Author Archives: Karl

Accounting treatment for discount to customers for early payment (“cash discount”)

There are situations where you might be in need of cash or to simply motivate your customers to pay up quicker to have some buffer when it comes to more liquid resources, you’d implement something called a cash discount.

The way cash discount works is simple – there’s the expected payment deadline and in addition, if the customer pays earlier, say instead of the normal period that’s 14 days, they pay within 7 days, they get an additional discount of 5% (the discount rate here is entirely up to you, but keep in mind that on one hand it should not be significant so that it would hurt your profits and on the other hand it cannot be too small since it wouldn’t motivate any more). Continue reading →

Supplier issues a credit invoice

So what do you do? Say the initial invoice was for 1,200 and now it turns out that your supplier was wrong and the actual amount should be 1,100. As such, they’re issuing a credit invoice. Continue reading →

Before things go off the rails

When dealing with everyday business you may come upon (or should at least) a question of whether your company is able to continue. Questions you may ask are similar to if there are enough liquid assets to pay up your creditors, is there room for required investments etc. Or possibly also the question whether you’ve been following all regulations and the possibility of the authorities coming and asking for a closure. Okay, maybe not closure, but nonetheless, they may ask something so impossible that you’re forced to close down. Continue reading →

Archiving accounting documents

As you surely already know, by regulation you’re required to maintain your accounting records for a certain period of time (i.e. 7 or 10 years, the length depends on your local requirements). Continue reading →

Proof of obtaining goods when your supplier won’t issue an invoice

Say that you bought goods from your regular supplier (or even not so regular, but just this one time) and for some odd reason beyond you they’re not issuing an invoice for the purchase. The reasons may vary as human mind is surprising at times, so let them be. How would you however deal with the situation if you’re facing an audit? Continue reading →

A company is being winded up or going into bankruptcy and they haven’t issued an invoice for goods already delivered – what to do?

So the situation is as the title says. You bought goods from a company that’s now being closed and they haven’t issued an invoice for the goods as of yet regardless of the repeated requests from your part.

The first question you ought to ask yourself is the reason why the company is being winded up. Is it just an inability to pay invoices and the creditors asking for insolvency or is it the owners wanting to close down business with the company otherwise able to pay its debts. Continue reading →

Accounting when producing

Accounting entries when you’re dealing with producing your goods are something that needs to be similar throughout. You have to have specific and pretty detailed accounting laid out – accounts, procedures and controls for measurement (i.e. to measure your own cost per unit). Continue reading →