeepers prepare reports at the end of specific period of time, such as daily, weekly, monthly, quarterly or annually.

Profit can be called different things, for a start.

Realizing that your business needs a savings plan is the first step toward better management.

Each business has to devise a method of allocating indirect costs to different products, sources of sales revenue, business units, etc.

A going concern is a business that has sufficient financial wherewithal and momentum to continue it normal operations into the foreseeable future and would be able to absorb a bad turn of events without having to default on its liabilities.

These programs require you to move your hand to the mouse to select frequently needed options.

Preferred stockholders are promised a certain amount of cash dividends each year.

These principles have been fine-tuned over decades and have effectively governed accounting methods and the financial reporting systems of businesses.

While EPS is more important to determine the market value of a stock, book value per share is the measure of the recorded value of the company's assets less its liabilities, the net assets backing up the business's stock shares.

In this capacity, the forensic accounting professional quantifies damages sustained by parties involved in legal disputes and can assist in resolving disputes, even before they reach the courtroom.

The owners must enter into very detailed agreements about how the profits and management responsibilities are divided.

In December 2000, Enron claimed to have tripled its profits in two years.

At Tyco, shareholders were not informed of the 0 million in loans that were taken by Tyco's CEO, CFO, and chief legal officer.

Cost accounting serves two broad purposes: measuring profit and furnishing relevant information to managers.

it's a combination that will be in demand for as long as human nature exists.

If a business breaks the rules of accounting and ethics, it can be liable for legal sanctions against it.

Much of accounting though, is also concerned with basic bookkeeping.

It's important not to confuse profit with cash flow.

Many expenses are recorded by decreasing an asset other than cash.

Many of them run their farms year to year by taking loans to plant the crops.

If you don't, there's no way you can know how to increase it.

but a financial report is much more than just those statements.

General partners have the authority and responsibility to manage the business.

Many people use a CPA to do their returns;

Investigation may also occur in civil matters.

Showing a profit, or a positive figure on the balance sheet, is of course the aim of every business.

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.

Likewise, a purchase order can be created and converted to a vendor invoice, which can be paid in a number of different ways, including printing a check.

Although sole proprietors don't have separate invested capital from retained earnings like corporations do, they still need to keep these two separate accounts for owners' equity - not only to track the business, but for the benefit of any future buyers of the business.

This is called accrual based accounting, which records revenue when sales are made and records expenses when they're incurred as well.

Over-recording sales revenue is the most common technique of accounting fraud.

These include: --The financial Accounting Standards Board (FASB) has designated many standards.

It can deliberately deceive its investors and lenders with false or misleading numbers in its financial report.

Most audit reports on financial statements give the business a clean bill of health, or a clean opinion.

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.

A limited liability company (LLC) is becoming more prevalent among smaller businesses.

and 2) communicating the results of this process to interested parties.

Fraud committed by corporations can be devastating, not only for outside investors who have made share purchases based on false information, but for employees who, through 401ks, have invested their retirement savings in company stock.

Businesses don't discose margin information in their external financial reports.

Depreciation is the method of accounting that allocates the total cost of fixed assets to each year of their use in helping the business generate revenue.

When the business acquires products, the cost of them goes into what's called an inventory asset account.

Estimate how much revenue you expect to bring in each month, and project what your expenses will be.

The occupational fraud committed by employees usually involves the theft of assets.

It's sometimes called net income or net earnings.

A large number of public companies include only condensed financial information rather than comprehensive financial statements.

One partnership created by Enron, Chewco Investments (named after the Star Wars character Chewbacca) allowed Enron to keep 0 million in debt off of the books it showed to the government and to people who own Enron stock.

Revenue and receivables In most businesses, what drives the balance sheet are sales and expenses.

The financial statement also records what the sources of the assets were.

Depreciation Depreciation is a term we hear about frequently, but don't really understand.

It's one of the key components of a manager's job.

If GAAP are not the principles used for preparing financial statements, then a business needs to make clear which other form of accounting they're used and are bound to avoid using titles in its financial statements that could mislead the person examining it.

The content of a private business's annual financial report is often minimal.

It's a promise of case that the business will receive.

Beyond carrying out the fundamental tasks of the occupation-preparing, analyzing, and verifying financial documents in order to provide information to clients-many accountants now are required to possess a wide range of knowledge and skills.

Businesses need to be consistent from year to year regarding when they record sales.

As Enron grew, it expanded into other industries such as Internet services, and its financial contracts became more complicated.

But they're generally prepared at the end of each month, quarter and year.

It can also include items such as shelves and cabinets.

As an example, cars and trucks are typically depreciated over five years.

GAAP are not cut and dried, however.

The balance sheets reports the financial position of the business at a specific point in time, ofteh the last day of the period.

If a dispute reaches the courtroom, the forensic accountant may testify as an expert witness.

This used to be a rare thing in the business environment, but is now fairly commonplace.

One modification to an auditor's report is very serious - when the CPA firm says that it has substantial doubts about the capability of the business to continue as a going concern.

Obviously, a company wants to show a higher amount of assets to offset the liabilities and show a profit.

The reasons for growing a financial nest egg are strong.

The business subtracts the amount of fixed expenses for the period, which gives them the operating profit before interest and income tax.

The acid-text ratio is calculated by dividing the liquid assets by the total current liabilities.

Forensic accounting financial investigative specialists work with financial information for the purpose of conveying complicated issues in a manner that others can easily understand.

Some of these can include ATM fees, overdraft fees, special transaction fees or low balance fees, if you're required to keep a minimum balance in your account.

Every step of the income statement reports the deduction of an expense.

The controller is in charge of managing the entire accounting system in a business stays on top of accounting and tax laws to keep the company legal and is responsible for preparing the financial statements.

Rarely do you find a business that can increase its sales revenue without increasing these assets.

Personal exemptions - this is a certain amount of income that is excused from tax.

The profit ratio is very important in analyzing the bottom-line of a company.

Make more money than you spend to sell or manufacture products.

This is calculated by dividing the annual cash dividend per share by the current market price of the stock.

It's always prepared at the close of business on the last day of the profit period.

Or a business may choose not to record all of its cost of goods sold expense fore the sales made during a period.

On October 22nd, the Securities and Exchange Commission (SEC) announced that Enron was under investigation.

If revenues are lower than expected, increase efforts in sales and marketing or look for ways to increase your rates.

Not disclosing that it has used principles other than GAAP makes a company legally liable for any misleading or misunderstood data.

Many routine and recurring maintenance costs required for autos, trucks, machines, equipment and buildings can be delayed, or deferred until later.

What is a sole proprietorship?

Some business owners choose to create partnerships or limited liability companies instead of a corporation.

This is where profit smoothing can come into play to manipulate earnings.

A sole proprietorship is the business or an individual who has decided not to carry his business as a separate legal entity, such as a corporation, partnership or limited liability company.

Otherwise the president of chief officer of the business should clearly warn the shareholders that GAAP have not been followed in one or more respects.

However, changes in prepaid expenses are usually much smaller than changes in those other two asset accounts.

A company writes a lot of checks during the course of year to pay for purchases, supplies, salaries, taxes, loans and services.

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.

Cash does not increase until the business actually collects this money from its business customers.

But of course nothing's ever really simple, is it?

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