Accounting for Bad Debts

One of the unfortunate issues that companies need to deal with at year-end is accounting for bad debts. Bad debts are not an issue for a company that operates on a cash basis; if you haven’t collected the money, then it isn’t included in your income. For companies that keep their books on an accrual basis, however, it is an important part of their year-end process, since you book your revenue as it occurs or is billed out, not when you receive payment. Read More »

Tags: Accounting For Bad Debts, Accounts Receivable Aging Report, Accrual Basis, Allowance Account, Attempts, Bad Debt, Bad Debts Expense, Balance Sheet, Cash Basis, Documentation, Expense Account, Income Statement, Invoices, Irs, Money, Net Income, Receivables, True Expectations, Year End

It’s Not Too Late to Budget for 2011

Did the end of 2010 creep up on you before you had time to create budgets for the new year approaching? Or maybe, you’ve never created an annual budget for your business before. Either way, it’s not too late to put together a budget for 2011.
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Tags: Budget Reports, Budgets, Creep, Decreases, Expense Accounts, Gauge, Gross Profit, Majors, Net Income, New Year, Office Supplies, Previous Years, Revenue Goals, Sync, Thermometer, Waste Of Time

Income Statement Breakdown (Part 4): Finding the Bottom Line

We’ve been taking apart the income statement to help you better understand it and so that you can find money-saving, profit-increasing opportunities inside of it. This is the fourth and final step in the process and here we are getting close to the bottom line!

So far we’ve…

• Looked at Revenues and came away with Net Sales
• Looked at Cost of Goods Sold (either accrual or cash-based) and came away with Gross Profit
• Looked at Operating Expenses and came away with Net Profit

But those are not the only people who have their hand in the cash register! Let’s not forget banks and the government. In this fourth and final section of the income statement breakdown, we need to make sure they get their share.

Like the other sections, you add up the various expenses you have here and subtract it from Net Profit. This section is sometimes called “Non-Operating Expenses”. If you have shareholders, some of their payouts go here, too.

Now let’s look at this part of the income statement and we’ll compare how the accrual and cash-based system work so you can see both in action:

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Tags: Accrual, Banks, Bottom Line, Cash Register, Gross Profit, Income Report, Income Statement, Money, Net Income, Net Profit, Net Sales, Operating Expenses, People, Shareholders, Statement Numbers