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A business term meaning the inability of the business to pay its current obligations. There are two forms of insolvency, Equity Insolvency which is cash flow related and Balance Sheet Insolvency whereby either current assets are less than current liabilities or total assets less than total liabilities.

Bookkeeping – Controlling Cash (Lesson 48)


In small business, cash is almost always the number one issue.  There is simply never enough.  This is primarily attributable to growth.  Growth requires both physical assets to produce more and expansion of accounts receivable.  Technically [...]

Bookkeeping – Tracking Cash (Lesson 46)


Of all the assets in business cash is the most valuable and coveted.   Keeping track of how much is available and where it goes is the responsibility of the bookkeeper.   Often owners have no idea of how much they really have nor how much of the [...]

Bookkeeping – Accounts Payable Management (Lesson 43)


With small business the biggest hearache for the bookkeeper is addressing the daily phone calls and letters (bills, statements and notices) related to purchases.   Vendors regulary communicate with the accounts payalbe manager wanting to know [...]

Cash Flows – Introduction


Insolvency is defined as the inability to pay liabilities as they come due. To meet the demand of creditors cash is required. For most small businesses there are as little as a single source to multiple sources of cash. Think about these two [...]

Negative Basis in Business – Tax Shelters


Almost one third of all the small businesses I’ve seen in my career had negative basis.  Most of the owners, actually almost every one of them did not understand what I meant by negative basis.  In private, I would lower my head and shake it in [...]

Form 1099-C: Cancellation of Debt


If you received a 1099-C, the first question you ask is: ‘Do I have to include this in my taxable income?’  Well, the answer is ‘it depends’.  Not what you want to hear but there is a lot of variables involved in answering this question.  [...]

Insolvency and Bankruptcy – Know the Difference


Every business owner needs to know the difference between insolvency and bankruptcy.  Often these two terms are misunderstood and improperly used in conversation.  You need to know their correct meaning because both are used in civil law and both [...]