Author Archives: Karl

Spreading the bonus expense over a period

We have discussed accounting for bonuses – whether to recognize them in the first place, making the estimate and so on. However, what we haven’t discussed is how to be smart about them.

Recognizing bonuses in general includes making estimates based on the performance indicators the bonus is calculated on, i.e. profit margins, units produced etc. If the bonus is paid monthly, the expense as such is also recognized each month the conditions are met. There’s no measuring and estimating in that sense. Continue reading →

Planning for the stock count

When planning for a stock count, it’s important to agree on the timing with the needs of the business and accounting. It’s also crucial to agree on items which are to be counted, teams counting and other relevant procedures, i.e. how exactly this counting should be performed. Continue reading →

General considerations

General considerations that should be made for a stock count revolve around items themselves.

The key questions that need to be answered are as follows: Continue reading →

Stock count

Why would you perform a stock count procedure?

There are two reasons you might and should do it. Remember that stock count is not just for the ‘checkmark’, but for actually providing the company’s accounting and management with relevant information – accurate positions in stock and understanding whether there’s anything missing (that is there haven’t been any thefts) or if there’s something that’s actually long standing and if the net realisable value of such items has actually dropped below the currently recognized cost. Continue reading →

Recognizing an advance payment to employee

An advance payment to your employee is something you can make, however, I would keep them rather rare than a regular thing. You wouldn’t want to pay too much in advance for something you at the end of the day may not receive. Continue reading →

Recognizing salaries (expense and payment)

Salaries are what you pay to your employees as they have done their work. There are companies who pay in advance for the job performed in the next period, but as those are rare, we are not focusing on those occasions right now. Continue reading →

Prepayments and construction in progress

Every now and then you’re required to make prepayments for an acquisition of asset. Or you’re constructing a building; or setting up machinery is taking time and setting up the place for the machine requires additional investments. How should you treat those transactions? Continue reading →