While many differences exist between nonprofit and for-profit businesses let's give focus to the accounting world of them both. For example, one of the well-known factors between the two business is related to tax exemptions. One difference in the balance sheets of a nonprofit or not-for-profit organization and a for-profit business is the name or title shown in its heading. In a nonprofit, the name of this financial statement is the statement of financial position. In the for-profit business this financial statement is the balance sheet. Another difference is the section that presents the difference between the total assets and total liabilities. The nonprofit's statement of financial position refers to this section as net assets, whereas the for-profit business will refer to this section as owner's equity or stockholders' equity. The reason for this difference is the nonprofit does not have owners. This means that the nonprofit organization's statement of financial position will reflect this equation: assets – liabilities = net assets. The net assets section will consist of the following parts: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The amounts reported in each of these parts are based on the donor's stipulations. The difference in financial statements is just one of the many reasons why extensive policies and procedures are a key tool when establishing and building a business or brand. Fontenot & Associates Solutions LLC can start the process of developing your business policies and procedures virtually, no need to delay any further. Source:AccountingCoach The function of leadership is to produce more leaders, not more followers. – Ralph Nader
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Don’t make friends who are comfortable to be with. Make friends who will force you to lever yourself up. – Thomas J. Watson Did you know statistic have shown that 90% of tech start-ups fail? They have contributed most of the failure to company's not having a clear defined guide for users. The use of their site or system was too complex and users were not able to navigate as friendly as they would have liked. In addition, when tech companies change their platform without issuing a guide or reference to current followers, those followers then become unsatisfied and find a more friendlier platform. These are just a couple of reason why some tech companies have failed in their business.
One key tool or option when making changes to a platform, especially when your company has a great number of followers is to get volunteers to test the new changes on a different platform and give the company feedback. This would provide direct feedback before making all of the changes in your live platform. Entrepreneur magazine published an article that gives tips on how to build a successful tech company and believe it or not majority of it has to do with location. Fontenot & Associates Solutions is your ideal small business for developing unique extensive policies and procedures. Visit our website today to view a list of services available for your start-up business. Knowledge is key when building a business or team. A great way to build knowledge can start with incorporating your business history and important facts and definitions within the company policies and procedures. Management will see it build company awareness and team cohesiveness. Just know, it's never to late to start. Below is a financial definition and example: An outstanding deposit refers to a company's receipts (cash, checks from customers, etc.) which have been recorded by the company, but the amount will appear on its bank statement at a later date. An outstanding deposit is also known as a deposit in transit. To illustrate an outstanding deposit, let's assume that on October 31 a company received cash and checks from customers in the amount of $800. Clearly the company should report the $800 as part of its cash as of October 31. However, the company did not deposit the $800 into its bank account until after October 31. Since the $800 is not on its bank statement as of October 31, the $800 is described as an outstanding deposit or deposit in transit as of October 31. The $800 outstanding deposit is pertinent to the company's bank reconciliation as of October 31. When the company reconciles the bank statement, the outstanding deposit is an addition to the balance shown on the bank statement as of October 31. (There is no adjustment to the balance per books since the $800 had been recorded as of October 31.) Understanding how receipts should reflect in your business financials is important for business owners when they want to know how much cash they have on-hand or available. Visit our website today to get your business started on developing or improving policies and procedures. Source:AccountingCoach
In the Oil and Gas industry one of the common related cost is Production Cost. Theoretically, the production cost are part of oil and gas produced and, therefore, allocable to inventory and cost of goods sold. However, crude oil and natural gas inventories are usually insignificant and not recognized on E&P company balance sheets. In accounting for production costs, one of the first requirements is to determine the functional accounts that will be used. The accounting system must provide information in sufficient detail to permit accounting cost in accordance with recognized accounting principles and at the same time meet the needs of operating personnel in evaluating operations. In accounting for production costs, it is also essential that the accounting records furnish the necessary data for federal income tax purposes. Production cost are expensed as incurred except in two cases:
Fontenot & Associates Solutions has the skills and knowledge to support companies establish policies and procedures with extensive detail and definitions. Visit our website today. Source:PetroleumAccounting
When building your start-up business, equipment is purchased to get you started. When it's time to lease office space additional equipment is purchased to keep the business moving forward. How are business owners accounting for these purchases. Learn more about the best practices and an example below. The purchase of equipment that will be used in a business is not reported on the profit and loss statement. However, the depreciation of the equipment will be reported as depreciation expense on the profit and loss statements during the years that the equipment is used. For example, if a company buys equipment for $100,000 and it is expected to be used for 10 years, the company's profit and loss statements will report depreciation expense of $10,000 in each of the 10 years (assuming the straight-line method of depreciation is used). The purchase of equipment is shown on the statement of cash flows for the period in which the purchase took place. The equipment will also be reported on the company's balance sheets at its cost minus its accumulated depreciation. The profit and loss statements are also known as income statements, statements of operations, and statements of earnings. Establishing policies and procedures to ensure the accounting process for reporting equipment purchases is a key tool to avoiding company losses in the future. Visit our website today to schedule your appointment. Source: AccountingCoach If everything seems under control, you’re just not going fast enough. – Mario Andretti As a non-profit are you categorizing your fundraising expenses accurately? These expenses should relate to the non-profits classification as specified with the IRS. It is a key tool to establish proper policy and procedure guidelines to ensure those supporting the non-profit organization are following the required guidelines. "Fundraising expenses are defined as a subgroup of a nonprofit's supporting activities expenses. This functional expense classification is used for the fundraising activities including fundraising campaigns, mailings for funds from supporters, and other solicitations for contributions. It may also include an allocated portion of the executive director's salary and benefits plus other management and general expenses." In addition, a non-profit should be reporting funds by functions - what does that mean? For a not-for-profit organization, the reporting of expenses by function means the statement of activities will report expenses according to the following functional classifications: 1) each of its major programs, and 2) the supporting services which are a) management and general, b) fund-raising, and c) membership development. Just as there is a high rate of failure among business startups, charities can go under just as quickly. That's why founders of new charities and existing organizations must think long and hard about the how, why, where, and when. Below are just a few common mistakes tips business owners should avoid.
A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them. – John C. Maxwell I have not failed. I’ve just found 10,000 ways that won’t work. – Thomas Edison Small Business Accounting TipRecording accounting journals is a process for each company. This process entails receiving income from clients and customers, recording business expenses and maintaining a business budget just to name a few. Accounting journal entries are necessary but some of those entries are expected to be reversed the next month because the actual invoice (cost) is set to be processed for payment.
Here is a summary of guidelines for reversing entries to companies of all sizes.
Visit our website today to learn more about accounting services Fontenot & Associates Solutions can support your team with on-site or virtually. As your business continues to grow so should the way you review your financials. As a start-up business, it may have been obvious which services made up the majority of your income. After you have been operating for more than two years, opened a store front, hired new staff or purchased new computer equipment the frequency in which you review you financials will change. Entrepreneur magazine published an article with 3 tips for giving your small business a financial review, this is a great time to review business goals and future plans. Fontenot & Associates Solutions can support your business with establishing policies and procedures which is a key tool in providing a framework to the growth of the business and clear goals for current and new staff. Business opportunities are like buses, there’s always another one coming. – Richard Branson Understanding the accounting language is important as a business owner. The accounting profession has many definitions and processes to reference depending on the industry of business. Below are a few vocabulary words to get you started thinking about your accounting system and establishing policies and procedures. Cost basis: Original cost of investment minus prior accumulated depreciation Goodwill: Purchase price less tangible value of physical assets purchased Net asset value: Cost basis minus accumulated depreciations (prior total depreciation) NSF: Non-sufficient funds, typically a returned check Unrealized gain & loss: Investment that has increased & decreased in value, but not yet sold A successful business owner understands their cost, asset worth and financial statements. Fontenot & Associates Solutions supports all business with establishing policies and procedures, visit our website today to learn more. Master your industry craft- Fontenot & Associates Solutions Don’t just read the easy stuff. You may be entertained by it, but you will never grow from it. – Jim Rohn The accounting for a manufacturing business deals with inventory valuation and the cost of goods sold. These concepts are uncommon in other types of entities, or are handled at a more simplified level. The concepts are expanded below just to name a few:
1. Review the company’s capitalizable costs. When setting standard costs, have all appropriately capitalizable costs been considered, such as incoming freight for procured inventories or overhead for produced inventories? For instance, freight is subject to potentially significant variations due to factors such as the carrier or the quantities being ordered. 2. Update standard costs regularly. Updating standard costs on an annual basis is a good start but is probably not frequent enough to ensure accurate inventory costing (not to mention the potential effects on the company’s income statement every time inventory is expensed inaccurately). If the cost of procuring or producing a product has changed since the standard cost was last modified, inventory will be misstated accordingly. 3. Maintain a “standard-to-actual” reserve in the balance sheet. Every time that any component of inventory is acquired or produced at a cost different than the assigned standard cost, that variance hits the income statement and inventory is misstated. If feasible, at the end of every reporting period an analysis of purchase and production costs for capitalizability should be performed. When complete, capitalizable variances should be recorded in a “standard-to-actual” reserve within inventory on the balance sheet with the remainder being appropriately expensed through the income statement. This reserve has the effect of adjusting the company’s inventory balances to “actual,” which is appropriate under GAAP. Fontenot & Associates Solutions LLC offers services in establishing policies and procedures for accounting and operational staff. Visit our website for a complete listing of our services and create the business framework of your business. Source:AccountingTools
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