Fixed Assets

Fixed assets are large ticket purchases that have an extended utilization with life. They are not typically sold in the due course of business and as such they are allocated via depreciation to the income statement.

Internal Controls – Fixed Assets

Internal Controls - Fixed Assets

Internal control is a subset of the accounting system to aid in proper reporting of existing assets and liabilities. Internal controls over fixed assets alleviate two distinct risks. The primary risk is physical in nature and relates to the asset getting lost, stolen or damaged thereby affecting the value as reported on the financial statements. The second risk is financial in nature related to errors in determining cost basis, useful life, and depreciation assigned; all of which can affect value.

Each risk uses a separate set of controls to minimize or eliminate the exposure and reduce management’s concern that the financial value as reported is incorrect.  This article explains the standard set of controls for each risk group.

Tangible and Intangible – Business Definitions and Use

Tangible and Intangible Meaning

Tangible and intangible are terms with several different meanings. A lot of well educated folks have a difficult time providing an all inclusive definition. Someone once described tangible as ‘something that can be burned’. Well, land is tangible and yet, you can’t burn it.  Actually, in Boy Scouts, we teach the boys to use dirt to put out fires! But the best overall definition for these terms that I heard was a synonymous statement made by a Supreme Court Justice when trying to define pornography in relation to art. He said something along the line of ‘I don’t have a definition, but I just know it when I see it’. Basically the gray area for the definition is vast. This is true for these two terms because there are various levels of definitions related to their respective use.  

There is the classic college textbook definition.  It is straight forward, but it doesn’t really begin to get involved in the gray area definitions.  Then there is the more extended definition as used in accounting and customarily in the traditional business setting.  Really getting into higher thinking and use of the terms comes into play when discussing value.  Finally, there is the relationship to each other with regards to economics and the evolving concept of wealth.  They are similar to the theory of the Yin and the Yang of life itself.  

Lease or Buy

Lease or Buy

Fixed assets are normal in business operations. However, financing those assets is the critical issue. If you buy the asset outright, you tie up capital that can be used to expand operations or keep overall costs low in operating the company. You can buy the asset paying a down payment and borrowing funds from a lending institution and make payments over time. This is still a form of purchasing the asset. However, there is another option, leasing.

Capital Expenditures – IRS Definition

Capital Expenditures

The Internal Revenue Service uses a complex definition to identify capital expenditures (assets). A capital expenditure is not deductible as an expense in the tax year purchased; the taxpayer or entity must use depreciation, amortization or depletion to obtain deductible value on the entity’s return.

How to Purchase Equipment for a Restaurant – Planning Phase

Planning Phase

Equipment costs for a restaurant can easily consume the gross profit of your business. The key is to keep the costs low in order to spread the costs appropriately over time. Purchasing equipment for a restaurant requires planning, researching and using finesse to acquire equipment at the lowest cost possible. This article is dedicated to teaching the owner how to purchase the equipment for a restaurant at the lowest cost possible.

Create a File Structure for Accounting

File Structure for Accounting

Creating a file structure for accounting is critical for the overall success of the business. If properly structured, data retrieval and information access add to the overall value of the company. This article teaches the new business owner how to create a file structure to use with accounting.

The primary goal of creating a file structure is to make data retrieval easy and understandable by just about anyone involved in office operations.  Keep in mind that the end user is how the structure is developed.  From a simple format to a more complicated structure incorporating the entire office, the file structure should be organized in a systematic approach.  First, break down the accounting function into the respective areas of importance.  Next, subdivide these areas by accounting cycles.  Finally, incorporate the accounting software function and the overall office to end up with a well-organized file structure for the company.

Small Business Model Series Entry #4 – Basic Research

I spent a lot of time on the internet researching the industry as a whole. There are about 220,000 machines in the US that are owned by non-banking companies and individuals. My first thought is that this is about 1 machine per 1,000 individuals (there’s about 220 million adults in the US/220 thousand machines and you get 1,000 adults per machine).

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