Bookkeeping

For a car company, they may have allowances for a questionable part that has the potential of being recalled. It basically allows the company to preemptively account for defective merchandise. Alternatively, a car manufacturer could choose not to make low quality products in the first place. Net revenue represents the actual earnings of a business after deducting discounts, returns, allowances, and commissions from gross revenue. Understanding how to calculate net revenue is crucial for assessing profitability, financial health, and business performance. At Taxfyle, we connect small businesses with licensed, experienced CPAs or EAs in the US. Encouraging cross-departmental collaboration ensures everyone in the business understandsRead More →

Usually, companies record these amounts the cash over and short accounts. Accruing tax liabilities in accounting involves recognizing and recording taxes that a company owes but has not yet paid. This is important for accurate financial reporting and compliance with… Therefore, the balance of cash short and over is on debit or credit depends on whether it is shortage or overage. Effective management of accounts receivable journal entries ensures businesses can track outstanding account balances and maintain smooth cash flow. Likewise, it can save us a bit of time and effort by including both cash shortage and cash overage into only one account. Streamlining accountsRead More →

The ability to estimate the amount of the loss means being able to reasonably estimate the most likely amount for settlement if the event were to occur. If the most likely amount is unknown, but there is a reasonably estimated range, then it is acceptable to use the range and apply the minimum limit of the range. The warranty liability account will be reduced when the warranties are paid out to the customers. For example, Vacuum Inc. will debit the warranty liability account $500 and credit either cash– in the case of a full refund– or inventory– in the case of a replacement– in theRead More →

Profits may increase temporarily when business is declining, and losses can increase, again temporarily, while actual business is increasing. To provide a more accurate picture of profitability, the industry has developed a combined ratio that combines a loss ratio and expense ratio over a given period. The loss ratio equals losses for a given period divided by the earned premium for that period. The expense ratio equals expenses divided by the total written premiums for the period. A combined ratio of less than 1 indicates profitability, called the trade profit, while a combined ratio exceeding 1 indicates losses. Statutory accounting reports and audited statutory financialRead More →

A statement of retained earnings details the changes in a company’s retained earnings balance over a specific period, usually a year. Investors pay close attention to retained earnings since the account shows how much money is available for reinvestment back in the company and how much is available to pay dividends to shareholders. Your Bench account’s Overview page offers contra asset account an at-a-glance summary of your income statement and balance sheet, allowing you to review your profitability and stay on top of your cash flow from month to month. How Do You Calculate Retained Earnings on the Balance Sheet? Although retained earnings are not themselves an asset,Read More →

As shown in the income statement below, new income from a grant with donor restrictions is recorded and displayed in the With Donor Restrictions column. Once the terms are set, the next step is to integrate these funds into the organization’s overall financial planning. This involves creating a budget that reflects both restricted and unrestricted funds, allowing for a holistic view of the organization’s financial landscape. Budgeting software like Adaptive Insights can be invaluable in this process, offering tools to forecast and plan for various funding scenarios. By incorporating restricted funds into the broader financial strategy, nonprofits can ensure that they are maximizing their resourcesRead More →

They’re expensed in the period in which they are incurred, directly affecting the net income of the business. Keep in mind that as a small business owner, you have some restrictions, such as on the amount of interest that’s deductible for purchases of vehicles and vacant land. If you have a home office, deduct interest Car Dealership Accounting on your home mortgage as an expense related to the business use of your home. You can’t deduct legal and other fees related to buying a capital property, but you can add such fees to the property cost. Michelle Payne has 15 years of experience as aRead More →

In double-entry bookkeeping, asset accounts typically carry a debit balance. When the value of assets increases, the asset account is debited, and when the value decreases, it is credited. By understanding the normal balance concept, you can correctly record transactions, such as the cash injection and the equipment purchase, in your double-entry bookkeeping system. Remember, the normal balance is the side (debit or credit) that increases the account. For liabilities, revenues, and equities, a credit does the job. Adherence to these norms is not merely a matter of convention but a functional necessity for the clarity and accuracy of financial data. Conversely, crediting an assetRead More →

When an expense is incurred, it is subtracted from the company’s revenue to determine the company’s gross profit or operating income, depending on the nature of the expense. Ultimately, expenses reduce the company’s net income, which is the final figure after all revenues and expenses have been accounted for. Current liabilities are usually paid with current assets; i.e. the money in the company’s checking account. Rent Managing short-term debt and having adequate working capital is vital to a company’s long-term success. If you have digital asset transactions, you must report them whether or not they result in a taxable gain or loss. Expenses are costsRead More →