Current Liabilities

A section of the Liabilities and Equity side of the balance sheet. It refers to accounts payable, credit card debts, short term debts, and payroll compliance or taxes owed.

Insolvency – Detection

Insolvency

Insolvency refers to the ability to pay bills in a timely manner.  It does not mean bankruptcy but long-term insolvency is a underlying factor of bankruptcy.  Many owners and/or managers of small business have no idea of how to determine if the company is insolvent or headed towards the inability to meet their day to day obligations.

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Bookkeeping – Estimating Employee Benefits (Lesson 84)

Estimating Employee Benefits

Employee benefits consist of vacation, sick time, retirement benefits, healthcare and other de minimis benefits.  As a function of accrual accounting these benefits are estimated and posted as a deferred liability in the accrued payroll section of the current liabilities section of the balance sheet.  This lesson explains how to calculate the respective benefits and post this information to the books.

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Cash Flow From Operations – Understanding Cash Flow (Part II)

Cash Flow From Operations - Understanding Cash Flow (Part II)

To understand the cash situation, the cash flows statement is an additional report included in financial statements to basically convert the accrual basis balance sheet and income statement into a cash basis report.  This way, management gets the best attributes of both accrual and cash basis accounting.

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Working Capital Management – Production and Sales Flow

Working Capital Management

There is no single management style to address the multitude of working capital cycles existing in the various business sectors and the underlying industries.  Taking raw resources and turning them into consumer goods has different time frames depending on the item produced.  In addition, the sales period varies from product to product.  Compare the production and sales cycle for an automobile to that of ice cream.

Bookkeeping – Franchise Fee and Revenue Taxes (Lesson 57)

This lesson focuses on the accounting procedure for franchise fees and the formula used for revenue taxes   What is interesting is that in some states, one affects the other.  To fully grasp this accounting nuance, I'll first explain the franchise fee.

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Bookkeeping – Loan Accounting (Lesson 54)

Loan Accounting

Almost every small business borrows money.  The most common reason is to purchase a fixed asset of some sort.  The amount borrowed is most often a long-term liability.  There are several steps involved in recording the original loan and then processing the respective payments.

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Current Ratio

Current Ratio

The current ratio is an inappropriate relationship to use or rely on in small business.  The ratio is best suited for large publicly traded organizations.  This article explains the basic formula for the current ratio, how to identify the ratio in reading financial statements, its purpose and the many drawbacks for its use with small business.

Bookkeeping – Cash Disbursements (Lesson 45)

Cash Disbursements

Cash disbursements is the process of remitting payment to vendors, suppliers and third party contractual obligations.  Better managed offices pay bills in regular cycles including weekly and monthly obligations.  Preparation, reconciliation and actual check writing is commonly referred to as cash disbursements. 

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Bookkeeping – Purchases Via Credit Cards (Lesson 42)

Purchases Via Credit Cards

It is more common in small business, especially small contractors, to buy materials using credit cards.  Often the credit card accounts are the owner’s personal accounts.  Sometimes the cards are merchant cards.  As the bookkeeper it is your job to keep this information organized and up to date.

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Bookkeeping – Tracking Purchases (Lesson 41)

Purchases

In business purchases describes the process of acquiring the necessary goods and materials for operations.  Many novice business individuals believe the term is strictly limited to those materials purchased for resale.  In reality it is much broader in scope and encompasses all forms of expenses too.  When a company buys insurance, it is making a purchase.

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