Depreciation: Which method is right for you?

If you own assets that depreciate over time, you have two choices in recording that depreciation: The “straight line” method and the “reducing balance” method.

In the straight line method, you depreciate the asset by the same amount over the life of the asset. So let’s say that you buy a piece of equipment for $10,000 and you reduce it by $1000 per year over 10 years. In the first year it’s worth $10,000; in the second year it’s worth $9,000, in the third year it’s worth $8,000, and so on.

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Tags: 10 Years, Accountant, Assets, Benefit, Depreciation Method, Economic Advantage, Lifetime, Match, Reducing Balance Method, Straight Line, Two Choices

“But my BAD debt isn’t really that bad… is it?”

Unless you get money from customers up-front before you give them the product or service they purchased from you, you will likely get shafted now and then from customers who will never pay.

In spite of your best efforts, these receivables end up getting older and older and you realize that you will never collect from them. Everyday people might call this “hopeless” but in accounting lingo, it’s called “bad debt“.

It’s tempting to just ignore your bad debt. (Hey, no business owner wants to be reminded of a customer who pulled a fast one on them). Unfortunately, doing that will artificially inflate the assets on your balance sheet while also misstating your profit.

But you do need to do something with these numbers! Here’s what to do:

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Tags: Assets, Bad Business, Bad Debt, Balance Sheet, Best Efforts, Business Owner, Call Accounting, Debt Expense, Everyday People, Hey, Income Statement, Liabilities, Lingo, Money, Payables, Receivables, Same Time Period, Spite, Stock

But HOW do You Make Sure Timing is Correct?

Last week we talked about timing and making sure that certain costs were entered when they are relevant. This is a very difficult territory for some and confusing for others.

I am going to try to make it simple (and I hope I’m able to do so!)
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Tags: Abc Inc, Accrual Accounting, Books, Business Income, Business Operations, Cash Basis Accounting, Graphic Designer, Invoice, Irs, January February March, Memory, Money, Pay Taxes, Small Businesses

Transform Your Business With Spreadsheet Accounting – Part 3

In the first blog post in this series I introduced you to the 3 key spreadsheets that every business needs and I gave you a really quick-and-dirty way to set up the three spreadsheets in one Excel file. In the second blog post in this series, I talked about the relationship between all three spreadsheets.

I’m realistic enough to realize that financial statements can seem complex and unwieldy at the best of times, which I’ve been walking you slowly through the details that I felt you needed to know. And I was planning to show you how to build the three spreadsheets yourself. But I’ve got good news for you: In the last blog post of this series, I’m going to make it really easy for you! I’m going to link you to one free file that you can download that will GIVE you all three spreadsheets in a single Excel file. Here’s how to get it and use it:
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Tags: Balance Sheet Income Statement, Business Accounting, Business Guide, Business Owners, Cash Flow Statement, Consolidated Report, Decisions, Financial Spreadsheets, Financial Statements, Free File, Microsoft, Microsoft Excel, Microsoft Office, Relationship, Report Template, Spreadsheet, Step 1, Template Section

Transform Your Business With Spreadsheet Accounting – Part 2

In a previous blog post I showed you a way to put together a single file consisting of your three most important financial reports – the reports that every business should have.

I’ll be talking to you over the next couple of blog posts about these spreadsheets and how to put them together but in this post I want to pause momentarily to talk to you about the all-important question of WHY.

Why do we need those three financial reports? When we answer that question, understanding HOW the spreadsheets work falls naturally into place.
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Tags: Analogies, Balance Sheet, Balance Sheets, Business Accounting, Cash Flow Statement, Connect One, Countryside, Cows, Exact Time, Fence Posts, Film Strips, Filmstrips, Financial Information, Financial Statements, Income Statement, Intervals, Single File, Spreadsheet, Spreadsheets, Time Period, Wooden Fence