How Unusual Items are Presented on an Income Statement
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 to Find the Best Small Business Accountants in My Area
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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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
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 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 an Accountant Can Help a Business Succeed
Business Success
If you are a small or large business owner you have probably spent a significant amount of time trying to figure out how to make money, how to save money and how to sometimes simply break even. While crunching numbers is incredibly important, it’s also important that you try not to do it on your own and instead hire an accountant.
Here are a few ways your accountant can help your business succeed.
- Ensure you are following accounting regulations both nationally and locally.
- Give insightful advice on how to better track your expenses daily, monthly and quarterly.
- Give advice on how to separate personal and business expenses.
- Review all employment documentation to make sure that freelancers and contractors are classified properly.
- Properly teach employees on how to read your financial statements.
- Monitor payroll procedures.
- Help provide advice on all tax payments.
- Determine who’s responsible for mailing out W2 and 1099s.
- Close out all financial statements, reports and assets by the end of the year.
- Make sure all IRS paperwork is submitted on time.
- Point out all areas of growth or decline within your business
- Help facilitate purchases inside or outside the business.
- Work with you on IRS auditing prevention.
- Be willing to stand by your business during audits.
- Help you budget for your business.
- Help financial forecasting.
- Provide business advice.
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Four Ways Your Accountant Should Be Using Math to Help Your Business
When people think about an accountant, one of the first things they think is that he or she must be good in math. While not every accountant is a superb mathematician, it is true that accountants do use math to assist their clients in various ways.
Math & Accounting
Here are four examples of how your accountant can use his or her math skills to help your business:
Production Costs
Before you can take your business to the next level, you must determine how much it will cost to actually run your business. These calculations are considered production costs. Hiring an accountant will help you determine not only what your pre-production costs will be but also how much it will cost your business to be sustainable for years to come.
Pricing
While most companies try to determine their pricing strategies alone, this is not recommended. It’s recommended that you hire someone specifically to help you with your pricing and that person could be an accountant. An accountant can work with you to determine how much you should price your goods and services in order to obtain a profit or to help you break even.
Profits
Profits are just as important as pricing, which is why it’s a skill that many accountants should have. They can work with you to both forecast future profits and also forecast your return on investments.
Analyzing Finances
In order to fully analyze how your business is doing, your accountant should be using math to help you determine your revenue and expenses. It is vitally important that you keep your records up to date in order to ensure that you are staying on top of sales increases and decreases.
In what other ways do you expect your accountant to use math? Leave your comments below!
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Five Pitfalls You Need to Avoid During Tax Season
Pitfalls of Tax Season
Tax season is rough simply of its nature, and so the last thing most people need is any additional sources of headache during this time of the year. There are a number of pitfalls, unfortunately, which you need to work hard to avoid during tax season so that your stress level doesn’t go through the roof. Here are five things you want to avoid in order to make tax season as easy and painless as possible:
Writing Off Personal Expenses as Business Expenses
Writing off personal expenses as business expenses could be a slick way for individuals to save a little extra money during tax season; however, this sends a huge red flag to the IRS and could ultimately lead to you being audited by Uncle Sam.
IRS Form Errors
Not sure if you’re filling out your tax forms correctly? It’s important that you go the extra mile and be certain of the accuracy of your forms. If you’re not sure about an item on your IRS form, consult a CPA or a tax preparer so that he or she can help you navigate the tax process.
Not Reporting Cash Businesses
Cash businesses are often watched closely by the IRS. Cash businesses are often places like restaurants, car washes and hair salons. If you are reporting your business to the IRS, make sure you’re also tracking the cash you receive to ensure that you’re not underestimating your earnings each year.
Missing Tax Deadlines
Do you miss tax deadlines year after year? This may cause the IRS to wonder what you may have to hide year after year and could ultimately lead to you being audited by the IRS. Missing tax deadlines shows not only inconsistency but it also signals that perhaps you don’t know what you’re doing. Hiring a CPA could be what helps you stay on track with deadlines in the future.
Misclassifying Workers
Classifying your full-time workers as part-time or contract workers is a major “no,” especially when dealing with the IRS. By misclassifying workers you may not only be putting your employees at risk for being audited but also your business which could ultimately lead to major repercussions.
What tax season pitfalls have you seen or heard of? Leave your comments below.
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Three Questions to Help You Decide between a CPA or Tax Return Preparer
Tax Return Preparer vs. CPA
Every year, many business owners struggle to properly answer the same recurring question: should I hire a CPA or a tax return preparer? The best answer to that question is that it really depends on a variety of things, and sometimes resolving this dependence requires a bit of mental horsepower.
Here are three questions you should ask when you determine if you should hire a CPA or a Tax Return Preparer:
How Much Time Do You Have?
If you don’t have a ton of time to waste, your best bet is probably to hire a tax return preparer. In most cases, these people can be found at your local library, helping you file your taxes for free (or prepaid with your tax dollars; however, you choose to view it). If you aren’t short on time and really feel as if you need to have your finances audited while having your taxes filed, a CPA may be better for you.
How Much Money Do You Want To Spend?
Because there are so many free ways in which you can get a tax return preparer, whether or not you decide to use a return preparer or a CPA depends solely on how much money you wish to spend. If you wish to save your dollars, then hiring a return preparer is best. If you don’t mind paying the hourly rate or retainer to guarantee that your taxes are done correctly, then hire a CPA.
How Much Does Performance Matter to You?
If you want to feel secure that your taxes were done right, and also that you received the maximum number of tax benefits, consider hiring a CPA. While a tax return preparer is trained to do your taxes the right way, in many cases they are civilians working as volunteers with the IRS. CPAs are in some cases certified at a higher level to help with tax preparation.
Which do you prefer: CPA or tax return preparer? Leave your comments below.
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Three Tips You Can Always Use When Filing Taxes
Tips for Filing Taxes
Every single year the IRS releases new changes to their tax filing systems. Oftentimes the changes the IRS makes can come so swiftly that we can’t seem to keep up with the changes from year to year. While the changes can be frequent, there are still ways your company can be smarter about their taxes each here. Here are three tips you can always use when filing taxes:
Educate Yourself
One of the tips you should always be willing to implement when it comes to your taxes is making sure you always educate yourself. Educate yourself by reading books about filing taxes, taking time to attend seminars or even asking local tax professionals how certain tax laws work. Educating yourself is what will help you if you decide to file your own taxes and it can also help if you hire an accountant to do your taxes for you.
Track Expenses
Tracking your expenses is always something that you as a business owner or taxpayer should be doing. Tracking expenses not only helps you make sure you’re monitoring what is coming in and out of your bank account, but it’s also a great way to make sure that you’re getting all your tax write offs when filing season arrives.
Don’t Combine Personal and Business Taxes
Combining personal and business taxes could literally turn into a living nightmare. By combining personal and business taxes, not only are you putting yourself at risk of being audited, but you’re also putting yourself at risk for owing high amounts of money to the IRS. Best way to avoid this? Don’t combine the two.
What other tips do you believe are indispensable during tax time? Leave your comments below.
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Four Areas Which Could Use the Help of an Accountant
Accountants Can Assist Your Business
It’s 2017 and what are you doing? Are you still making excuses on why you still haven’t hired that accountant that you know you have so desperately needed for the last several years? Are you still talking to your employees about how you’re unable to afford an accountant and you will look at hiring one once you get some extra money? It’s time to dismiss all those excuses and hire an accountant.
Here are four areas of your business which could be significantly improved with the assistance of an accountant:
Business Planning
Business planning is critically important to the growth and success of any company. There are several things which business planning has to account for, including: market trends, the goals of the CEO, development and more. Because of this, there is no one more qualified to handle all of your business planning needs than your accountant. If you allow someone on your staff who is not qualified to handle your business planning, you could risk losing money or even opportunities to make money.
Investments
Investing can be a tricky topic, especially if you have no prior experience in the investment industry. Investing is mainly tricky because it requires so much knowledge, such as knowledge of stock market trends, knowing how much to invest, when to invest and when not to invest. This is where your accountant comes in. He or she can make sure you are investing the right amount and investing at the proper time.
Sales Revenue
Making sure you are selling the items for your business at the right price is essential. If you’re constantly analyzing internal and external factors of your business, and constantly feeling like you’re not making ends meet, it’s time to hire an accountant. An accountant can make sure your pricing structure is accurate for whatever you’re selling.
Compliance
Tax law can be confusing. It is expressed in difficult language and it is constantly evolving. If you want to make sure you are able to navigate through the applicable compliance rules, your accountant can help you. A properly trained accountant can help you decipher between laws regarding your taxes, investments, future planning and more.
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