It’s a question that happens on daily basis and multiple times per day in world in my opinion. There are so many expenses, which don’t even have to be fixed charges for that matter, but basing purely on consumption and yet they are distributed based on units. Or vice a versa. Continue reading
Author Archives: Karl
Invoices – as detailed as possible? Or not
As you set about your business, one of the things you must consider are the details you put on invoices when it comes to specifying what you’re charging the customer for. It’s always nice to follow consistency and still be thinking about the client, what they want to see on the invoice and what would benefit them. Continue reading
Showing fixed and changing charges on invoices
Being in a business where you’re charging your clients for the amounts they’ve used (hours fee etc.) and adding also a fixed charge, i.e. use of an item during this time and so on, means you’re essentially charging your customers for two separate things. Continue reading
Key assumptions for future and sources for estimations
In whichever accounting area you’re making significant assumptions or estimations in, you ought to disclose them. Assumptions and estimations are in essence subjective so disclosing them means that the readers of the report know exactly what the related numbers are based upon. Otherwise it would just be a number from the sky for them. Continue reading
Management judgements in the Annual Report
In almost every accounting framework there is in the world there are areas where company’s management has the right to choose between methods and approaches. Whether they’re important to the company or not, the options are there. Continue reading
How to deal with prepayments made for an operating lease?
Renting assets is part of everyday business and as it happens, with operating leases there are often enough prepayments required. Question than to the one renting the asset and making the payment should be how this prepayment should be recognized on the accounts. Continue reading
Components of an Annual Report
One thing is the purpose of the report and how to reach this goal, but what does the report itself consist of and how it’s built up is another story. Well, it does help to keep the report structured so it will help you on reaching the end objective of the Annual Report.
First things first the Annual Report kicks of with the financial position statement, which is the balance sheet. It tells the users where exactly the company is with its operations, assets owned and liabilities taken. Then to follow is the results for the reporting year – income and expenses – presented on the income statement. An added statement coming then (“added” in the sense that it’s prepared just for the report and not kept separately during the year) is the statement of cash flows that represents the cash inflows and outflows, which occurred over the reporting year. It really gives the users an idea how your company is using and generating the most liquid resource of them all, the cash. Another added statement is the statement of changes in owner’s equity that presents to users the usage of given funds.
With this the statements are presented, but bear in mind that there are notes to follow. Notes to the statements we just named, but also about the significant accounting policies used in compiling the statements themselves. Pretty much how the notes are built up is as follows:
– The accounting principles or the framework if you may that was used to compile and present the statements;
– Notes to the statements themselves in the order the statements are presented (i.e. if you start of with a balance sheet, your first note is about the first significant line item on the balance sheet).
Remember, as we mentioned, the Annual Report should be as structured as possible presenting all required components in manner which they are easily follow able and readable.