Recent Articles

Depreciation

Depreciation is the expensing of an asset purchase over its life expectancy. It is most commonly used to allocate a prorated portion of an asset purchase such as heavy equipment, vehicles, buildings, and othe large ticket items.

Bookkeeping – Recurring Entries (Lesson 65)

07/15/2017

Every day bills arrive from vendors that are mere repetition like the electric or phone bill.   They basically recur every so often (mostly monthly).   The bookkeeper must create a new entry as a part of his/her  daily functions.   This [...]

Cash Flow From Operations – Basic Formula

07/02/2017

The cash flows statement in accounting is broken out into three major sections as follows: 1) Cash Flow from Operations 2) Cash Flow from Investing 3) Cash Flow from Financing Of the three, cash flow from operations is the most prominent.   It [...]

Bookkeeping – Amortization (Lesson 53)

04/23/2017

Amortization is similar to depreciation whereby an asset’s cost is allocated to the expense over time.   There are several differences with amortization.   Amortization is used with intangible assets and the method is almost always straight [...]

Bookkeeping – Book and Tax Depreciation (Lesson 52)

03/19/2017

One of the differences between book income and taxable income is depreciation.  In general Section 168 of the Internal Revenue Code allows businesses to accelerate their depreciation for tax purposes.  This increases the expenses of the business [...]

Bookkeeping – Depreciation Schedules (Lesson 51)

03/19/2017

When a small business purchases fixed assets two financially based opposing forces come into play.  The first is the financial reporting desire to present information in a fair manner so management can make good financial decisions.  The opposing [...]

Bookkeeping – Introduction to Depreciation (Lesson 50)

03/12/2017

Depreciation is the process of allocating the initial capital outlay for fixed asset purchases over time to the income statement.   The basic principle is that any fixed asset has a predetermined lifetime based on time, usage or fair market value. [...]

EBITDA

02/03/2017

EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and Amortization.   The value is generally known as operational profit before capital expenditures and tax obligations.   EBITDA is frequently used for estimating value of [...]

Bookkeeping – Schedules (Lesson 23)

01/18/2017

In accounting there are books (journals) and ledgers for source entry of information.  A trial balance is used to monitor the types of accounts.   With the use of parent-child accounts and control accounts bookkeepers can generate a wide array of [...]

Economic Substance Principle

12/26/2016

The Internal Revenue Service uses an economic substance test to identify sham transactions that exist solely to reduce or eliminate taxes.    In addition,  the courts use this same doctrine to rule on the legitimacy of activity between two or [...]

Internal Controls – Fixed Assets

07/06/2015

Internal controls is an accounting system to aid in proper reporting of existing assets and liabilities.  Internal controls over fixed assets alleviate two distinct risks.  The primary risk is physical in nature and relates to the asset getting [...]
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