Monday, July 29, 2013

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Wednesday, March 6, 2013

Accounting - Balance Sheets

Comprehending some basic Accounting principals is not just for accountants - all investors should have some essential accounting information that will help in the share-picking process. The balance sheet gives a look of a company's financial location on a particular day. That snapshot shows you what the company's assets, liabilities and its net worth (assets minus liabilities) are. (The net worth is reflected as shareholder funds or net asset value (NAV) in the balance sheet.)

A balance sheet on its own will only give you with restricted information, so you should compare it to the company's past results. To judge the financial potency of a company, ask at least the following four basic questions:

o Has the worth of the company's assets increased from six months ago, a year ago or two years ago? By comparing the present asset base to that of the past two financial years, you will be able to see if a company is increasing in both size and financial strength.

Accounting - Balance Sheets

o How do the single items compare with those in the previous periods? In particular you should look at the expansion in line items such as accounts receivable to ensure that debtors are being well managed.

o Look at the liabilities and ask how they (especially debt and accounts payable) are growing relative to assets. A company could experience a cash flow crunch if accounts payable grows faster than accounts receivable for some time. Debt that grows faster than the items on the other side of the balance sheet can be a red flag of pending financial problems.

o Is the company's NAV or shareholders' funds (equity) greater than the previous year's? In a financially healthy company, NAV will increase as earnings grow. The income statement's purpose is to show the company's profit (or earnings or net income or bottom line) for the entire accounting period. Profit is simply the amount of money that's left over once all expenses (including operating costs, interest payments and taxes) have been subtracted from sales.

Investors should always compare this year's profit to last year's. A strong company should show consistent profit growth over time.

Investors should ask the following questions when they examine a company's income statement:
o Are operational earnings growing? Operational earnings are the portion of the bottom line that's made from the company's core activity. In other words, ascertain that the key contributor to a company's profit is its "real business" and not non-recurring items such as profit on the sale of assets.

o Are sales growing and why?

o Are expenses growing at a reasonable rate? Pay attention to one-off charges (such as a large
bad debt write-off and determine whether they make sense).

o Is the company's tax payment in line with the corporate tax rate (of 30%) or are earnings inflated by the use of past tax losses?

If you only have time to look at one financial statement, it should be the cash flow statement because it shows how a company is managing its resources. A company could be profitable yet can go out of business if it manages its resources poorly - for example if it doesn't collect its accounts receivable, it may not be able to pay its bills and be forced into liquidation.

The cash flow statement shows all receipts and payments of cash. It's split into three key sections: cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. It shows how the balance sheet line items have changed over the accounting period.

Cash flow from operating activities is, arguably, the most important section as it shows the underlying cash performance of the company's operations. Consistent negative operating cash flow can warn of future financial problems.

Cash flow from investing activities shows the money the company spends on investments, including capital expenditure and acquisitions. Cash receipts from sales of assets will also reflect in this section. Investors should check that a company is investing adequately to maintain its productive capacity - in other words that it's not artificially inflating profit now at the expense of its future earnings. One quick and easy way is to check that capital expenditure is at least equal to depreciation over a number of years.

Cash flow from financing activities reflects all cash flow of a capital nature, including equity injections, debt raised and debt repaid.

These three financial statements are not all. Investors can glean important extra information from both the Value-Added Statement and the Statement of Changes in Equity. Don't forget to read the notes to the financial statements, if anything this is even more important than reading the financial statements themselves. The notes contain the small print that you need to evaluate the balance sheet, income statement and cash flow statement.

Accounting - Balance Sheets
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Tuesday, February 26, 2013

Accounting for Government Contracts - Fringe, Overhead and G&A

If you are planning to have the U.S. Government as a client, you will need to have your accounting systems set up so you can handle their accounting requirements. Regardless of whether you are engaging in a plain vanilla contract or an SBIR grant, you will be required to negotiate fringe benefit rates, overhead rates, and general and administrative rates.

Fringe benefits rates include

Compensated Absences, such as Vacation, Holidays, and Sick Leave; Medical Programs, such as Health and Dental Insurance; Retirement, such as the Defined Contribution Portion of your Retirement Plan and Plan Service Fees; Long-term Disability Coverage; Worker's Compensation Coverage; and Employee Wellness, such as Fitness Club Membership and Other Wellness Programs

Accounting for Government Contracts - Fringe, Overhead and G&A

Overhead covers direct and indirect support of the employees whose time is being billed to the Government. This includes items like

Rent (only for the space that those employees use); Depreciation of their furniture and equipment; Utilities (based on the space allotment for those employees); and Supplies that these employees share, such as office supplies.

General and administration covers other costs that are necessary for the company to perform in this contract, including:

Management (and their associated fringe, direct, and indirect costs) Legal costs State and Federal taxes Marketing to the Government costs Accounting

Note, however, that they have extensive regulations covering was is not considered an allowable cost (see the FAR section 31.205 - Selected Costs [http://farsite.hill.af.mil/reghtml/regs/far2afmcfars/fardfars/far/31.htm#P268_51249] to get a specific description as to what is allowable and what is not.

Once you have negotiated these rates, you will be required to back them up yearly using an indirect cost model to show that you are matching your negotiated rates. This model is subject to audit.

Although you can figure out what needs to go into these calculations, it will take a long time to read all the regulations. If you believe that you want to win Government contracts, you must think ahead or hire a consultant to assist you with the process.

Accounting for Government Contracts - Fringe, Overhead and G&A
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Wednesday, February 20, 2013

Should I Get an Accounting Degree? Pros and Cons

The Pros:

You are almost guaranteed to find a job somewhere as there is always a need for accountants. Especially with the clamping down on financial legislation, professional management reports and annual financial statements need to be submitted in order to stay in business, so in house accountants are always on board, if not the people with accounting degrees are outsourced. Unless you work for yourself, you will more than likely be offered work within a large firm allowing you to interact with many like minded people on a day to day basis. Your degree can be utilized within many fields of accounting, adding diversity and growth to your qualifications. Through the use of your studies, you can become exposed to many different types of business when you do their books or their tax. Whatever work you do for clients will be an education in the operating of their business. Impressive salaries and opportunity for growth with any of these degrees.

  The Cons

Should I Get an Accounting Degree? Pros and Cons

Although there is a lot of job availability within this field, so too are there a lot of accounting degree graduates. You will be up against some tough competition for entry level jobs. Using your accounting degree to go and work within a big firm, you will usually be assigned to many different operations for many different businesses. This means you will be answering to a number of different "bosses" which can be stressful and require a lot of management on your part. On the whole, the accounting world is relatively conservative. But perhaps that will suit you? Your work is generally billed per hour which means you need to stay on top of every single hour that has been worked. All work needs to be documented, so an extensive record of hours worked and to be billed needs to be kept. All graduates will soon find out that you will be required to work long hours. Sometimes all night or all weekend if it means that the job gets done on time. That impressive salary does have it's hitches!

All in all, opting to study for an accounting degree is a positive choice that will offer you many rewards in the long run. But maybe after perusing these few pros and cons, you will feel differently about this.

Should I Get an Accounting Degree? Pros and Cons
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Thursday, February 7, 2013

Chart of Accounts for a Service Business - Accounting

A well-designed chart of accounts for a service business limited liability corporation, or LLC, allows for easy reporting and income tax preparation. The chart of accounts is a catalog of all accounts to be used by a business during the year. It's organized to provide a centralized place to accumulate financial information. The accounts are generally identified by numbers and a brief description, such as 1010 Cash - Bank of America, 2010 Accounts Payable and 5020 Insurance Expense.

Verify what reports you need.

A proper chart of accounts for a business service LLC should provide information for reporting internally and to external parties. You first identify what you need for tax returns and then set up the chart of accounts around this need. Then, check out other government reports, such as sales tax or equipment reports and be sure the chart of accounts can help you in these processes. If management or investors need a specific financial report, be sure that the accounts setup in the chart can be compiled to create such a report. You may need to separate sales by type or to provide more granular information, such as sales by locations, or sales by type and you will need to create separate accounts to accumulate data in this fashion.

Chart of Accounts for a Service Business - Accounting

Assets, liabilities and equity accounts

Set up balance sheet accounts in your chart of accounts, such as assets, liabilities and retained earnings. Identify ranges for assets, such as from 1000 to 1999. Liabilities could run from 2000 to 2999 and retained earnings would run within the 3000 to 3999 range. As you create accounts, use these ranges to keep the accounts straight. Within the assets, you should have at least one cash account, which could be a 1001 Cash - Bank Alliance. Don't set up a liability account using the range for assets, or you will end up with a mess. If you're not clear about what accounts to create, search for a balance sheet template online to get ideas.You can also review your tax return for balance sheet accounts.

Income and expense accounts

Create income statement accounts in your chart of accounts. These are revenues and expenses related to the service business. You decide on an account range for your revenues, such as 4000 to 4999 and set up these accounts within this range. For example, a service revenue account would be 4001 Consulting Revenue account. Expenses would have a range of 5000 to 7999 and are created to track expenses separately. For example, if you pay for rent, office supplies and insurance, these transactions are recognized in three different accounts, such as 5010 Rent Expense, 5003 Office Supplies Expense and 5010 Insurance Expense. Don't use the same account number on more than one account. If you'd like to know what accounts belong to the income statement, take a look at your own business tax return or at the Internal Revenue Service Form C, filed with a 1040.

Note that commas are not used with account numbers.

Creating a chart of accounts can be a challenge, but doing it on a systematically way will help you get the results you need. You could test your chart of accounts by running reports and making sure information is placed in the right spots. You could also have an accounting professional review your chart of accounts before you start using it.

Chart of Accounts for a Service Business - Accounting
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Thursday, January 31, 2013

Get Rid of Belly Fat Fast - 3 Deadly Things You Must Know When You Are Trying To Lose Belly Fat

How many days more do you want to go by where you wake up every morning and look at the mirror just to see that overhanging belly that never seems to go in?

Have you ever wished to just chop if off once and for all?

How many times have you got upset when you couldn't buy a nice pair of jeans that fits your size?

Get Rid of Belly Fat Fast - 3 Deadly Things You Must Know When You Are Trying To Lose Belly Fat

You need to forget the idea of a thousand of crunches. I bet that even if you do a million crunches, you are going to get the same slow result as doing a hundred crunches. So don't waste your time and energy in something that simple won't work.

Getting flat abs is every man and woman's dream, in their consciousness or at least in their sub consciousness. And that dream of yours can very soon become a reality if you follow the following steps I have outlined in a simple and easy to follow system.

# You need to think big.

If you are working to get rid of belly fat ONLY, then you have to understand that every time you lose a pound of fat in your belly, another pound of fat falls into your belly from another part of your body.

This shows that you have excess fat. And if this is the case, you can't get rid of belly fat by simple ab crunches. You need to work on getting rid of fat from all over your body. This means, you need to do more resistance training that works your entire body.

# You need resistance training.

Since you goal is to get rid of belly fat FAST, the best exercises to perform are ones that can turn your body into fat burning blowtorch. And what are these exercises called? Compound Exercises.

Compound exercises, to be simply put, are single exercises that target many muscle groups all at once.

Example:

The Famous "Pushup", targets the biceps, triceps, chest, back, shoulders, and the abs.
The Powerful "Dead lift", targets the thighs, quads, buns, abs, core, traps.

Let's compare:

Bicep Curl targets the biceps.

Tricep Kickback targets the triceps.

Leg Press targets the quads.

You can get a hardcore fat loss workout in less than 10 minutes if you choose the right compound exercises.

If you want to get rid of belly fat fast, you need resistance training, and the fastest resistance training exercises that can speed up the goal to losing belly fat and getting that nice set of abs is compound exercises.

# You need a proper Diet and Nutrition plan.

Did you know that diet and nutrition accounts for 80% of your body fat system? If you want to get rid of belly fat fast, then you need to:

=> Eat more often, a minimum of 6 short meals a day.

=> Have a portion of lean protein in every meal. This could be a protein shake, chicken breast etc...

=> Eat breakfast like a king, and dinner like a peasant. This means, you need to eat less in your dinner than you eat in your other meals.

=> Like parents always say, always eat your green vegetables.

=> Try to have a glass of green tea after every meal. This helps control your hunger.

=> Drink a minimum of 10 glasses a day.

=> Keep sugar levels low, but not too low, you need a little sugar to keep your system active. No wonder eating too many chocolates makes us hyper active.

=> Never let yourself to starve. This trigger's fasting inside your system, and starts storing more fat instead of burning them.

If you want to get rid of belly fat, then you really have to follow the diet and nutrition plan. It is the most important of all factors. Even if you skip the first three factors, Diet and nutrition can help you achieve 80% of your fat loss goal.

So, to sum it up, three things are crucial if you want to get rid of belly fat fast. You need to lose fat from all over your body, perform more compound exercises, and an optimized diet and nutrition plan.

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Saturday, January 26, 2013

What Are the Key Differences Between Forensic Accounting and Traditional Accounting?

Here're some of the best known differences between a Forensic accounting and Traditional Accounting in a glance;

1. A very obvious and discrete key difference which one can identify between a traditional auditor VS a forensic accountant is that :
The former is someone who checks the math accuracy in the accounting department while the latter is someone whom are looking behind these financial numbers find out what's not quite right.

2. The second differentiation is the "investigative intuition".
Intuition refers to the gut instinct which one may have to guide you to the appropriate direction as of where your investigation should start from. This is not text book earned, but rather something which can be earned through massive experiences. Most of the time, no investigation intuition is found nor required in the traditional accounting scope.

What Are the Key Differences Between Forensic Accounting and Traditional Accounting?

3. Traditional auditing is a process of auditing others' work to determine if they have followed the documented official policies, procedures and practices of the company. The determination is based on evidence. It is a matter of fact and not merely a matter of opinion. This kind of audits is required by financial intermediaries and the government depending on circumstances.

4. Traditional auditing focus on error identification and prevention. Prevention is the result of an effective internal control system. The auditor reviews the effectiveness of the internal control system by sampling transactions of some agreeable percentage. Materiality is the accounting way of designating the importance of a transaction or an event.

5. Traditional Auditors use statistics to determine the probability that material errors will or will not be identified and the possibility of its happening. This is a concern since only a sample of transactions and events will be reviewed. The system of internal control is evaluated. It is argued that If the internal control system is deemed to be highly effective, then material errors are not probable.

6. Traditional auditors typically adhere to the generally accepted auditing standards (GAAS) as promulgated by the Public Company Accounting Oversight Board (PCAOB). External auditors are typically reviewing whether an organization is following GAAP. GAAP are promulgated by the Financial Accounting Standards Board (FASB) .This denotes that means that auditors are affected by all three of these organizations and must stay current with old, new and changing standards and principles issued by all three of these organizations.

7. Instead, forensic accountants use physical evidence, testimonial evidence, documentary evidence and demonstrative evidence to help identifying suspect and culprits.

8. For Forensic Accounting, any type of evidence can be used as information, be it documentary paper, a computer video or audio. However, it requires an expert to interpret the evidence and present it. Demonstrative evidence is not actual evidence. It is just an aid to understanding just like a model of a body part or pictures or other devices are used to help clarify the facts.

9. Forensic Accountant is often asked to serve as an expert witness for a lawsuit or criminal case in a court, the forensic accountant needs to have applied reliable principles and methods to sufficient facts or data. The expert witness is a recognized specialist relative to the principles and methods applied to the sufficient facts or data.

10. A forensic accountant typically need to possess the expertise and skills in these 2 fields : Private investigator and Accountings are what specifically required to be a great forensic accountant. On the other hand, there is no such requirement in the traditional accounting space.

What Are the Key Differences Between Forensic Accounting and Traditional Accounting?
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Wednesday, January 23, 2013

The Importance of Cost Accounting

Managers rely on cost accounting to provide an idea of the actual expenses of processes, departments, operations or product which is the foundation of their budget, allowing them to analyze fluctuation and the way funds are used socially for profit. It is used in management accounting, where managers justify the ability to cut expenses for a company in order to increase that company´s profit. As a tool for internal use, versus a tool for external users like financial accounting, cost accounting does not need to follow the GAAP standards (Generally Accepted Accounting Principles) because its use is more pragmatic.

It creates a financial value out of the production of a product, measuring currency that is nominal into units that are measured by convention. By taking recorded historic costs a bit further,it allocates a company´s fixed costs over a specific time period to what items are actually produced during that period of time, creating a total cost of product production. Products that were not sold during that period of time produced a "full cost" of those products, recording them in a complex inventory system that uses accounting methods of its own that are in compliance with the GAAP standards. Managers are then able to focus on each period's results as it relates to the "standard cost" of any product.

Any distortions in expenses that were caused by calculating what the overhead of a product is versus what a unit cost is for companies that specialize in only one specific product are very minor in industries that mass produce that product with a low fixed one. Understanding why it varies compared to what was actually planned helps a manager to save a company money by taking actions that are appropriate to correct that variation in the future. Variance analysis is a very important part of cost accounting because it breaks down each variances into many different components of standard and actual one. Some of these components are material expenses variation, volume variation and labor expenses variation.

The Importance of Cost Accounting

It is a very important part of the management accounting process. In order for managers to determine the best methods to increase a company's profitability, as well as saving a company money in the future, cost accounting is a necessary system in the management of a company's budget, providing important data to analyze fluctuation in company production expense.

The Importance of Cost Accounting
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Executive level pay is based upon company performance. If the performance of a company is not reported in a proper manner, executives make money that far exceeds what the business is capable of and creates a false picture of a company's performance. This false reporting causes the stock market to balloon by rewarding stock to companies who do not deserve it, and these methods have a bad effect on our economy. Business accounting that honor the GAAP (Generally Accepted Accounting Practices) creates a transparent persona, an air of trust and respect, from the users of their financial statements. Read more [http://www.bigarticlepool.com/articles/The_Importance_of_Cost_Accounting_2b40a090-6a45-102c-8c43-000e0cc62f92.php].

Uma Ilango is a programmer from profession. Has lots of interest in non-technical writing too. She has written articles in several topics. Her hobbies include reading, surfing, writing and playing chess. She writes regularly at Bigarticlepool.com [http://www.bigarticlepool.com]

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Monday, January 21, 2013

Accounting Ethics - The Importance of Ethical Practices in Business and Personal Finance

What is ethical accounting? The idea of accounting ethics deals with the moral and values-based judgments and decisions an accountant or accounting agency confront daily in their practice. Due to the nature of their work as communicators of financial information to business managers, shareholders, and the general public, as well bookkeeping and auditing of business entities, accountants and accounting agencies are held to the highest standards of transparency and morality in regards to their research and the information they convey. Accounting can be used as a way to study how and why a business may succeed or fail, but above all it is a public service; those who practice it must make judgments and decisions that can sometimes supersede the interests of their clients in favor of the interests of the public at large.

Failure to apply ethical standards to accounting creates the opportunity for manipulation of facts and information that, if used to mislead, could cause a person to invest under false pretenses, or a business to represent its finances fraudulently to its shareholders. It is of the utmost importance that the public be able to trust accountants and accounting, because their financial future, and that of their family or business, could be at stake.

Why is it important that accountants and accounting firms be ethical?

Accounting Ethics - The Importance of Ethical Practices in Business and Personal Finance

Over the years there have been several large accounting scandals in the United States, and in the world at large, which caused private investors and public shareholders to lose billions of dollars, and giant businesses and accounting firms to fold, because of falsified or incorrect information given out about the companies in which the money was invested. The Enron scandal is perhaps the most recent and glaring example of unethical accounting causing widespread negative effects, including the loss of billion in shareholder assets, the closure of the Arthur Anderson auditing firm, and the subsequent loss of 85000 jobs when the unethical practices were reported and the company dissolved.

Ethical accounting is not only important to private businesses or individuals for reliable information about their respective financial states, but has a responsibility to the public to provide transparent evaluations of publicly held business entities. Ethical accounting can help eliminate the serious problems raised when incomplete or incorrect information about business or individual is disseminated, saving money and jobs and helping to increase stability in financial markets.

Accounting Ethics - The Importance of Ethical Practices in Business and Personal Finance
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