Success is not final, failure is not fatal: it is the courage to continue that counts." - Winston Churchill
Source: AccountingTools
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Accounts payable is the aggregate amount of an entity's short-term obligations to pay suppliers for products and services which the entity purchased on credit. There are many responsibilities involved in running a business successfully, but maintaining strong control over accounts payable is among the most critical. If organization leaders do not have proper oversight of these processes, it’s possible for errors to negatively affect the bottom line and even a company’s reputation. According to Inc. Magazine, there are a few primary reasons that supporting cash flow and cultivating positive business relationships are among the most important functions of accounts payable. If best practices are not being adhered to, it’s possible for problems such as late or duplicate payments to occur, and these errors can severely damage a company's reputation. Source: Technologyinsight; AccountingTools When you reach the end of your rope, tie a knot in it and hang on." -Franklin D. Roosevelt How Do you Prepare your Financial Statements?The activities of a service business differ from those of a merchandising business. The differences are illustrated similar to below. The revenue activities of a service business involve providing services to customers. On the income statement for a service business, the revenues from services are reported as fees earned. The operating expenses incurred in providing the services are subtracted from the fees earned to arrive at net income. In contrast, the revenue activities of a merchandising business involve the buying and selling of merchandise. A merchandising business first purchases merchandise to sell to its customers. When this merchandise is sold, the revenue is reported as sales, and its cost is recognized as expense. This expenses is called the cost of merchandise sold. Source: Corporate Financial Accounting 12E
It's not about ideas. It's about making ideas happen." - Scott Belsky, co-founder of Behance Continue building your vision everyday until you start to see the reality of it all." - Fontenot & Associates Solutions What are Sales Discounts? A seller may offer the buyer credit terms that include a discount for early payment. The seller refers to such discounts as sales discounts. Sales discounts reduce sales revenue. To reduce sales revenue, the sales account could be debited. However, managers usually want to know the amount of the sales discounts for a period. For this reason, sales discounts are recorded in a separate sales discounts account, which is a offsetting account to sales. Here is an example: Assume that Fontenot & Associates Solutions sold $18,000 of merchandise to Southwest Oil & Gas on March 10 with credit terms 2/10, n/30. Under the credit terms, Southwest Oil & Gas has until March 20 (March 10 plus 10 days) to pay within the discount period. We will assume Southwest Oil & Gas pays the invoice on March 19. Since the invoice is paid within the discount period (10 days), Southwest Oil & Gas would deduct $360 ($18,000 X 2%) from the invoice amount of $18,000 and pay $17,640. The transaction would be recorded similar to below: Being able to track the amount of discounts your business if offering each quarter provides a great snapshot to how much the company has sold and potentially how much the company will forecast for the upcoming quarter. Having established policies and procedures in place would provide management with additional assurance that the financial recordings are being processed accurately. Source: Corporate Financial Accounting 12E
Risky leaders, Creative leaders and leaders in control do exist." - Fontenot & Associates Solutions How Does this Effect your Financial Statements?Any errors in merchandise inventory will affect the balance sheet and income statement. Some reasons that inventory error may occur include the following:
Stay connected with us via the social media platforms (Facebook, Instagram, Twitter - @FontenotSolutions) to learn via examples, more about how inventory errors can effect your financial statements. Some companies use a single-step income statement, which totals revenues and gains (sales, other income, etc.) and then deducts total expenses and losses (cost of goods sold, operating expenses, other expenses, etc.). A simplified single-step income statement is similar to below: As an owner responsible for the creation of your financial statements, it key to understand the set-up of your companies income statement. This example, shows all revenues and gains and then lists all expenses and losses. Total expenses and loss items deducted from total revenue and gain items determine the net income. Ideas are easy. Implementation is hard." - Gary Kawasaki, founder of AllTop Source: Financial Reporting and Analysis 12E
As an entrepreneur, we have already decided to take the good with the bad." - Fontenot & Associates Solutions Companies of all Sizes should have a Guide to MonitoringMonitoring the internal control system is used to locate weaknesses and improve controls. Monitoring often includes observing employee behavior and accounting system for indicators of control problems. Some indicators are below: Warning signs with regard to people:
Source: Corporate Financial Accounting 12E
Oil & Gas IndustryPetroleum companies are interested in securing the rights to drill for and produce subsurface minerals. The existence of minerals is uncertain until a drilling rig has probed the earth to the depth at which exploration information has suggested that deposits of oil and gas are likely to be found. Sometimes these rights may be secured by simply purchasing the fee interest in the property, which results in outright ownership of both surface and minerals. In almost every case, the right to explore and produce is obtained by means of an oil and gas lease or a mineral lease. Source: Petroleum Accounting
It's nothing like having a plan for the unexpected." - Fontenot & Associates Solutions The company's checking account balance in the bank records is a liability. Thus, in the bank's records, the company account has a credit balance. Since the bank statement is prepared from the bank's point of view, a credit memo entry on the bank statement indicates an increase (a credit) to the company's account. Likewise, a debit memo entry on the bank statement indicates a decrease (a debit) in the company's account.
Customers' checks returned for not sufficient funds, called NSF checks, are customer checks that were initially deposited but were not paid by customer's bank. How are you handling these special occurrences in review of your cash monthly? This incident would mean your bank account has more money than it should because your customer's check was returned by their bank. A great reason to have support with your bookkeeping or a "Know How" guide to support your staff with the step by steps of how to analyze and make corrections to the financials when required. |
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