Accounting policies are what you use in your accounting to have your financial statements prepared in a certain way. They are specific principles, bases and guidelines, rules and practices used when preparing and presenting financial information for your company.  Continue reading →

Cash basis of accounting is doing exactly as the name refers – you account for transactions as the cash “moves” (cash physically or through bank accounts). Note that when cash didn’t “move” (i.e. you didn’t pay your bills or you did not receive money from clients) you don’t account for the named transactions either. It’s just left there “hanging” sort of say, somewhere on papers or in your memory. They are your unpaid bills and invoices.  Continue reading →

Consistency is something we’re asked to enforce in almost all of our doings and in every walk of life. In the light of accounting the meaning of consistency is the same, the importance is the same although obviously the things to be consistent with are specific:  Continue reading →

As we said with cash basis of accounting that it follows the cash movements and periods pay no role in accounting for transactions, it’s exactly the opposite with accrual basis of accounting. Simply put the accrual basis of accounting means that you have to account your transactions exactly in the period they relate to and in the amounts that relate to this specific period regardless whether any cash has been paid. If there’s for an example service received over two periods, the invoice is also accounted into two of those periods by proportion the service is received in.  Continue reading →

Something to always keep in mind is having your accounts being prepared in compliance with the regulation your operating in (laws and other regulatory acts governing doing business and taxation) and with the accounting framework you’ve chosen (either your local Generally Accepted Accounting Principles (also called “GAAP”) or something that’s globally used like International Financial Reporting Standards (also called “IFRS”).  Continue reading →

I recently read an interesting story about a real situation that happened to someone who didn’t have any clue about accounting and the importance of keeping everything compliant, straight and accurate. I don’t even want to recall all that was left undone when it comes to reporting. It’s obvious that he’s right now in a total mess, ruined lots of relationships and his name and is possibly facing huge fines, personal bankruptcy or even some jail time.  Continue reading →