Essentially when you’re doing your accounting, you have had to opt for an accounting framework. An accounting framework is a set of guidelines based upon which you’re recognizing your transactions within your “books” or set of financial statements. Continue reading
Author Archives: Karl
Tools for estimating expenses and accruing for them
As it happens, not always your suppliers issue their invoices in time, sometimes invoices get lost in mail and so on. If you have more than just one person making expenses, i.e. buying materials etc., it may happen that the invoices just lay in the back of their drawers somewhere and are at some point forgotten. Continue reading
Receivables on the statement of cash flows
Normally, receivables on the statement of cash flows are treated as a part of cash flows from operating activities. I say “normally” since some receivables, those not related to the company’s business, should be part of investing activities. Continue reading
Overdue receivables should be made to earn interest
Whenever your customers cannot pay in due time, you should ensure they’re aware of the consequences. Under normal conditions, if you buy from somewhere services or goods and don’t pay up, it’s considered taking a loan. I say “normal conditions” since it’s assumed you haven’t bargained for special treatment, i.e. longer payment terms for an example. Continue reading
Recognising a previously written down receivable
Say there’s a situation where you consider a receivable being doubtful, you write it down and after a while your customer still pays the balance. How would you treat such a transaction in your accounting? Continue reading
Recognising a receivable write-down
Sometimes it happens so that you are unable to collect the receivable and as it happens, you should consider writing it down. Whenever your client has financial difficulties, it’s one of the conditions that should make you doubt the ability of the customer to actually pay up what they owe. Continue reading
Recognising a receivable collection
Making a sale happen is one thing. You’ve accounted for the receivable from the sale, that’s another thing. Getting paid for the sale and collecting the receivable is entirely another matter. In one of our examples we accounted the receivable and we’ve been lucky enough that our client actually owned to what they had to pay and that’s what they did. Continue reading