How Unusual Items are Presented on an Income Statement

Income Statement Items Unusual Report

Unusual Items on Your Income Statement

According to investopedia.com, the definition of an “unusual item” is the following: items on an income statement which are reported separately from the normal income of the business due to their irregular nature. Unusual items can generally be categorized as one of three types: extraordinary items, discontinued operations and adjustments due to a change in accounting methodology. As a general guideline, unusual items can be thought of as being either strange out-of-the-blue occurrences, or accounting phenomena which are not likely to occur again in the future.

Lay Terminology

In more laymen’s terms, unusual items are items that you don’t frequently purchase or use. In many cases these are one-time instances, such as office supplies or even an emergency expense.

Presenting Unusual Items

Presenting unusual items may be difficult, and in some cases you may forget to report these items simply because these are not items you have to report on a regular basis; however, failing to include these in your reports could be detrimental to your expense reports given that they are still legitimate expenses.

Not sure how to present these items? That’s why it’s important that you hire an account an accountant who can help you determine how to best present these items on your income statement and how to avoid being audited for incorrect or inaccurate information.

Have an unusual item that you need help reporting? Leave your questions in the comments below and we can help you determine how to present it.

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How Your Business Can Survive a Tax Audit?

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Tax Audit

The Internal Revenue Service (IRS) conducts tax audits on businesses and individuals each and every year to ensure that all (taxable) income is reported. A tax audit can be a frightening process, but it can be easier to navigate if you have the information you need in order to navigate through the audit successfully.

Here are a few tips to help your business survive a tax audit:

Hire a CPA

One of the easiest ways your business can survive a tax audit is to simply hire a CPA. Hiring a CPA can help you navigate through an audit in the easiest way possible by offering advice on how to properly deal with the IRS.

Don’t Delay the Audit

One of the worst things you can do when being faced with a tax audit is delay the audit. Attempting to delay the audit will throw red flags up to the IRS that you are attempting to cover up something in your taxes.

Have Realistic Expectations

This is not going to be an easy process, but you must have realistic expectations. Realistic expectations means you must come in with all your documentation and also all your paperwork in order to avoid red flags that may make it appear you are attempting to hide something.

Stay Calm

I know this may be hard to do but the best thing you can do is to stay calm. Don’t overreact and just comply with the IRS in every way you can. It’ll be worth it in the end.

How have you survived your latest tax audit? Leave your comments below.

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How to Find the Best Small Business Accountants in My Area

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Accountants in Your Local Area

Hiring an accountant for your business is not always easy, and finding a suitable accountant who is located close to you is even harder; these things are why many small businesses become so frantic during their search for an accountant. While it’s not imperative that your accountant live near you, it is helpful to have an accountant on staff who can readily drop into your office in case of an emergency, an audit or any other critical time in your businesses’ life cycle.

So how do you find the best small business accountant near you? Here are a few ways how:

Ask

One of best ways to find a small business accountant near you is to go the old fashioned route and ask around. Ask your friends or family if they know any accountants who can be of assistance to you and your business.

Local Associations

Local associations are another great way to find great accountants near you. Not only can they recommend accountants but in many cases they can also offer accountants who are certified in accounting as well.

Google Search

Yes, Google is still one of the greatest ways for your business to find accountants in your area. Google offers an exciting feature which allows you to turn your geographic location on and find the best accountants who are also close to you.

What other ways do you use to find small business accountants in your area? Leave your comments below.

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Three Big Signs You Need a New Accountant

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Signs You Need a New Accountant

Hiring an accountant can be extremely challenging, but it can be even more challenging to let go of your current accountant and find a replacement. Because we know how hard it can be, we have created a list of signs you should look for to help you determine when it’s time for a new accountant:

You Aren’t Getting What You Pay For

There is nothing worse than hiring an accountant, or anyone else, to do a job and then seeing your new hire either perform poorly or failing to provide you with services you paid for altogether. Substandard performance should be a major red flag, especially for accountants as many accountants are paid by the hour, and if they aren’t doing the work you’ve paid them for it may be a sign that they are attempting to financially swindle you. Before paying for any services from an accountant, make sure you draft an agreement which lays out in precise terms the various services and duties they will perform for you.

They Refuse to Show You Financial Statements

Your financial statements are important indicators of the financial condition of your company. You should always have access to your statements at any given time. If your accountant refuses to show you your financial statements, it should be a red flag that either they’re not doing their job or that they’re attempting to hide something that they don’t want you to see. Either way, this is a sure sign that it’s time for you to move on and pursue another candidate.

File Tax Returns Late

You can mess things up all by yourself, literally. If your accountant has a bad habit of filing tax returns late, it’s time for you to ditch him or her and simply begin to take things into your own hands. Filing your tax returns late could have severe consequences for both you and your business.

What signs prove to you it’s time to find a new accountant? Leave your comments below.

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What Not to Ask Your Accountant about Your Business Plan

If you’re a business owner of any sort, your accountant should be your guide to practically any and everything surrounding your finances. For things beyond your finances, however, your accountant isn’t necessarily someone you should look to for guidance. It’s important for your accountant to have a good look at your business plan; however, it’s not imperative that your accountant write it.

Business Plan Accountant Finance Financial

Business Plan

Here are just a few things you should never ask our accountant about your business plan:

To Develop Your Mission Statement

As much as your accountant will want to make sure he or she is involved with your business plan, your mission statement should be one of the things over which you have solid control. In fact, if you don’t know what your mission statement is, or even the purpose of your company, perhaps you aren’t ready to hire an accountant just yet. A great philosopher once said: “if you don’t know where you’re going, anywhere will get you there.”

To Write Your Business Plan

An accountant is there to help you handle the financial aspects of your business plan, not write it. That’s what a business plan writer is for, specifically to help guide you as you write your business plan. If you feel your accountant should do it, perhaps you need to revisit what an accountant’s role is.

How Much Money You Need to Spend

While your accountant can help you as you determine what you should and should not invest in financially, they can’t be babysitters for your business. Ultimately, how much money you spend depends solely on you and your business partner (if you have one).

What questions do you feel should be off limits to your accountant? We hear some pretty entertaining stories so leave your comments below.

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Accounts Receivables vs. Account Payables: Knowing the Difference

Accounts Payable Receivables Company Business

Accounts Payables & Accounts Receivables

When first beginning to work with a new accountant, two common terms you will want to become well acquainted with are accounts payables and accounts receivables. Accounts payables are used to describe money which comes in and money which comes out of the business. An example of accounts payables could be computers or any other products and or goods.

Accounts receivables are the amounts a company can rightfully collect partly as a result of goods the company has sold or serviced on credit to a particular business or customer. In most cases, accounts payables are liabilities and accounts receivables tend to be assets.

Concrete Example

As an example of accounts payables, let’s pretend that your company has recently sold merchandise to another vendor on credit. Your company’s responsibility is to record a sale and from there record a receivable. The entity with whom you conducted business will then record a purchase and then also record an “account payable” and from there you will see a true accounts payable and receivable.

Means to Keep Track of Things

A good way to shed light on accounts payables and accounts receivables is to look at the old proverb which talks about the importance of giving and receiving. In a nutshell, it is a process which was designed to ensure that things don’t get lost in the translation of selling and buying which so often occurs.

These are also probably two very important daily items which any good accountant will constantly hassle you over to ensure you’re not getting lost or mixed up in the shuffle.

What other ways has your accountant worked with you on accounts payables and accounts receivables? Leave your comments below.

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How to Determine if an Accountant be Right for You

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Picking the Right Accountant

Hiring for certain jobs can often feel like a full-time job. From job postings to interviews and background checks, hiring for some positions can undoubtedly be a strenuous process. Despite how long and annoying this process can be, there are actually alternative ways to determine if an accountant be right for you.

Check their Credentials

Always check any new candidate’s credentials. Believe it or not, we live in a society where lies sound better than the truth even on resumes. Some people will even go as far as lying about where they obtained their degrees. This alone could hurt your business because it means you are hiring someone who is not qualified.

Ask for References

If you really want to know how a person works, ask their previous clients. These references will not only give you the good, bad and ugly, but they may also be able to offer advice on how to work with your new candidate.

Ask for their Niche

Every professional has one niche which they have more experience in than others, and the same is true with accountants. Find out whether your accountant has experience in your particular industry.

Be Transparent About Your Expectations

During the interview process, you should always be transparent about your expectations. If you be transparent, then candidates will know from the beginning if they even wish to work with you further. If you try to keep things under wraps, however, you risk deceiving potential employees.

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The Three Steps of Finding the Best Accountant for Your Business

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Finding the Best Accountant

Finding the best accountant for your business may seem relatively easy, but it can actually be a very significant challenge. There are so many variables to consider when hiring an accountant, and occasionally these variables can make finding the right one a huge headache. Below is our three step plan on finding the best accountant for your business:

Contact Your Local Accounting Association

If you’re looking for the best of the best, you may want to contact your local accounting association. They can connect you to the best accountants in the area and they can also connect you to accountants who are certified to work in your industry. Utilizing professional networks is great for businesses, especially when you are new to an area and are afraid of hiring an accountant who may be trying to scam you out of your money.

Ask Your Friends

One of the best ways to ensure that you’ll get a job done is to ask your friends. Your friends will always be a great reference, especially if your friends work in a similar industry as you do. Your friends can also help you determine who may or may not be a good fit for your business. This is because, in many cases, an outsider has more insight on your business than an insider.

Interview

If you enjoy being hands on and don’t like the idea of not being in control, you may want to go the old school route and simply just interview your next accountant; by interviewing, you can help guarantee that you are weeding out the bad apples in the bunch who may be trying to win your business over by using a lot of unnecessary accounting lingo.

How have you been able to find an accountant in the past? Leave your comments below.

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How Much Does a CPA Cost for a Small Business?

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The Cost of a CPA

When most people think about hiring a CPA, the first thing that comes to mind is that it will be expensive to hire such a critical member of your team. Though thinking about hiring a CPA can be overwhelming, it doesn’t have to be. Here are a few things to which factor in to how much a CPA is likely to cost a small business:

What Will You Need Your CPA to Do?

CPAs are qualified to help you in a plethora of ways, including business growth, increasing access to capital, filing taxes and so much more. Because of this, you will want to determine what you will need your CPA to do prior to hiring them. Establishing these guidelines will help your CPA determine how much he or she will charge you for his services.

Will They Be Full-Time, Part-Time or Contracted?

Just because you hire a CPA doesn’t mean you have to hire them as a full-time employee. It’s possible to bring on a CPA in a variety of ways. Because of this fact, you should determine immediately what type of employee he or she will be. This will not only help you once tax season arrives, but it will also help you in establishing your working relationship.

Will They Be Hired Only To Do Your Taxes?

Will your CPA be hired only during tax season? If so, your CPA may charge you an hourly fee or a flat rate. Again, you will want to establish ground rules before beginning a business relationship with him or her.

What City/State You Live In?

As with anything else, where you live plays a critical role in how much services will cost for you. For example, a CPA in Little Rock, Arkansas may not be even half as expensive as a CPA in Los Angeles, California.

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Two Ways to Reduce Your Likelihood of Being Audited

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Avoiding an IRS Audit

The odds of being audited by the IRS are not too dissimilar from the odds of hitting the lottery; in other words, the probability is quite low. But though this is the case, the possibility of being audited by the IRS is something that always exists. If you find yourself being one of the chosen ones in the IRS lottery drawing, you’ll want to make sure you have all your ducks in a row.

If you have yet to be audited by the IRS, there is still hope; here are just a few ways you can minimize your chances of being picked for an audit:

Audit Yourself

One of the easiest ways to ensure that you won’t be audited by the IRS is to audit yourself. Auditing yourself means keeping an accurate record of all of your expenses, payments, invoices, receipts etc. Keeping track of these things is what will help you make sure you’re not filing your taxes with incorrect financial information. One of the most common red flags for taxes is incorrect information. If you can avoid putting down incorrect information you can substantially reduce the likelihood of receiving an audit.

Ask For Help

Don’t feel like you have to face the potential audit of the IRS on your own. In fact, there are lots of accountants available who can help you as you navigate through your tax filings. Asking for help could save you thousands of dollars in IRS debt.

What other ways have you found to be beneficial to you in avoiding the IRS? Make sure you leave your comments below.

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  • Huddleston Tax CPAs / Huddleston Tax CPAs – Mill Creek
    Certified Public Accountants Focused on Small Business
    40 Lake Bellevue Suite 100 / Bellevue, WA 98005
    (800) 376-1785

    Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching,
    QuickBooks consulting, bookkeeping, payroll, offer in compromise debt relief, and business valuation services for small business.

    We serve: Tukwila, SeaTac, Renton. We have a few meeting locations. Call to meet John C. Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.