Tag: Accrual Accounting
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Bookkeeping – Cash or Accrual (Lesson 25)
Generally Accepted Accounting Principles (GAAP) advocates using the accrual basis of accounting over cash basis. The difference between the two methods is important to understand as a bookkeeper.
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Various Sets of Accounting Books
Accounting’s primary purpose is to measure economic activity. There are several different methods to determine the economic value generated in your business each year. In accounting this is referred to as sets of books. There are four basic sets of accounting books. Each has a different purpose and end goal.
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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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Fixed Costs – Explanation and Examples
‘Fixed costs’ is a business term used mostly in cost accounting. It has several meanings based on its usage. The most common definition associated with fixed costs is expenses that must be paid regardless of production or sales volume. The best example is rent for a company. It doesn’t matter whether you produce or sell one widget…
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Deferred (Unearned) Revenue – Definition and Accounting Procedures
Deferred or unearned revenue is an advance payment made by a customer for a product or service that has not yet been rendered (delivered).
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What is Accrual Accounting?
Accrual accounting is the preferred method of accounting for all business operations. Any publicly traded company must comply with the principles of accrual accounting. Small business operations can choose between cash and accrual accounting for their records. Although cash accounting is the easiest to work with as a small business operation, accrual accounting will provide a more…
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Depreciation – This is Weird Accounting
In the world of accounting, there are two types of expenses on the reports widely misunderstood. They are depreciation and amortization. I will try to help the novice gain an understanding of depreciation in this article.
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Cash Counts
Just like employees, cash has its problems too. Sometimes it calls in sick. Other times, it shows up late (actually quite often), and for some reason cash isn’t as productive, it doesn’t do as much work as you would like it to do.
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Accounting Principles
Simply stated, accounting is the measurement of economic activity. Its primary principle is to report information to the user so that (s)he can make informed decisions. The primary reporting format is in the form of dollars. There are two important reports used by pretty much 99% of all business operations to determine the status of the business…