Edmonton Tax Accountant

One startup decision that seems to cause entrepreneurs unnecessary consternation is selecting the right accounting method — cash basis or accrual basis. The primary purpose of the accounting method you choose is to calculate your business’s taxable income for federal (and state) income tax purposes. Of course, if you register as an LLC and elect not to be taxed as a corporation, your business does not pay federal taxes, but choosing the right accounting basis is still important. Financial management is a critical key to success in small business, and the accounting method you use is an important tool for keeping you on track.

What Are the Two Accounting Methods?

The difference between the two methods is simply a matter of timing — when business transactions are posted to the accounting system. With the cash method, income and expenses are recorded when money changes hands. That is, no matter when you close a sale or place an order, it does not go on the books until you get paid or the bill is due. Cash basis accounting is basically managing your business finances like you do a checkbook — money only exists once it is deposited, and expenses only exist once money is spent.

With the accrual method, the transactions are recorded when they occur, regardless of when you actually get paid or pay the bill. That’s pretty much all there is to it — when the transactions are posted on the books!

If You Sell Products, You Must Choose the Accrual Method

Deciding which accounting method is best for your business is not particularly difficult either. First, if you carry inventory that your business sells to customers, the IRS requires you to use the accrual method, for good reason. Because the accrual method accounts for all income and expenses when they occur (and not when money changes hands), your financial statements reflect a more accurate picture of how your business is doing. If you sell inventoried products of any kind, the expense of making or purchasing those products occurs in line with your ability to sell them (at least on the books). The accrual method keeps these income and expense accounts in line. Otherwise, if you buy inventory on credit but make cash sales, your books will look like you bring in a substantial income with no expenses during the grace period for payment. Then, when payments to your suppliers come due, the books will show enormous expenses all at once compared to income. By using the accrual method, a financial report for any given period will be a substantially more accurate reflection of the overall health of your venture.

If You Only Sell Services, You Have a Choice

For micro-businesses (consultants, self-employment, etc.) that sell only services, the cash method of accounting can be a good choice. Because income and expenses are recorded only when money is exchanged, the cash method gives a more accurate view of how much cash is available at any given time. Keeping the books for cash basis is like keeping a checkbook, money in and money out. The downside of using the cash method is that it can reflect a misleading picture of your business’s overall profitability and health. For example, if you extend credit terms to your customers, your income at a given time will not necessarily reflect the actual sales volume during that time. Cash can still be moving in and out of the business during periods of no sales, as customers pay invoices and bills come due.

Plan for the Long Term Growth of Your Business

Think ahead when you are setting up your accounting system. Choose the cash method only if you plan to stay small and you only plan to sell services over the long term. Otherwise, use the accrual method and work on learning how to manage all aspects of your business’s financial health. If your plans are to grow a company rather than own your job over the long term, the accrual method is a better tool to show the ebbs and flows of the business’s transactions. Of course, you will still need to review and analyze cash flow to verify the health of your venture.

Your small business accounting software (Peachtree Accounting is a great choice!) allows you to select either cash or accrual basis for handling your books. However, once one is selected, you are stuck with it unless you start over with a new company file and migrate your data. The reason for this is that the federal government’s rules are the same — if you want to change your accounting basis, you have to file paperwork with the IRS.

Successful entrepreneurship means knowing how to read and analyze the entire financial picture, and neither accounting method ensures that on its own. Don’t rely on a single financial report to tell you how your business is doing, but learn to use multiple financial management tools to keep an eye on the bottom line.

K. MacKillop, a serial entrepreneur, is founder of LaunchX and authors a small business startup blog. The LaunchX System helps entrepreneurs who are starting a business. Visit LaunchX.com to learn more about the financial management of your business startup.

Article Source:http://www.articlesbase.com/accounting-articles/cash-or-accrual-basis-of-accounting-which-should-you-select-when-starting-a-business-1398516.html

There are many ways to make the most of one’s assets, and accountants in Devon are qualified to assist in any endeavor with sound bookkeeping, solid tax counseling, and informed investment advice.

Most people think of accountants as mere bean-counters, and to an extent they are purely involved with tabulation and mathematical calculations. Yet the many applications of this aspect of the services that a conscientious and reputable accountant can offer may uncover a myriad of potentially fortuitous opportunities that are lying dormant in any type of account. This is true for the individual or the business owner, regardless of their current financial situation.

Consider the average wage-earner. The money that rests comfortably in an ISA or other such savings method accrues a defined amount of interest each year, providing a modicum of profit that is most often balanced out by taxes and banking fees. It’s just a fact of life, some would say. Not true. The tax laws that apply to gains received from investments using ISA funds virtually guarantee pure profit if such investments are wisely chosen and, indeed, profitable. Current capital gains taxes and taxes on income from these types of investments are not applicable, meaning that any profit gained in such a manner can be added to one’s savings without any depletion from taxation.
In fact, the cap on ISA fund limits for people aged 50 and over that are allowed for investments has just recently been raised by the government to a maximum of £5,100. This is available to anyone who has such funds to invest in cash (such as building society accounts and designated National Savings), shares and stocks (including investment trusts and government securities), and life assurance. Additionally, an individual may hold two separate ISA accounts each year - one for savings and one for stocks and shares.

Businesses can benefit enormously from using the services of accountants in Devon. Small start-ups can always use help with bookkeeping and advice on methods of tracking sales and purchases as well as year-end tax preparation. This is often the make-or-break period for a venture, and surviving the first few years depends to a great extent on keeping operating costs down while using profits wisely to be able to re-invest in the business to make it grow. Even large corporations understand the worth of reliable and intelligent accountancy, and the success of most of today’s Fortune 500 companies is directly attributable to the wisdom they have shown entrusting their accounting staff to recommend ways to minimise spending and increase profitability through sound asset management and insightful investing.

Accountants in Devon can be of invaluable assistance in other ways as well. Tax counseling and bookkeeping activities are just a part of the many services that an accounting firm can provide. Experience and innovation qualify accountants in Devon to suggest analysis schemes to monitor asset usage for maximum profitability. They are also available as a conduit to the business community of Devon at large, and can open many doors for individuals and business owners alike. There are many reasons to enquire to the services of accountants in Devon.

Looking For a New Accountant? Find an Accountants in Devon. For details visit http://www.accountantsinplymouth.co.uk

Article Source:http://www.articlesbase.com/accounting-articles/accountants-in-devon-1389746.html

The new face of Plymouth is one of forward-looking entrepreneurial pride. This is due in large part to the efforts of the Chamber of Commerce in recent years, who have managed to refocus the thrust of Plymouth’s interest from merely being the home of the Royal Navy to becoming a centre of industry, education, and culture in the South West. Economic indicators prove out their efforts, as increases in industrial development, university attendance, and tourism have soared from previous numbers seen just 10 years ago.

All of this is very good news indeed. Yet this new-found surge in innovative and sustainable business thinking carries with it an important responsibility: diligent maintenance of those endeavors to ensure that they remain viable and solidly grounded on good business sense. This is where the services of accountants in Plymouth come into the picture.

In order for business to grow in a realistic and practical way, a no-nonsense accounting of asset dispersal and tax liability must be maintained through all the various stages of its development. The incredible complexity of tax laws alone would suggest that the advice and services of an experienced accountant are mandatory, let alone the risky nature of plying the sometimes volatile waters of industry. These are reasons enough to seek help, yet the many other services that accountants in Plymouth provide more than justify any expense in acquiring their services.

Consider for a moment the liabilities of a major industry such as tourism. The nature of this category of business endeavours , which depends on veritably incalculable future client statistics, is one that requires very careful use of available assets and reliable reinvestment strategies that allow for a certain degree of flexibility. A vendor of, say, t-shirts who relies on tourists for his or her livelihood has no way to predict profits from the next fiscal year, and so they must have a solid business plan that allows for fluctuations in the marketplace while at the same time covering taxes that will be due, regardless of profits or losses.

This is where accountants in Plymouth can be of such invaluable assistance. They can recommend appropriate bookkeeping and asset management schemes based on payroll size, tax liability, supplier costs, and any plans for expansion that the vendor may have. Professional accountants can also find ways to invest available assets safely that the business owner may not be able to recognize, focused as they are on the day-to-day challenges of operating.

Another valuable service that accountants in Plymouth can provide is acting as an entrée to others in the business community that may be able to support a business owner with specific advice and utile contacts within a chosen industry to help an entrepreneur not only stay afloat, but to succeed in ways they hadn’t thought of. Any business venture needs a system of support and good advice, whether they are a major university or an ice cream vendor. Having a solid relationship with a reputable accounting firm can pay dividends in ways that may not have been even imagined before. These are but a few of the valuable services that accountants in Plymouth can offer.

Looking For a New Accountant? Find an Accountants in Plymouth. For details visit http://www.accountantsinplymouth.co.uk

Article Source:http://www.articlesbase.com/accounting-articles/accountants-in-plymouth-1389756.html

The ways in which Plymouth’s industrial foundation has changed over the past several years has given rise to the need for a more proactive approach to the practice of asset management for businesses and individuals alike. The welcome increase in new business from sources other than maritime ventures - such as medicine, education, IT ventures, and hospitality - lends itself to the need for common sense conduct in business affairs more than it ever has. Choosing an accountant in Plymouth can be seen as a wise investment in the future of any undertaking that is enjoying the fruits of this new-found opportunity.

The general financial status of Plymouth and her citizens has improved greatly, with new retail businesses, engineering firms, and call centers settling in every year. The overall effect can be felt on the boulevard and the home front equally, as bank accounts have begun to swell for many due to this boost in the local economy. This is a positive development, to be sure, yet the inherent danger of new-found wealth is in the potential mismanagement of these funds. How many tales are there of the “overnight sensation” that was penniless come the morn?

Intelligent management of assets is part of what choosing an accountant in Plymouth is about. Although an accountant is not an asset manager per se, their experience with credit and debit ledgers gives them a greater perspective on the way in which funds can and should be used to protect the original assets as well as make them grow in a responsible and practical manner.

The usual activities of an accountant are themselves very valuable tools that anyone can take advantage of. Sensible accounting relies on proper keeping of books, analysing costs and other expenditures, and attaining the ability to forecast trends in any business climate so that the client can make the best of their financial situation while protecting their fortunes.

Along with these aspects comes the experience with the plethora of tax laws that every accountant worth their salt takes the time to stay abreast of. The ability to meet all tax liabilities - and to do so in advance so that the rest of the fiscal year can be planned out - is just one of the many services that an accountant in Plymouth can provide their clients.

Tax liability is one thing, and taking advantage of available tax shelters is quite another. This is one of the best reasons of all to seek the counsel of a qualified and reliable accountant in Plymouth. There are many completely legal ways to restructure a business’ system of asset management to make the most of the tax laws as they stand today.

This is true not only for corporations but for individuals as well. The standard banking practices that many individuals adhere to are all well and good, yet the potential to maximise one’s ability to invest wisely using their ISA funds is an everyday function of an accountant in Plymouth. Additionally, the onus of those year end tax returns can be lightened considerably when one can find an accountant who can be relied upon to allow for all tax liabilities while at the same time making the most of available deductions and savings that are due.

Looking For a New Accountant? Find an Accountant in Plymouth. For details visit http://www.accountantsinplymouth.co.uk

Article Source:http://www.articlesbase.com/accounting-articles/choosing-an-accountant-in-plymouth-1389764.html

Any business that has a staff of employees relies on accurate payroll accounting in order to ensure the proper imbursement of the employees as well as the monitoring of expenditures that a business covers month in and month out. A willy-nilly approach just won’t do when staff is waiting for their pay at the end of a work week, nor will it sufficiently answer the auditor’s questions when they call the account executive in for a look at the books.

This is what accountants do for a living. It is their daily fare, and as such it is a natural inclination to need and to seek the counsel of experienced and reputable accountants when handling payroll questions. In fact, this is the most practical and sensible step a business can take, regardless of the scope of their venture.

Even the smallest of businesses that maintain a temporary staff of two will have payroll issues that must be addressed each and every week. The payroll may be small, but the possible liabilities will not be if the government finds any mistakes on the tax returns at year’s end. Accountants are trained, educated, and required to answer these types of questions for business owners of any size, and they can also provide several options to their clients in how a payroll is handled.

The first thing that accountants can do for a business is help them to initiate a solid payroll system to begin with. This is often an afterthought in business planning, unfortunately, other than an awareness that employees must be paid somehow at the end of each pay period. Installing an efficient and flexible payroll scheme at the outset can help the business owner avoid coming up short when wages are due, as well as stay ahead of pending payrolls with intelligent asset management ideas.

Manual bookkeeping can be sufficient in the beginning for payroll purposes, and accountants are experienced in this undertaking, because they understand how to arrange budgets and allow for credit and debit effects on a business’ cash flow. They can also help to set up an electronic bookkeeping system when that becomes necessary, helping the business owner to learn how to use the system and how to customise it for current and future ventures.

The taxation side of wise payroll practices is perhaps one of the most important ways in which accountants can be of invaluable assistance. Tracking sales and expenditures is the lifeblood of a business, and learning how to predict trends in a particular marketplace and take steps to adjust the ledger so that those tax payments can be made in full and on time is just another way in which accountants earn their keep.

Sales and expenditures can also affect the profit margin vis-à-vis investment opportunities, and any chance a business owner has to ensure that payroll will be made not just this week, but the week and the month after should be taken full advantage of. Accountants have the expertise and the solid experience to help the business owner to recognize investment opportunities, and to have a grasp on how much of the available assets the business can safely invest.

Looking For a New Accountant? Find an Accountant in Plymouth. For details visit http://www.accountantsinplymouth.co.uk

Article Source:http://www.articlesbase.com/accounting-articles/the-importance-of-accountants-in-payroll-activities-1389780.html

Although some would consider the U.S system of financial reporting one of the most efficient in the world, many would also point out that we have many inefficiencies. This can be seen through the multiple scandals in major US companies such as Enron and WorldCom, and with rapidly increasing technology and the ability to communicate across the world in seconds, it is clear that a global standardized set of accounting principles will soon be a necessity. Though a convergence of accounting standards to a “one-size-fits-all” method of financial reporting is enticing, there are multiple road blocks that prevent us from instituting a universal system. However, despite the problems, there are many who are working to initiate a global convergence of accounting standards and principles

Though the Generally Accepted Accounting Principles (GAAP) have acted as a suitable and reliable set of standards, it is comprised of items from various organizations that vary in format, unity, and structure, and at times GAAP has been considered inconsistent and difficult to interpret. As financial reporting has been becoming increasingly more complex, stock holders and non experts have expressed concerns about how foggy some company’s financial statements are. Similar to some of the issues expressed by the stock holders, companies have let their concerns with the inconsistency of our current financial reporting system be known. Additionally, they have stated that often times it is very difficult to ensure accuracy in their financial statements given the complexity of the GAAP requirements. The GAAP also tends to be more conservative compared to financial accounting standards in other countries. This is due to, in part, the legal implications that come with issuing a financial statement. In short, accountants are worried about being sued. This differs somewhat from the International Financial Reporting Standards (IFRS), which is primarily based in Europe. Because financial accounting laws are different across the way, it is more difficult to sue accountants. With this conservatism consistent with GAAP, coupled with the lack of clarity of financial requirements, comes multiple public companies restating their previous years financial reports as to prevent lawsuits. In 2007 nearly 10% of US publicly traded companies restated their prior financial reports. Not only is the restatement of financial reports costly to companies, but it also can shake the confidence of their current investors and deter future stock holders.

One major issue in the convergence of accounting standards deals with the detail that financial reports should be presented. While the majority of people in the US who hold stock would prefer a broader more abridged format of financial statements that are easily understood, there are users of financial accounting statements, such as market analysis and other financial professionals, who would prefer a more detailed account of financial reports. Users of financial accounting statements simply have overlapping and conflicting needs for financial data of a variety of types.

We are getting closer to a two system world accounting standard every day. The majority or Europe and developed Asian countries use the IFRS, and the US GAAP is currently the most widely used set of accounting principles throughout the global capital market. Despite the problems that face a global convergence of accounting principles, with today’s rapidly increasing technology, it is looking like more and more of a possibility. In fact, the Accounting Standards Board of Japan (ASBJ) met with the Financial Accounting Standards Board (FASB) in Norwalk, CT on October 22, 2009 to discuss their common goal of instigating a set of global accounting standards. This was their eighth time meeting, and it is clear that a global convergence is a priority. However, that is not to assume that we should expect a universal accounting standard in the near future. There are many cultural and legal implications that must be taken into consideration before a complete and total convergence of principles can be achieved. In order for a universal set of accounting principles to work, the stock holders, market analysts, and accountants must all evolve with the changing market and quickly learn to adapt the new principles. In addition, the legal system must also adapt to this new standard. Initially a set of universal accounting standard will leave the accountants open to significant subjectivity. (Fortunately, this should subside as people become more and more comfortable with a universal system.) Therefore, a modification of the legal standards concerning accountants is a necessity. It would be ignorant to assume that a convergence of accounting standards will be an easy thing to achieve, and financial reporting will remain complex. However, we will see a global convergence of accounting principles in the future. The question is simply whether that future is five years or twenty years away.

Sources:

Kemp, Robert. “A Closer Look At Convergence of Accounting Standards: The Reality of Our World - GLG News.” Gerson Lehrman Group - The Expert Network. Web. 21 Oct. 2009. <http://www.glgroup.com/News/A-Closer-Look-At-Convergence-of-Accounting-Standards–The-Reality-of-Our-World-9184.html>.

“View Point: Convergence of IRFS and US GAAP.” Www.pwc.com. Ed. Edward Smith. PricewaterhouseCoopers, 7 Apr. 2007. Web. 23 Oct. 2009. <http://www.pwc.com/en_GX/gx/ifrs-reporting-services/pdf/viewpoint_convergence.pdf>.

“Accounting Standards Board of Japan Meets with Financial Accounting Standards Board to Discuss Global Convergence.” Public relations, press release distribution, investor relations, SEC filing | Business Wire. Ed. Christine Klimek. 22 Oct. 2009. Web. 25 Oct. 2009. <http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20091022006369&newsLang=en>.

Conrad W. Hewitt, “Opening Remarks Before the Initial Meeting of the SEC Advisory Committee on Improvements to Financial Reporting,” US Securities and Exchange Commission, Washington, DC. (August 2, 2007)

Keiso, Donald E., Jerry J. Weygandt, and Terry D. Warfield. Intermediate Accounting. Thirteenth ed. Madison, Wisconsin: John Wiley & Sons, 2007. Print.

I am currently a Junior Accounting Major at West Chester University

Article Source:http://www.articlesbase.com/accounting-articles/working-towards-a-global-convergence-of-accounting-standards-1379167.html

People tend to” judge the book by the cover” when it comes to understanding what accountants are and their job responsibilities. For most people they assume that accounting is based on numbers, and to their knowledge accountant’s only prepare taxes.  But what people don’t realize is all the concepts and formats an accountant must comprehend.

A lot of people who have difficulties with mathematics tend to be scared of accounting, because they believe that accounting only obtains numbers and calculations.  For many accountants numbers and mathematics calculations come easily; however, performing mathematical calculation is just part of an accountant’s job. With all the high tech computer equipment and software available, most accounting firms use the software to all their financial calculations.

Tax accounting is the most recognizable type of account but does not mean it is the only one.   There are many different types of accounting such as: managerial, bookkeeping, accountant, Certified Public Accountant, and in large companies they break down their accountants into more direct sections (Accounts Receivable/Payable, Payroll, etc).

Not only do accountants have to understand the laws that they must obey and make ethical decision making, but they also have to understand the basic accounting concepts before they can perform any accounting task.  One of the important basic concepts is understand what assets, liabilities, and equity means in the accounting world and how they work with each other.  Assets are anything that the company owns, liabilities is what the company owes, and equity is the company net worth.

Another concept that is important to know is which of these accounts hold a debit balance (right side) and which hold a credit balance (left side). An asset normally holds a debit balance while liability and equity normally hold a balance credit. This can get tricky because depends on the accounts balance determines if one would increase/decrease the account with a debit/credit balance.  To simply remember how these accounts works with each other, always remember that assets equals liability plus equity and both sides of the equations must equal value of change another.

Accountants also have to be able to prepare financial statements for the business.  Financial statements are formal records of the businesses financial activity during a period of time.  There are four financial statements that are required by the Generally Accepted Accounting Principles (GAPP) which consist of: statement of financial position (balance sheet), income statement, retained earnings, and statement of cash flows.  Each of these statement measures different activities for a company.  The statement of financial position demonstrates where the company stands financially during the fiscal year or during certain points of the year. To summarize the company’s revenue and expenses transactions for a period of time an accountant would prepare an income statement for the company.  When a company wants to illustrate a change in the company retained earnings of a period of time an accountant would then perform a statement retained earrings.  Demonstrating how the company’s cash has changed during a designated period of time is referred to statement of cash flows.  Not only does an accountant have to be knowledgeable on what financial statement to use and what information/numbers is obtained in those statements, they also have to know how to correctly format the statements.

Once an accountant can comprehend the basic accounting principles then they are capable to work with numbers to perform these tasks.  Mainly all the number are given or shown by transactions, only little calculations maybe needed.  An accountant job is to organize financial information/numbers and demonstrate the company financial activities.

Article Source:http://www.articlesbase.com/accounting-articles/there-is-more-to-accounting-than-numbers-1370672.html