Author Archives: Karl

Accounting treatment for specific accounting entries

In your accounting you definitely have specific entries. Now don’t get me wrong, I know that every entry is specific since you use the account names and numbers in your company’s ledger, however I want to focus on those specific entries that you’ve determined for specific transactions, the structure of entries if you may (i.e. how you account for the cost of goods sold when you make a sale, does it happen with the same entry, do you account the cost once a month etc.)  Continue reading →

Change in inventory – why is it on the income statement?

You may have noticed that sometimes the income statements of companies include a line named as “Change in inventory”. Why would it be there you might ask since “Inventory” is a balance sheet item and it’s an asset account? Why would it be on the income statement?

Matter of fact is that normally it isn’t there, however if there’s a change in inventory value, now there’s a reason to include a line item called “Change in inventory” onto your income statement.  Continue reading →

Work-in-progress in your inventories – what is it good for?

By definition work in progress is something that’s still in the progress of being finished. It’s no longer raw material and not just yet finished product either. In your accounting you’d refer “work-in-progress” to materials within the production process and partly finished products (i.e. components of finished products). Note that components may be part of some other components that are just another stage of the work-in-progress and not yet finished goods.  Continue reading →

Make salaries depend on results!

The best way to motivate people to work better, more efficient and more profitable is making their salaries, the thing they work for; depend on the results of their work. That’s a no brainer.

Place it works the best obviously is where the employee actually feels they can do something to earn a better pay. For an example you cannot use such a scheme with support staff in the office – they have no contact with the customer, the customer doesn’t see the fruits of their work, i.e. if it’s an accountant we talk about.  Continue reading →

Standard price – expenses on income statement and then take them off

Standard pricing in your inventory producing means two things – the prices need to be accurate and up-to-date. It’s not just having the right price but ensuring the price reflects actual costs made for producing this certain item. If the inputs change often, you need to identify the goods affected and test the standard against the actual quite often.

However, on bigger picture, standard pricing is aside continuous testing against actuals just another way to expense your inventory. If the inputs rarely change, it’s a pretty solid method however.  Continue reading →

Simplified method for accounting cost of your own produced goods

Say the situation is as follows: you don’t want a complicated standard costing system; in fact you don’t need it. You produce small number of items or very similar that is at least and at the end of the day you’re looking for something that’s not overly complicated, not staying in your way of earning money and not stressing your accounting. Perfectly understandable and something I’ve come across may help you.  Continue reading →