tag:blogger.com,1999:blog-90565310970295571142024-02-20T02:51:50.830-08:00Beginning AccountingLinxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-9056531097029557114.post-72497881417889689502016-12-31T08:41:00.000-08:002016-12-31T08:41:03.601-08:00Days in Accounts Receivable Ratio
<br />
<div style="margin: 0in 0in 0pt;">
Cash flow is the most important short term factor in
business survival. The days in accounts receivable ratio is a key barometer of
the funding situation of a company.</div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
A company that provides customers credit, or that allows
payments over time needs to have a good understanding of when they can be
expect to be paid.<span style="mso-spacerun: yes;"> </span>Looking at historical
ratios can provide insight, as well as offering an opportunity against other
companies. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
The days in accounts receivable ratio is, as the name
implies, is the calculation of how many days of cash are locked up in
receivables.<span style="mso-spacerun: yes;"> </span>Receivables are the money
is that is owed the company. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;">Calculating Days in
Accounts Receivable (A/R)</b></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"> </b></div>
<br />
<div style="margin: 0in 0in 0pt;">
There are two factors involved in the calculation:</div>
<br />
<div style="margin: 0in 0in 0pt;">
The accounts receivable at a point in time.</div>
<br />
<div style="margin: 0in 0in 0pt;">
The revenue generated by the company over a specific period.
</div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
An example with the following variables:</div>
<br />
<div style="margin: 0in 0in 0pt;">
Revenue over the first three months of the year equals
$90,000.</div>
<br />
<div style="margin: 0in 0in 0pt;">
Accounts receivable on the books at 3/31 equals $30,000.</div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Days in A/R are calculated by dividing revenue by the number
of days in the period to get the average daily revenue and then dividing that
number into the accounts receivable. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Average daily revenue ($90,000 divided by 90 days) = $1,000
per day</div>
<br />
<div style="margin: 0in 0in 0pt;">
A/R ($60,000) divided by average daily revenue ($1,000) = 60
days in accounts receivable. </div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"> </b></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;">The Importance of
Days in Accounts Receivable</b></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
What this calculation is saying is that on average it will
take 60 days to collect what it is owed.<span style="mso-spacerun: yes;">
</span>If the company pays its bills today, it will take 60 days to replace
that money.<span style="mso-spacerun: yes;"> </span>The company must have a
reserve of $60,000 in order to remain solvent.</div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
The ratio is best used as an indicator to compare time
periods or against like companies.<span style="mso-spacerun: yes;"> </span>If
the number is increasing from a prior year, it may indicate a problem.<span style="mso-spacerun: yes;"> </span>The company can positively impact the ratio
by becoming more aggressive in collecting debts.<span style="mso-spacerun: yes;"> </span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Since industries differ in customers and payment terms, it
may not helpful measure against non-similar companies.<span style="mso-spacerun: yes;"> </span>Comparing against a competitor or an industry
benchmark can inform the company on the success of its credit and collection
efforts. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;">Limitations of the
Days in A/R Calculation</b></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"> </b></div>
<br />
<div style="margin: 0in 0in 0pt;">
This calculation is only valid if the company has a solid
history of generating revenue and collecting bills.<span style="mso-spacerun: yes;"> </span>A new company is likely to have a lower
ratio, but keeping the ratio at 60 days (for instance) means that as new
revenue is generated, the older accounts have to be collected. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Many companies use the 90 days measurement of revenue, but
other time periods may be more appropriate.<span style="mso-spacerun: yes;">
</span>Too short a time frame may give inconsistent and less useful results,
and too long may be useful in spotting trends.<span style="mso-spacerun: yes;">
</span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Days in Accounts Receivable is an important business ratio,
but to get the full picture of a company, it should be combined with other
measurements, including return on investment and net income. </div>
<br />
<div style="margin: 0in 0in 0pt;">
<span style="mso-spacerun: yes;"> </span></div>
Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-48410739289858196442016-12-30T11:18:00.003-08:002016-12-30T11:18:53.254-08:00Choosing a Career in Accounting
<br />
<div style="margin: 0in 0in 0pt;">
Accounting is a growing field with lots of opportunities,
but the lifestyle is not for everyone.<span style="mso-spacerun: yes;">
</span>Having a steady job is good, but there are trade-offs to making money.</div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
When making a career choice, many young people with an
affinity for numbers make a decision to enter accounting.<span style="mso-spacerun: yes;"> </span>Business schools have bachelor programs for
accountants, and there are openings in businesses, government and auditing firms.
</div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Questionable business practices and the resulting government
regulation have increased positions for accountants.<span style="mso-spacerun: yes;"> </span>A Certified Public Accountant with expertise
in Sarbanes-Oxley compliance is very valuable.<span style="mso-spacerun: yes;">
</span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
The long hours, hard work and pressure situations make the
accounting field inappropriate for everyone.<span style="mso-spacerun: yes;">
</span>Even those with great mathematical skills may be ill-suited to the rigor
and monotony of the life of accountant. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;">Positives of an
Accounting Career</b></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"> </b></div>
<br />
<div style="margin: 0in 0in 0pt;">
The primary reason many end up in accounting is that it is a
specific career.<span style="mso-spacerun: yes;"> </span>Courses taken in
college provide specific training. Many students can walk out of college and
apply the lessons immediately at a job.<span style="mso-spacerun: yes;">
</span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
In contrast, a major in mathematics or economics does not
train the student for a particular occupation.<span style="mso-spacerun: yes;">
</span>There is more flexibility, but less security. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Accounting is an indoor job, not a lot of heavy lifting,
other than briefcases.<span style="mso-spacerun: yes;"> </span>Today, computers
play a large role, and accountants need to be able to use spreadsheets and word
processing software. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
As a white collar occupation, the pay is good, with starting
salaries above $50,000 in some markets.<span style="mso-spacerun: yes;">
</span>Mobility is fairly easy, within a country.<span style="mso-spacerun: yes;"> </span>Crossing borders is more difficult since
rules vary by country.<span style="mso-spacerun: yes;"> </span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Accounting is not bookkeeping.<span style="mso-spacerun: yes;"> </span>There is considerable challenge in
identifying issues and solving mathematic problems.<span style="mso-spacerun: yes;"> </span>There is often interaction with others, which
may include clients, peers or subordinates. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
There are many opportunities for advancement, to the highest
financial position in the organization; partner, chief financial officer or
treasurer, depending on the type of company.<span style="mso-spacerun: yes;">
</span></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"> </b></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;">Negatives of an
Accounting Career</b></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"> </b></div>
<br />
<div style="margin: 0in 0in 0pt;">
Accounting is a rigorous profession.<span style="mso-spacerun: yes;"> </span>Most accountants, especially at the beginning
of their career, are expected to work long hours and weekends.<span style="mso-spacerun: yes;"> </span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
Staff at auditing firms, particularly, work many hours in
their first years, doing basic accounting reviews on the road, in firms that
tolerate their presence at best.<span style="mso-spacerun: yes;"> </span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
The expression used at these firms “three years, up or out”
embodies the experience.<span style="mso-spacerun: yes;"> </span>Staff either
get used to the hours, or move to other companies or professions.<span style="mso-spacerun: yes;"> </span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
The work can be tedious and become monotonous.<span style="mso-spacerun: yes;"> </span>In a business, there is a regular month end
closing process, and no vacations can be taken during this time, and weekends
are expected.</div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
There is a stigma of the bean counter, evidenced by people
in other professions.<span style="mso-spacerun: yes;"> </span>The role itself is
a matter of monitoring and reporting on others, rather than creating
business.<span style="mso-spacerun: yes;"> </span>It is not a good fit for an
entrepreneurial person, or someone needing a lot of human interaction. <span style="mso-spacerun: yes;"> </span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
With the long hours and indoor work accomplished mostly by
sitting, it is not a healthy occupation.<span style="mso-spacerun: yes;">
</span></div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;">Finding the Right
Career</b></div>
<br />
<div style="margin: 0in 0in 0pt;">
<b style="mso-bidi-font-weight: normal;"> </b></div>
<br />
<div style="margin: 0in 0in 0pt;">
A student should carefully assess their strengths and
desires before deciding on a career.<span style="mso-spacerun: yes;">
</span>Accounting offers stability and financial rewards, but requires
mathematical ability and a strong work ethic. </div>
<br />
<div style="margin: 0in 0in 0pt;">
</div>
Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-27341759766301955652013-05-02T17:48:00.001-07:002013-05-02T17:48:50.692-07:00Your First Job as a Corporate Accountant<br />
<div class="MsoNormal">
Those considering a career in accounting and those that have
completed their college coursework will want to have an idea what awaits them
when they finally start that first job in accounting. Accounting is a worthwhile, stable and
generally well-paid vocation, but starting out can be difficult and
stressful. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
There are many distinct fields of accounting that one can
wind up in for a first position. Public
Accounting, or acting as an outside auditor, is one of the better known, but
virtually every organization larger than a few employees needs an
accountant. Companies, hospitals, and
governments all need financial statements put together by accountants for
auditors to audit. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Although each type of job, and every company, is somewhat
different, as someone starting your first job, there are a number of things you
can expect no matter where you happen to fall.
</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Jobs for a Beginning
Accountant<o:p></o:p></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Since you are starting out at the bottom, it is very likely
you are going to be assigned the most menial task that the office has,
something no one else wants to do.
You’ll find that four years of intense study at the university is more
of less useless in your first few months.
No one will give you anything to do that requires advanced accounting
knowledge. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Depending on how technically advanced your office is, the
first few jobs will consist of working with an already created database,
collating financial documents, or filing away all the reports that have been
waiting for your arrival. A novice isn’t
going to be trusted with presenting to the board of directors or reviewing the
CFO’s work. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
The most likely job a beginning accounting will get is to
prepare the bank reconciliation. In a
large company, this is usually tedious work and will likely be several months
behind. Preparing account
reconciliations is pretty safe work to hand to a novice, as is preparing
journal entries. Expect to have to do
several revisions, as accountants are very particular people by nature. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Hours of Work<o:p></o:p></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
A beginning accountant is expected to be at work the same
hours the senior staff do, even if they haven’t been trusted with much work to
do. Expect to be there late into the
evening and some weekends, especially if it tax or budget time. It is most important to look busy when any of
the big bosses are around. </div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b>Moving up the
Accounting Ladder<o:p></o:p></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
Eventually, newer accountants are given more meaningful
tasks under close supervision. How long
depends on the size of the company and whether any vacancies appear above. The novice can look forward to years of
doing financial program analyses, monthly closes and dealing with bankers,
auditors and department heads, if they can get through the first few months and
years. </div>
Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-51187172223503885512012-01-15T17:17:00.001-08:002012-01-15T17:17:59.980-08:00Adjusting Withholding Allowances on the IRS W-4<h1>
Is Getting a Big Income Tax Refund a Good Idea?</h1>
<h3>
U. S. Income Taxes that are withheld in excess of the tax liability are refunded each year. Some taxpayers intentionally overpay their taxes to get a large refund.</h3>
<div>
In the United States, persons who are employed are required to file a W-4 form with their employer. The form provides information on the employee, including social security number, name and address, as well as tax information.<br />
<br />
The W-4 includes how many withholding allowances the employee is claiming and marital status. This choice, along with their wages earned, determines how much tax will be deducted from the paycheck. Allowances are similar to exemptions on the tax form, but do not have to be the same. For instance, the taxpayer can claim zero allowances even though they claim an exemption on the return.<br />
<h3 class="dynamic">
Underpaying Income Taxes</h3>
Claiming too many allowances will result in underpayment of tax. Significant underpayments are subject to penalties and interest. It is therefore important to claim enough allowances, or to make estimated payments.<br />
<h3 class="dynamic">
Overpaying Income Taxes </h3>
Claiming fewer allowances, or withholding additional tax than necessary to meet the tax obligation, will result in a refund. Some taxpayers intentionally claim more than necessary in order to get a large refund. The reason for this is to get a large amount of money at one time. Receiving the money spread over the whole year may result in the money being spent, not saved. For example, a $2,600 refund may get deposited for a special occasion, but $50 a week may just be put toward the bills.<br />
<br />
The standard response for those getting a big refund is that they “are giving the government an interest-free loan” since the there is no interest earned. To some employees, a forced savings program may be an advantage over earning a few pennies in interest.<br />
<h3 class="dynamic">
The Withholding Impact of the 2009 Stimulus</h3>
For taxpayers earning less than $75,000, the IRS will be reducing taxes with the Making Work Pay Tax Credit in the <i>American Recovery and Reinvestment Act of 2009 </i>(the 2009 Stimulus). There will be credits of $400 to $800, depending on income. In order to accomplish the goal of stimulating the economy, the tax tables will be adjusted for the credit some time in spring.<br />
<br />
Taxpayers who do not adjust their W-4 will receive more in their paychecks, and can anticipate the same refund that they would have gotten without the stimulus. If taxpayers adjust their W-4 to receive the same amount of taxes taken out, they would receive a larger refund. The government allows taxpayers to adjust their W-4s at any time, although employers may have restrictions on how often they can be changed.<br />
<br />
Taxpayers should determine how important refunds are compared to having the cash in their pockets. Underpaying carries great risks, but wisely choosing withholding allowances can result in bigger paychecks and the option of stimulating the economy.</div>
<div>
<img src="http://images.suite101.com/1048391_com_3178973811.jpg" /></div>
<!-- sname: www3 -->Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-19802080940396906372012-01-15T17:16:00.000-08:002012-01-15T17:20:06.143-08:00Increase your Income Tax Refund by Proper Timing<h1>
Lower your Taxes by Deferring Income and Maximizing Deductions</h1>
<h3>
Using discretion when recognizing income and paying expenses can help reduce payouts and maximize refunds on United States income taxes.</h3>
<div>
Taxpayers who use the cash basis of accounting can reduce their United States federal tax burden by adjusting when income is received and expenses are incurred. Sometimes the effect will only be temporary, but in other cases permanent savings will be generated.<br />
<br />
Cash basis accounting is a different method from accrual accounting. In cash basis, income and expense are recorded when they are paid. Accrual accounting recognizes these when they are incurred.<br />
<br />
The following examples relate to the taxpayer using cash basis accounting.<br />
<h3 class="dynamic">
Effect of Timing on Income</h3>
The simplest example of timing is in delaying taxable income until the next year. If there is any ability to defer taxes until after the end of the tax period (usually January 1), money received will not be taxed until the next year.<br />
<br />
If the taxpayer falls into a lower tax bracket in the next year, this will result in actual savings. Alternatively, it may actually be better to move taxes into the current year if income (and the resulting tax rate) is low.<br />
<br />
This is the principle being 401Ks and IRAs, which defer taxable income until after retirement. This is not true for Roth IRAs, which do not feature tax deferral.<br />
<br />
It may be rare to find a circumstance where income can be deferred, but if the situation applies, it is smart to take advantage of it. In cases where the alternative minimum tax situation applies, consulting with a tax professional may be appropriate.<br />
<h3 class="dynamic">
Effect of Timing on Deductions</h3>
There is much greater flexibility in determining the timing of expenses for deductions. Expenses are recorded when paid.<br />
<br />
Generally, paid means when the funds leave the taxpayer’s possession. Checks that are mailed are based on the postmark date. Credit card transactions are considered to be as of when the charge is made, not when the balance is paid off.<br />
<br />
Why is this important? Creating deductions before the end of the year lowers taxes in that year. Paying real estate taxes, estimated state taxes, or employee expenses early can defer taxes for the cash basis taxpayer.<br />
<br />
There are other opportunities for real savings, not deferrals, built into the tax code. Deductions from federal tax can be used two ways:<br />
<ul>
<li>The Standard Deduction</li>
<li>Itemized Deductions</li>
</ul>
The taxpayer is entitled to take the greater of these two. It is legal and smart to consider whether tax can be reduced by combining as many deductions in one year to maximize itemized deductions, and then claiming the standard deduction in the alternate year.<br />
<br />
For example, a taxpayer may have $5,000 in deductions in each of two years, but has the option of prepaying $1,500 in real estate taxes in year one.<br />
<br />
If the standard deduction is $6,000, it makes financial sense to pay the taxes early. Then the itemized deduction of $6,500 can be taken in year one. In year two, the standard deduction of $6,000 is greater than the remaining $3,500 of itemized deductions.<br />
<br />
Other savings can be garnered from areas where there are limitations. Medical deductions have to exceed 7.5% of adjusted gross income (AGI) to be deductible.<br />
<br />
The taxpayer with high medical costs will benefit by maximizing payment in one year, even the amounts exceed the threshold. Similarly, the category of other deductions must exceed 2% of AGI.<br />
<br />
Although taxpayers are obligated to pay the appropriate amount due to the Internal Revenue Service, the tax code has provisions that enable honest taxpayers to reduce their burden by the effective use of timing. Always consult a tax professional for specific questions on your situation.</div>
<div>
</div>Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-23073059880599625922012-01-15T17:11:00.000-08:002012-01-15T17:11:25.245-08:00Stock Trading and the Wash Sale Rule<h2>
Why the IRS Law is Important to Short-term Traders</h2>
<h3>
The Wash Sale Rule prevents taxpayers from deducting losses on some investments that are repurchased. When does it apply and what are the reasons behind the rule?</h3>
<div>
The Internal Revenue Service is the governing body with respect to United States tax laws. The IRS allows many legitimate deductions from income, but as investors have developed ways to take advantage of the rules for inappropriate benefit, the IRS has issued regulations to enforce the spirit of the laws.<br />
One of the legitimate deductions is allowing a taxpayer to deduct losses on investments, up to a current annual maximum of $3,000 for a single taxpayer.<br />
The law also allows losses on investments to be used to offset gains. The wash sale rule was instituted to make sure this is not abused. Losses cannot be deducted from sales or trades of stock or securities in a wash sale.<br />
<h3 class="dynamic">
IRS Definition of Wash Sales </h3>
IRS Publication 550 defines a wash sale as:<br />
When an investor sells or trades stock or securities at a loss and within 30 days before or after the sale they:<br />
<ul>
<li>Buy substantially identical stock or securities,</li>
<li>Acquire substantially identical stock or securities in a fully taxable trade, or</li>
<li>Acquire a contract or option to buy substantially identical stock or securities.</li>
</ul>
<h3 class="dynamic">
The Importance of the Wash Sale Rule</h3>
Because the IRS allows taxpayers to deduct losses against gains, the IRS issued the rule to prevent traders from taking sham losses in order to reduce taxes on gains.<br />
For example, an investor might have a $5,000 in realized gains (based on sales that have already occurred), and have an open position in XYZ stock that is sitting at a $5,000 loss. With no additional transactions, the investor would owe taxes on the $5,000 in realized gains.<br />
The investor could sell the open position and realize the $5,000 loss, netting his taxable gain to zero. However, the investor may believe that XYZ stock will recover and does not want to give up his position.<br />
If he buys back the stock within 30 days, even after the year has ended, he cannot deduct the loss, and will still have to pay taxes on the $5,000 realized gain.<br />
To be clear, the law does not prevent him from selling or buying back the stock, but does not allow the deduction. The IRS only prevents the deduction of sham losses, which it defines as buying back in investment in 30 days.<br />
<h3 class="dynamic">
Strategies Regarding Wash Sales</h3>
Wash sales can occur any time of year, but are most significant near and just after the end of a tax year. The law is based on facts, it does not matter what the intent of the trader is.<br />
In order to fully comply with tax law and still minimize taxes:<br />
<ul>
<li>Consider selling an investment and buying back more than 30 days after the sale. The rule is hard and fast, anything over 30 days does not count as a wash sale, whatever the intent.</li>
<li>After selling, buy an investment which may be similar in nature but not substantially identical to the investment sold during the 30 days period. Retail giants Walmart and Target may be similar, but their stocks are anything but identical.</li>
<li>Remember, at best tax loss selling is a delaying strategy. The decision to delay recognition of taxable income should take into account the taxpayer’s entire situation.</li>
</ul>
This article is informational only. Always consult a tax advisor for specific situations and questions.</div>
<div>
<img src="http://images.suite101.com/1539710_com_photoxpres.jpg" /></div>
<!-- sname: www3 -->Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-39893815747806252602012-01-15T17:09:00.000-08:002012-01-15T17:09:04.141-08:00Home Mortgage Interest Tax Deduction<h1>
<span style="font-size: small;">The United States IRS offers a deduction for home mortgage interest. Does it make sense to buy a home just to benefit on the tax savings or save money on rent?</span></h1>
<div>
Renting has been compared to throwing money away. Homeowners can build equity and in the United States, can deduct home mortgage interest off their income taxes.<br />
<br />
The Internal Revenue Service allows taxpayers to deduct mortgage interest from adjusted gross income (AGI) on Schedule A. The deduction is limited by the actual amount paid and AGI.<br />
The tax savings may be beneficial, but the way taxes are calculated can reduce the positive impacts.<br />
<h3 class="dynamic">
The Standard Deduction versus Itemized Deductions</h3>
One of the key calculations relates to the Standard Deduction. The Standard Deduction is an amount that any taxpayer can subtract from AGI in order to arrive at Taxable Income, without itemizing deductions.<br />
<br />
For instance, the Standard Deduction for 2008 returns was $5,450 for single taxpayers and those married filing separately. If Adjusted Gross Income was $56,450, a taxpayer taking the standard deduction would have Taxable Income of $51,000.<br />
<br />
However, taxpayers are allowed to take the greater of itemized deductions or the standard Deduction. Itemized deductions are computed on Schedule A and include home mortgage interest, real estate taxes and medical expenses over 7.5% of AGI, as well as other deductions.<br />
<h3 class="dynamic">
Example of Deductions from Taxable Income</h3>
For example, itemized deductions on Schedule A may be:<br />
State Taxes - $2,000<br />
Real Estate Taxes - $1,000<br />
Home Mortgage Interest - $2,500<br />
Charitable Contributions - $500<br />
Total $6,000<br />
The taxpayer above would be able to deduct the itemized amount of $6,000. This is an increase of only $550 over the amount they could deduct without the home deductions.<br />
<br />
The tax savings are only $550, which is multiplied times the tax rate, which may be 28%. $3,500 in home taxes and interest result in a savings of income taxes of only $154.<br />
<br />
For these set of circumstances, it can be seen that there is a very small amount of tax savings generated by the home mortgage interest and tax expense. Rules can be complicated. Individual help is available by phone at 1-800-829-1040.<br />
<h3 class="dynamic">
Positives of Home Ownership</h3>
Tax savings are likely to be greater in the first few years of a mortgage, because as the loan is <a href="http://james-hutchinson.suite101.com/create-an-excel-interest-schedule-a37052">amortized</a>, interest is higher and principal payments are lower then. As more of the principal is paid off, interest, and the corresponding tax savings, are decreased.<br />
<br />
There are other reasons for buying a home rather than renting, including the gain in equity from paying principal, and the possibility of appreciation. The mortgage payments can be fixed, as opposed to rent, which can be increased by the landlord (although real estate taxes are subject to increase).<br />
<br />
People considering buying a home should take these factors in account and not just assume that buying will generate substantial tax savings. Each person’s situation will be different, and some may find that renting is a better financial choice.</div>
<div>
<img src="http://images.suite101.com/1105508_com_3363068625.jpg" /></div>
<!-- sname: www3 -->Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com1tag:blogger.com,1999:blog-9056531097029557114.post-39529390874190925342012-01-12T06:45:00.000-08:002012-01-12T06:45:08.606-08:00Excel Help on Arranging Worksheets<h1>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: small;">The window management functions are located on the Window menu on the main toolbar. Features such as Freeze Panes, Split and Arrange allow users the ability to see all their data at one time and make spreadsheets easier to use.</span></h1>
<div>
<h3 class="dynamic">
How Do I Freeze Panes in Excel?</h3>
Freeze Panes allows users to always see the titles in a spreadsheet even if there are too many columns or rows to fit on the screen. Click in the cell just after where you want to freeze the sheet.<br />
For instance, if the title for the columns you want to see is in Row 1. Click in row 2 and select Freeze Panes. If you have many columns of data and want to freeze the titles on the left, click in Column B and then freeze. If you want to fix both rows and columns, click in Cell B2.<br />
Excel allows the user to go back and change the data in the frozen cells at any time. Going back to the menu and selecting Unfreeze Panes will return the spreadsheet to its original condition.<br />
<h3 class="dynamic">
Split Windows in Excel to See Information Easier</h3>
Splitting is similar to Freeze Panes, but creates multiple windows that the user can move about. The windows are linked with each other, in that if there are two windows side by side, going toward the bottom in one will result in the other window going down as well.<br />
Splitting is useful if you are working with a large spreadsheet, where calculations in one section bring results in another. Split the worksheet so the cell you need to change and the result are visible in different windows. When you make the change, you will see the result without hunting through the spreadsheet.<br />
<br />
<b>Arrange Windows in Excel</b><strong> for Easy Use</strong><br />
<br />
A little used feature in Excel is arranging windows, located on the Window menu. Excel allows multiple spreadsheets (workbooks) to be open at the same time. Arrange gives the user the option of seeing those multiple workbooks on the same screen. It is important to understand that worksheets are the individual pages of a workbook.<br />
<br />
This is useful for transferring data between spreadsheets using <a href="http://james-hutchinson.suite101.com/copy-and-paste-in-microsoft-excel-a43262">copy and paste</a>, or with links. It can function that way the Split Windows command works when calculations flow from one workbook to another.<br />
<br />
The choices for arranging worksheets are Vertical, Horizontal, Cascade and Tiled. Tiled is likely the best choice for most uses, but the user can easily test each method for what works best for each purpose.<br />
<br />
A related feature is New Window, also in the Windows menu, which allows users to see multiple views of the same workbook, so that each worksheet within can be its own workbook, enabling the use of Arrange to see different worksheets in the same workbook easily.</div>
<!-- sname: www3 -->Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-18083178865083041102011-05-08T19:28:00.000-07:002011-05-08T19:29:54.130-07:00Phil Mickelson & KPMG<p>Golfers today display as many advertisements as race cars. Tiger Woods wears a Nike Swoosh, and other players were sporting good related images.<br /><br />Phil Mickelson prominently displayed KPMG on his hat at the Masters. KPMG LLC is a major accounting firm, one of the so-called Big 4 firms.<br /><br />They are:<br /><br />KPMG<br />Deloitte & Touche<br />Price Waterhouse Cooper<br />Ernst & Young<br /><br />There are thousands of other firms, but these are generally considered to the largest and most prominent. There was originally a Big 8, but with consolidation and the implosion of Arthur Andersen in the Enron scandal, the number has been reduced to four.<br /><br />One thing I don’t understand is the value for KPMG to advertise on Phil’s hat. How many people watching have the ability to engage KPMG? Everyone can buy a pair of shoes or a golf, a Srixon golf ball (advertised on Jim Furyk’s hat.) But an accounting firm? It’s their money, but it seems a waste </p>Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-78983296350230759922011-05-08T19:27:00.001-07:002011-05-08T19:27:53.883-07:00The Difference Between Cash and Accrual AccountingOne of the main goals of accounting is to be able to fairly measure the value of a business at any given point in time. Bookkeepers can use a check book to keep track of all the bills they pay and any deposits they receive. <br /> <br />Accountants, on the other hand, need to know more than just what checks have been written. They have to know what the company is responsible for paying, even if they haven’t cut the checks yet. So, a system was developed for tracking everything, even stuff that hasn’t been paid for. This system is called accrual accounting<br /> <br />Cash Based Accounting<br /> <br />A cash system is what most individuals use. Deposits are recorded in the checkbook when the money is received. Checks are recorded when they are written. <br /> <br />If things are properly recorded, a person can look at the checkbook at any time and know how much cash they have. This is usually good enough for most people, but not for large businesses. <br /> <br />Accrual Accounting Systems<br /> <br />Accrual accounting looks at more than just the cash position, and attempts to determine where the business would be if everything that was owed had been paid as of a particular date. Most businesses of any size use accrual accounting.<br /> <br />The technical terminology is that revenues and expenses should be recorded in the period that they are incurred (not necessarily when they are paid.)<br /> <br />Example of Accrual Accounting <br /> <br />Let’s use the example of buying furniture: <br /> <br />In a cash accounting system, if you buy a couch and have it delivered in January, but the bill is due in February, you record the amount in your checkbook in February. <br /> <br />In an accrual system, the accountant would record the expense for the couch in January, even if they paid the bill in February. Why? Because it doesn’t matter when the bill is paid. The company knows they owe the money in January. So that’s when they book it. <br /> <br />Individuals can get away with using cash basis because they usually keep track of how much they have spent each month fairly easily. Businesses need to have a good handle how much they owe for things that haven’t been paid yet. Accountants work each month to make sure they record all the revenue and expense each month on an accrual basis.Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-82168746604549902722011-05-08T19:25:00.000-07:002011-05-08T19:26:33.623-07:00Month End CloseMuch of the attention in the accounting profession is focused on public accounting, which is responsible for auditing financial statements and producing audit reports. <br /><br />However, I suspect that most of the accountants are engaged in financial or management accounting, who prepare the monthly financial statements presented management long before they audited by outsiders.<br /><br />These accountants design the spreadsheets and book the journal entries so management can see what the profitability of the company is, and so that the auditors have something to audit. <br /><strong><br />Month End Again?</strong><br /><br />Most companies issue financial statements monthly, so that these accountants have a routine. The last few days of the month involve getting ready for close, and then the next five to ten days are a furious race to close the books accurately. <br /><br />The next few weeks are spent working on other projects or preparing reconciliations, and then the process begins all over again. <br /><br />I knew one accountant that counted the number of month ends to retirement. So, if you desire an unpredictable job, with varied responsibilities, never knowing what is going to face you each day, don’t go into accounting.Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-89739717957124963432011-05-08T19:20:00.000-07:002011-05-08T19:22:01.607-07:00What is Accounting?http://www.merriam-webster.com/<br /><br />Webster’s Dictionary defines Accounting as<br /><br />> the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results; <br /><br />The goal of this website is to take complicated statements like the above and convert to easy, understandable language. <br /><br />Therefore, Easy Basic Accounting’s definition of accounting is: <br /><br />A way to know how much money a company makes, and <br />how much it can spend before it runs out of money. <br /> <br /><br />A good accounting system does both of these things. <br /><br />What is Bookkeeping?<br /><br />Again, to Webster:<br /><br />>a person who records the accounts or transactions of a business<br /><br />That’s pretty simple already, isn’t it? A person that keeps the books. Remember, to spell bookkeeping, use two ‘k’s. <br /><br />The Difference Between Bookkeeping and Accounting<br /><br />The simple answer, based on the above definitions, is that the Accountant designs the system, and the bookkeeper enters the transactions, and then the Accountant verifies and produces the reports, or statements based on what the bookkeeper has entered. <br /> <br />It can get a lot more complicated, but the goal here at EBA is to keep things understandable.Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-64430977489413952152011-05-05T17:18:00.000-07:002011-05-05T17:19:56.620-07:00Financial StatementsAccountants keep track of the transactions for a business and load each of the transactions in a ledger. At the end of a time period, usually at the end of each month, the accountant or bookkeeper pulls the data out of the ledger and prepares financial statements. <br /><br />There are three main financial statements that are required for public companies. <br /><br />1. Income Statement<br />2. Balance Sheet<br />3. Statement of Changes in Cash<br /><br />Each of these statements deserves their own page, and multiple pages, but this chapter will describe them briefly and highlight key differences.<br /> <br /><strong>Income Statement</strong><br /><br />The income statement shows the revenues the company generates and expenses it incurs, and then compares the two to show how much money the company made or lost. The income statement covers a time period, usually a month, quarter (three month period) or year. <br /><br /><strong>Balance Sheet</strong><br /><br />The balance sheet shows the financial position of a company at a point in time. It does not cover a month, but instead shows the company’s assets and liabilities at a specific date, usually the end of a month, quarter or year.<br /><br />Statement of Changes in Cash<br /><br />This statement, like the income statement, covers the company activities over a time period. Unlike the income statement, this statement covers all transactions that impact the company’s cash position. <br /><br />Investments in fixed assets, also known as capital expenditures, are shown here, since they are uses of cash, but they are not shown on the income statement until they are depreciated. <br /><br />Using Financial Statements <br /><br />These statements are all related, and when viewed together, provide important facts about a company to management and outside investors.Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0tag:blogger.com,1999:blog-9056531097029557114.post-17385681136511429872011-05-05T17:17:00.001-07:002011-05-05T17:17:57.682-07:00What is a General Ledger?Accountants need to keep track of every transaction a business might make. In order to accomplish this, the accountant will develop a ledger. <br /> <br />The ledger consists of accounts. Each account represents something that a business needs to keep track of. Types of accounts include cash, debts, expenses or revenues. A good accounting system will contain accounts for every type of transaction a business needs. <br /><br />An Example of a Simple General Ledger:<br /><br />Cash<br />Accounts Receivable<br />Inventory<br />Accounts Payable<br />Long term debt<br />Owners Capital<br />Revenue<br />Salary expense<br />Benefits<br />Rent expense<br />Supplies<br /><br />A larger business may have hundreds of different accounts if they are needed to keep track of a business. <br /><br />The ledger will be used to record each transaction. If money comes into the business, cash increases. If money goes out, cash decreases. Cash can also be broken out into different pieces, and these accounts are added to the general ledger. <br /><br />Cash- Checking account<br />Cash – Savings account<br />Cash – money market account<br /><br />There can also be the same accounts with different banks. <br /><br />Using Subsidiary Ledgers <br /><br />As you can see, ledgers could become very cluttered for larger businesses, with many different accounts, particularly in different locations. Therefore, many companies use subsidiary ledgers. <br /><br />These are similar in concept but focused on one topic. All the cash accounts above could be kept in one subsidiary ledger, and the total of the subsidiary cash accounts would equal one cash account on the general ledger. <br />The concept of subsidiary ledgers was very important when ledgers were kept by hand on paper. With computer systems, adding accounts to the general ledger is not as difficult, and space restricted. Still, subsidiary ledgers make it easier to balance the general ledger when financial statements are being produced. <br /><br />A word of warning: always make sure the subsidiary ledgers balance to their corresponding accounts on the general ledger. <br /><br />Once all the transactions are entered into the ledger, the accountant can use the information to create financial statements.Linxhttp://www.blogger.com/profile/06231462343123561311noreply@blogger.com0