Month: October 2014

Phantom Income

Phantom Income

Those small businesses using partnership or S-Corporation formats issue Form K-1 to the respective owners.  When income is assigned to the owner and there is no corresponding cash related to that income, then this income is referred to as ‘Phantom Income’.  In effect, it is assigned income for tax purposes without the corresponding cash to …

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Allowances in New Home Construction Contracts – The Business Model

Allowances in Construction

In almost every new home construction contract that I reviewed as an accountant, I saw where the contractor would lose several thousand dollars in this area of his business.  In every case, the situation was the same, there was no mutual understanding between the home buyer and the contractor.  Invariably, the contractor paid out significantly …

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Project Accounting – Introduction and Value

In the world of accounting, project accounting is a subset of financial accounting.  Many folks believe it is a form of cost accounting and it is not.  Cost accounting is more formally a function of manufacturing and deals with large quantities of identical products.   Project accounting is generally ineffective with homogenous types of jobs but …

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Variable Costs

Variable Costs

Variable costs are those business related expenditures that vary in proportion to production.  The most common examples of variable costs include raw materials, labor, packaging and distribution expenses related to producing and delivering the product or service.  The key to understanding this term is to realize that it is a cost accounting term.  Remember in …

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Stock

New York Stock Exchange

The one single term mostly equated to capitalism is ‘Stock’.  When a business is incorporated, stock is the core medium of exchange for the investment.  The company issues a certificate referred to as stock in exchange for the investment – most often cash.  This is the one true form of pure risk.  Most other forms …

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