First question you may have is “Why would I do this?” Think about depreciation and if land is depreciated in the accounting framework used in your country. If yes, maybe it’s a relevant question. That is if the useful lives are also deemed to be the same as for buildings on top of the land in question. Continue reading
Author Archives: Karl
Cash flow management when you have longer agreements
Yes, you who has signed a longer term service agreements, you need to consider how you manage your cash flows before you sign off the agreement.
It should be obvious without saying, but as it happens, it’s not done often enough and not with careful enough consideration. Just to give an example: Continue reading
Completion method versus cash flow management
You provide a service over a longer period of time and as it is, you’ve set out a payment schedule in your agreement. Now, in your accounting you use the completion method for determining receivables, sales and payables. We’ve talked about completion method and accounting that’s related to it separately, but what I want to focus on now is the payment schedule you agree on and the actual cash need you may have. Continue reading
Inventories received in foreign currencies
You’re buying goods from international suppliers that send you their invoices in foreign currencies. That’s perfectly normal.
One thing to keep in mind at all times is that your accounting is always done in one currency and not various at the same time. You may trade in different currencies, but they should be translated into one for your accounting purposes. This “one currency” is called in accounting world “functional currency”. Continue reading
Accounting when transaction is done in a different currency as opposed to functional currency
I would first like to stress this – in your accounting you can do entries in only one currency. Only one and this will be called your “functional currency”. You may however have various currencies in use when it comes to dealing with your suppliers, customers and why not your employees.
So how does one translate into another? In your accounting you can only use your functional currency and for your transactions you’re free to use whichever is businesswise the best and most efficient. Continue reading
Currency differences when you obtain an invoice at a later date for goods
So what if you receive goods earlier than the invoice for them and as it happens, you need to take them into use right away. They need a price, that’s for one, but what if the price is quoted in a currency that fluctuates as compared to your functional currency?
Say that your functional currency is A and you bought something for 120B. The B in this case would be the foreign currency that fluctuates. The exchange rate is let’s say 1A = 1.2B. Continue reading
Should I account for goods without an invoice?
Initial response is always “no”. Why would you? Accounting for something without a source document is firstly not allowed by most regulations and secondly, how do you know if the supplier is shipping them with correct prices and if quality is important, how have they measured the quality etc. You shouldn’t account for goods without an invoice. Continue reading