Accounting Unplugged

<< How to Use Financials and Ratios

Businesses live or die on the value of their products and services.   Similarly, individuals and departments within businesses survive on the value of their internal products.  Accounting is no different.  Accounting provides both services and products that add value to an organization or service which comes as very efficient when someone looks to trade fx in the UK.

The most important thing in accounting is to understand accounting and your own accounting systems.  But, if you want to truly succeed, think beyond debits, credits and reconciliations and become an expert in your company’s industry. — When asked about Sallie Mae loan forgiveness, MyCreditCounselor.net state that Sallie Mae (and Navient for that matter) don’t offer traditional forgiveness programs, but there are alternatives that achieve a very similar outcome. Financial accounting knowledge transfers fairly seamlessly from one business to another but specific industry and management accounting knowledge may not and it is through that kind of knowledge that you can add value to your organization.

Research your industry, spend time with operations people, become familiar with what their processes are and the order in which they occur, including the type of loaning and how they work, take in count there are the payday loans which today payday loans really serve the purpose in helping and managing emergency financial situations.

Learn how they use their information systems, understand the logic behind both the information they track and the order in which that information is organized.  Become familiar with the way your systems interact, how they are dependent on each other and how they are independent of each other.   Find out from them what information they have and what information they wish they could have.  Ask them if they use reports from accounting, if so, do they find them to be reliable, timely and useful.  (Always make sure to have the appropriate permissions for internal research).

As an accountant you perform the financial functions that keep a business going but you are also the custodian of a wide variety of business information.  In addition to standard accounting data, you have access to information about lenders, suppliers, customers and operations.  As you increase your understanding of your company and industry you will increase your understanding of the information available to you.   Find ways to increase and improve the information you can make available to your company and you will have a real impact on its success and on the value you add to it.

© 2008-2010 Erin Lawlor

<< How to Use Financials and Ratios

**disclaimer: All information posted on this blog is from my own experience and training. The guidelines I present are general and in my experience, standard practice. I do not write with authority from any Accounting Standards Boards.

The internet is a vast, ever-evolving jungle. Businesses, both big and small, fight tooth and nail to be seen and heard amongst the digital foliage. This is where internet marketing comes in – your machete to carve a path through the online wilderness and attract potential customers. But within internet marketing lies a powerful tool called SEO, and navigating its intricacies can feel like deciphering ancient jungle symbols. So, why should you consider hiring an SEO expert instead of going it alone?

SEO: The Compass in Your Online Journey

Think of SEO (Search Engine Optimization) as your guide in the digital jungle. It’s the art and science of making your website a beacon that search engines like Google can easily recognize. By strategically using relevant keywords and optimizing your website’s structure, SEO increases your chances of appearing at the top of search results when people look for products or services related to yours. It’s like placing a giant, SEO-infused sign that screams, “Hey, I have exactly what you need!” right at the heart of the online marketplace.

The Importance of Ranking High: Why the Top Spot Matters

Imagine two shops in the jungle – one hidden deep within the undergrowth, the other prominently displayed near a well-trodden path. The one with higher visibility naturally attracts more customers. The same principle applies to SEO. Studies show that most users only click on the first few results displayed on a search engine results page (SERP). So, the higher you rank, the more clicks you get, translating into a dramatic increase in website traffic – basically, more potential customers stumbling upon your virtual shopfront.

The Allure of DIY SEO: Can You Go It Alone?

The internet is full of resources on SEO, and the allure of doing it yourself is undeniable. However, SEO is a complex beast, constantly evolving alongside search engine algorithms and is better to hire Search marketing Calgary. Here’s where the expertise of an SEO professional becomes invaluable:

Decoding the Algorithm: SEO specialists possess a deep understanding of how search engines rank websites. They stay updated on the latest trends and best practices, ensuring your website is optimized for maximum visibility. It’s like having your own personal jungle guide who knows all the secret pathways to reach the top.
Technical Prowess: SEO involves some serious technical mumbo jumbo about website structure and code optimization. SEO experts have the expertise to handle these complexities, freeing you up to focus on running your business. You wouldn’t want to navigate a jungle without a map and compass, would you?
Keyword Mastery: Identifying the right keywords – the search terms people use – is crucial for attracting the right kind of traffic. SEO experts conduct in-depth keyword research, ensuring your website speaks the language your ideal clients understand. It’s like learning the secret language of the jungle animals so they know you have the solutions they need.

The ROI of an SEO Expert: Growth Beyond the Jungle

Hiring an SEO expert isn’t just an expense, it’s an investment in the future of your business. Here’s how a well-executed SEO strategy can help you flourish:

Increased Brand Awareness: By appearing at the top of search results, your brand gains valuable exposure, making it more recognizable to potential customers. It’s like having your name whispered through the jungle, piquing everyone’s curiosity.
Attract Qualified Leads: SEO helps you target the right audience. People actively searching for solutions you offer are more likely to convert into paying clients. It’s like attracting potential customers who are already looking for what you sell, not just random jungle explorers.
Boost Credibility and Trust: A high ranking on search engines signifies authority and expertise in your field. This trust factor encourages potential customers to choose you over competitors. It’s like having a glowing reputation in the jungle marketplace, making you the trusted provider.
Sustainable Growth: SEO is an investment that keeps on giving. By attracting a steady stream of qualified leads, you can achieve sustainable business growth over time. It’s like building a permanent, thriving camp in the heart of the online jungle.

Embrace the SEO Revolution: Partner for Success

Don’t get lost in the ever-changing landscape of internet marketing. By partnering with an SEO expert, you gain a valuable guide who can navigate the complexities of search engine algorithms and optimize your website for maximum visibility. With an SEO expert by your side, you can transform your online presence from a hidden clearing to a thriving marketplace, attracting a steady stream of customers and propelling your business to new heights. So, ditch the DIY approach and embrace the SEO revolution. The online jungle awaits!

The Revenue Principle of GAAP requires Revenue to be recorded in the period it is Earned regardless of when it is billed or when cash is received.

In some cases, it is simple to determine the timing for Revenues Earned, once ownership of a product is transferred or a service is complete, revenue is considered to have been earned.  But if revenue recognition were delayed until the end of a long term contract, the Matching Principle of tying revenues and their direct costs to each other would be violated.  The solution to this problem is the Percentage of Completion method of Revenue Recognition.

Contract Revenues are tied to Costs, but Billings on Contracts are not always tied to Costs. Sometimes elements of a contract are billed in advance or sometimes they are delayed by mutual agreement (or disagreement). This mismatch between actual billed revenue and earned revenue will require an adjusting entry but since the Percentage of Completion method adjusts billed revenue to reflect earned revenue, billings are posted to revenues and adjusted later to reflect the correct earned revenue amount. (Debit Accounts Receivable, Credit Sales).

Long Term Contracts will have estimates for both sides of a contract, Costs and Revenues.  Calculating Percentage of Completion requires both total actual and total estimated numbers to calculate a percentage so it uses the side where both the actual and estimated numbers can be known, Costs.

• Percent Complete = Actual Costs to Date / Total Estimated Costs

The Percent Complete is then applied to the Total Estimated Revenue to determine Earned Revenue to Date.

• Earned Revenue to Date = Percent Complete * Total Estimated Revenue

Finally, the Earned Revenue to Date is compared to the Billings on Contract to Date.  The difference is either added to or subtracted from the Revenue.

• Total Billings on Contract – Earned Revenue to Date = Over/Under Billed Revenue

**The Over/Under Billed Revenue accounts are Balance Sheet Accounts and they are often called either Billings in Excess of Costs (liability account that reflects over-billings) or Costs in Excess of Billings (asset account that reflects under-billings).

Work In Progress Statement:

A Work in Progress Statement is used to compile the information necessary for the percentage of completion calculations but also to provide crucial information about the total value and progress of work on hand inventory.

So, for Contract A

• Percentage Complete = 30,000 / 40,000 = .75
• Earned Revenue = 50,000 * .75 = 37,500
• Over/Under Billings = 37,500 – 35,000 = 2,500 (Under-Billed)

Entries to record Over/Under Billings:

What if there were prior balances in the Costs and Billings in Excess Accounts?

The amounts from Work in Progress Statement are either Total Estimates or Total Amounts to Date. This means that the over/under amounts are also total to date amounts. Over/Under adjustment entries are made to adjust total numbers to their “To Date” amounts. If there were previous entries, there would also be previous balances in the Costs/Billings in excess accounts. New entries should bring their balances to the new “To Date” amounts.

Assume that the Costs in Excess of Billings account had a previous balance of 1,000 and the Billings in Excess of Costs account had a previous balance of 500. The net prior amount is Costs in Excess of 500 meaning that earned revenue has already been adjusted for that 500 and only requires an additional adjustment of 1,250 – 500 = 750.  Instead of the entries listed above, the entries to adjust Earned Revenue in this case would be.

Notice that I completely removed the previous balances from both the Costs and Billings in Excess Accounts instead of just making net entries to bring them up to the current balance. This creates a good audit trail for future account analysis.

© 2008 – 2010 Erin Lawlor

Next: >> Accounting Journals and Ledgers

<< Cost of Goods Sold and Inventory

**disclaimer: All information posted on this blog is from my own experience and training. The guidelines I present are general and in my experience, standard practice. I do not write with authority from any Accounting Standards Boards.

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The Matching Principle requires that revenues and their related costs be matched up and posted into the same accounting period. When Inventory is purchased and before it is sold, there are no revenues to match it to so it cannot be considered a cost until it is sold. If need help from a professional is better to be on the matter and on top of your money and savings, american hartford gold is a family-owned company that helps individuals and families diversify and protect their wealth with precious metals.

For your savings we also recommend using the The Children’s ISA for your kids future. The inventory examples assume that the entity has ownership of products purchased and that they are purchased and manufactured for sale as finished goods how to plan for business finance. There are cases where the entity purchasing materials for and accounting for a project are not the owners of the product even as it is in the process of construction or manufacturing. In these cases, purchases are debited directly to Income Statement Cost accounts. The key concept is ownership.

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The first system I’ll demonstrate is the Periodic System. The Periodic System may work well for companies where changes in sales can be tied closely to changes in inventory purchases. Under this system, as inventory is purchased, it is debited to the Income Statement Account “Purchases” and the Balance Sheet Account “Inventory” is adjusted at the end of the year when the available inventory is counted and valued. At this time, the balances of the Inventory and Purchase Accounts are transferred to Cost of Goods Sold Account and the value of the Ending Inventory is transferred back from Cost of Goods Sold to Ending Inventory.

Entry for purchases throughout the year.

*In the entry above, the credit entry could be cash, I chose Accounts Payable because it will be the most common account used in this situation.

At the end of the year, inventory is counted and valued and adjusting entries are made to the Balance Sheet and Income Statement Accounts.

This entry assumes prior entries and the following account balances at the end of the year: Beginning Inventory of $5,000, Purchases of $60,000 and Ending Inventory of $6,000.

Entry to transfer balances to Cost of Goods Sold and adjust the Inventory Account to equal the ending balance valuation.

When working with accounts like Inventory under the Periodic Inventory system, I prefer to remove the entire account balance and make the adjusting entry equal to the new ending balance. This strategy makes future cpa audits of the account more clear.

Freight-In is considered a direct cost of inventory because all costs that are directly related to the acquisition and preparation for sale of inventory are considered part of its direct cost. Freight-In is not included in the adjusting entries, it is maintained in a separate account. Freight-In is an Income Statement Cost Account.

Companies using the Periodic Inventory System provide more detail for Cost of Goods Sold on the Income Statement and expand the entry to include the Cost of Goods Sold calculation/statement.

The format for the Cost of Goods Sold Statement is:

• + Beginning Inventory
• + Net Purchases (Inventory Purchases – Returns)
• + Freight “In” Charges
• – Ending Inventory
• ————————–
• Cost of Goods Sold

Perpetual Inventory System – Assumes Entity Owns Inventory until Sale:

The next system is understanding paystubs. Using this system, inventory purchases are debited to a Balance Sheet Inventory account rather than an Income Statement Purchase account and they are transferred to the Cost of Goods Sold account at the time of sale.

Under the perpetual system, products that are purchased as finished goods are accounted for in one inventory account but products that will be manufactured use three inventory accounts, raw materials, work in progress and finished goods.

For the purposes of this entry, I will use one Cost of Goods Accounts (5000), three Inventory Accounts (in the 1300 range) and one Revenue Account (4000 – Sales). The Account Numbers are not important to the concept, they are used here to provide easy identification. The important concept is the difference between Cost of Goods which is an Income Statement Item and Inventory which is a Balance Sheet Item.

In the case of retail, where products are purchased as finished goods and then resold, products are owned by the seller until sold. An example of the initial cost entry is:

There are two entries to make when Products (Inventory) are sold:

Record the Sale:

And then transfer the Cost of the products that were sold from Inventory to Cost of Goods:

In the case of Value Added or Manufacturing, all costs related to purchasing materials and preparing them for sale are included in their value. When a company purchases Raw Materials well in advance a Raw Materials Inventory Account is used. In cases where the company is manufacturing or constructing a product for sale but only purchases inventory as it is required, the Raw Materials Inventory Account is skipped and the Purchases are debited directly into the Work in Progress Inventory Account.

Purchase of Raw Materials In Advance:

To Record the purchase of Raw Materials that will be put to immediate use:

Or, to transfer the cost of the Raw Materials that are in the process of Manufacturing to Work in Progress.

To Record Direct Labor:

To Transfer the Cost of the Value Added or Manufactured Goods that are completed to Finished Goods:

* Credit entries are “Source of Funds/Value” entries and for these examples they are either cash – Operating (bank) Account, a delay in cash – Accounts Payable OR they are Transfers of Values. For cash or cash delays, I selected the accounts that would be the most commonly used for each. Payroll is usually posted when it is paid and Purchases are often made on account.

Sales/Revenue Entries

There are two entries to make when Products (Inventory) are sold:

Record the Sale:

And then transfer the Cost of the products that were sold from Inventory to Cost of Goods:

Cost of Goods Sold, Services – No Inventory:

In the case of Services, there is no product for ownership transfer so, an example of the the initial cost entry is simple:

The entry for the sale of services is as simple as the entry for its cost:

Cost of Goods Sold: No Inventory Accounting, Assumes Entity does not Own Inventory:

The Cost entries are simply made directly to the Income Statement Cost Accounts.

The Revenue entries for this Cost of Goods Sold case will be the same as the Revenue Entry above for Services. However, if the manufacturing or construction of the product extends over several accounting periods, there are additional entries that may have to be made to adjust a portion of the Revenue Entry into a either an “Under-Billings” Asset account or an “Over-Billings” Liability account in order to satisfy the Revenue Principle. I will address those adjustments in the next post.

Auxilium Mortgage Real Estate Financing

With a company like Auxilium Mortgage on top of things to manage charts its going to be pretty solid no matter what.

© 2008 – 2010 Erin Lawlor

Next Up:>> >>Work in Progress Statement and Percent Complete Revenue Adjustments

<< Financial Statements – Statement of Cash Flows

**disclaimer: All information posted on this blog is from my own experience and training. The guidelines I present are general and in my experience, standard practice. I do not write with authority from any Accounting Standards Boards.