For investors, the CFS reflects a company’s financial health, since typically the more cash that’s available for business operations, the better. Sometimes, a negative cash flow results from a company’s growth strategy in the form of expanding its operations. The direct method adds up all of the cash payments and receipts, including cash paid to suppliers, cash receipts from…
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Meanwhile the lessor (or the owner of the asset) acts as the financing party. It’s essential for companies to properly account for leases because it impacts a company’s financial ratios, debt levels, and overall financial health. Even though a capital lease is technically a sort of rental agreement, GAAP accounting standards view it as a…
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For payables for services, returning is not an option as services are perishable. The accounting entry for returns related to accounts payable is as follows. For example, a company purchasing heavy machinery from a large supplier may get better repayment terms as compared to small purchases from local vendors. The best way to learn how…
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When you loan money to someone, there’s an inherent risk they won’t pay it back. This is called credit risk and is typically reflected in the loan’s interest rate; the higher the risk level, the higher the interest rate. If you have $50,000 of credit sales in January, on January 30th you might record an…
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It has been debated whether a company should primarily consider its shareholders or stakeholders when making business decisions and adhering to fiduciary duty. Historically, shareholder theory has been widely accepted and used, noting that a corporation’s duty is to maximize shareholder returns. However, the emergence of corporate social responsibility (CSR) and environment, social, and corporate…
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On December 1, you are required to withhold Additional Medicare Tax on $20,000 of the $50,000 bonus. You may not withhold Additional Medicare Tax on the other $30,000. You must also withhold the additional 0.9 percent Medicare tax on any other wages paid to Trevor in December 2022. The Social Security tax (also called OASDI…
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The exceptions to this rule are the accounts Sales Returns, Sales Allowances, and Sales Discounts—these accounts have debit balances because they are reductions to sales. Accounts with balances that are the opposite of the normal balance are called contra accounts; hence contra revenue accounts will have debit balances. This usually happens when the company extends…
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My Count Solutions provides you with a team of experts to maintain your bank statements and prepare financial statements, every month. The My Count Solutions bookkeeping team works remotely, making outsourcing an easy, straightforward process for all businesses. Rest easy knowing your business is backed by professional financial experts, who are well prepared to tackle…
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Firms must account for amortization as stipulated in major accounting standards. Many intangibles are amortized under Section 197 of the Internal Revenue Code. This means, for tax purposes, companies need to apply a 15-year useful life when what is depreciation and how do you calculate it calculating amortization for “section 197 intangibles,” according the to…
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On March 31, 2017, Corporate Finance Institute reported net credit sales of $1,000,000. Using the percentage of sales method, they estimated that 1% of their credit sales would be uncollectible. As mentioned earlier in our article, the amount of receivables that is uncollectible is usually estimated. This is because it is hard, almost impossible, to…
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