Author: David J Hoare MSA
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Three Primary Characteristics of Successful Businesses
Over the last 27 years of working in the world of accounting, I have become convinced that to be successful in business, you must have three primary characteristics. It is the common thread that binds all successful operations in every industry I have witnessed.
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Tax Basis of Accounting – Accrual or Cash
This is the most often asked question by all new businesses. Should I be on the cash or accrual basis of accounting for tax purposes? The common layman would always answer ‘CASH BASIS’ for tax purposes. They say this because they understand that you only pay the tax on the cash that you keep. But for…
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At-Risk Rules – An Elementary Understanding
Code Section 465 of the Internal Revenue Code defines ‘At-Risk’ as the financial value the taxpayer has in jeopardy related to the business activity the taxpayer is invested in as some form of an owner. Effectively, the taxpayer may only take losses on his tax return contingent on the loss being directly tied to invested dollars…
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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 pay…
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Allowances in New Home Construction Contracts – The Business Model
This article is designed to help the contractor address the proper procedures and documentation related to allowances in a new home contract.
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Cost Drivers in Small Business
The textbook answer defines cost drivers as those factors that determine the overall cost of operations. As an example, in manufacturing the cost drivers may be processing time or number of steps to produce the product. With service, the cost drivers could be the actual ratio of billable to non-billable time.
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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.
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Shareholder Agreement – Capitalization Clause
The shareholder agreement lays out the rules of the relationship between the shareholders of a company. Most often the agreement is poorly written because the legal team fails to understand the business aspect of each of the respective sections. One of these sections is referred to as the Article of Capitalization or commonly called the Capitalization Clause.
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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.
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Nobel Prize – Economics
In the world of science and higher thinking, no award can compare to the Nobel Prize. Awarded each year in December, the selected individual or individuals are announced during the 2nd week of October.