It’s crucial to every accounting and accountant to be up-to-date with all the relevant regulations and obviously the changes thereto as well. Continue reading
Category Archives: 2 Processes
Restate or recognize in current period?
Question often asked and more than often faced is whether to restate financial statements because of an error or transaction not recognized in its proper period or not to do it. Usually there’s this tendency to restate financial statements and I have to admit, it’s not so much a judgment call but also understanding what exactly is the essence of this restatement. Continue reading
What is an accounting framework?
Essentially when you’re doing your accounting, you have had to opt for an accounting framework. An accounting framework is a set of guidelines based upon which you’re recognizing your transactions within your “books” or set of financial statements. Continue reading
Tools for estimating expenses and accruing for them
As it happens, not always your suppliers issue their invoices in time, sometimes invoices get lost in mail and so on. If you have more than just one person making expenses, i.e. buying materials etc., it may happen that the invoices just lay in the back of their drawers somewhere and are at some point forgotten. Continue reading
Receivables on the statement of cash flows
Normally, receivables on the statement of cash flows are treated as a part of cash flows from operating activities. I say “normally” since some receivables, those not related to the company’s business, should be part of investing activities. Continue reading
Overdue receivables should be made to earn interest
Whenever your customers cannot pay in due time, you should ensure they’re aware of the consequences. Under normal conditions, if you buy from somewhere services or goods and don’t pay up, it’s considered taking a loan. I say “normal conditions” since it’s assumed you haven’t bargained for special treatment, i.e. longer payment terms for an example. Continue reading
Accounting treatment for discount to customers for early payment (“cash discount”)
There are situations where you might be in need of cash or to simply motivate your customers to pay up quicker to have some buffer when it comes to more liquid resources, you’d implement something called a cash discount.
The way cash discount works is simple – there’s the expected payment deadline and in addition, if the customer pays earlier, say instead of the normal period that’s 14 days, they pay within 7 days, they get an additional discount of 5% (the discount rate here is entirely up to you, but keep in mind that on one hand it should not be significant so that it would hurt your profits and on the other hand it cannot be too small since it wouldn’t motivate any more). Continue reading