With loans you’ll be taking, often times the transaction costs are a significant part of the loan, i.e. like in our example of lending 100,000 a contract fee of 2,000 would be considered as significant. Now in case the cost is less significant, say 500, this would be charged to expenses right away and you’d account your loan received still as 100,000. However, pretending now that the cost was 2,000, you’d account as money obtained 100,000 less this 2,000 (that is 98,000) (see entry number 1) and this 2,000 would over time be credited onto the loan payable so that eventually you’ll still pay back 100,000 (see entry number 2). Continue reading
Category Archives: 1 Basic Accounting
Factoring receivables
When we talk about factoring, we’re talking about selling ones receivables or collection of receivables to a third party commercial financial company. The aim of such a transaction is to receive cash quicker than one normally would if it would wait for the collection due dates or even late payments. You’ll be getting your money within agreed deadlines and provided the financial company is reliable you can concentrate your focus on your business now.
You’re being paid only a portion
What happens in your accounting if you’re only paid partly at times? It’s one thing to consider whether it’s acceptable for you, but another to give it a proper treatment in your accounting. Continue reading
Operating lease in your accounting
Once you’ve determined it really is an operating lease (i.e. the rights and obligations of an ownership are not transferred) and more so, you’ve made the initial payment for the lease, there’s time to start treating the lease on the statements.
I say “statements” since it affects both, balance sheet and income statement. There are two aspects for the operating lease. Continue reading
Stage of completion method – using subcontractors
There’s nothing wrong with using subcontractors when providing service for a customer – whether it’s because you don’t have all the skills, materials or simply lack the time. As I’ve said before, be the reasons what they are, it’s all about proper accounting treatment. For almost all the transactions out there there’s an accounting treatment or even treatments.
So when you’re using subcontractors for your service, you must keep in mind two things: you’re providing service for the customer and subcontractor’s work is part of your service you’re delivering. Continue reading
Supplier bonuses, rebates and whatnot as a part of inventory
Supplier bonuses, supplier rebates and so on, are more common than you might imagine and getting them for your company and for your purchases is all down to your negotiation skills.
Regardless however, we would like to focus on treating such items on your financial statements. Continue reading
Transportation and handling
Unless you’re bringing the goods to your premises by foot, that is by your own foot, you’re bound to encounter some sort of transportation expenses – whether it’s someone else’s service you’re using or your own transportation which depreciates and uses fuels, thus creating expenses. The same way you’re likely to encounter handling expenses when storage spaces are used in-between transports or the goods require special treatment (i.e. special packaging). Continue reading