Understanding collection patterns and practices can be evaluated by looking at the A/R aging report. This chapter discusses accounts receivable, uncollectible accounts, bad debts, and accounts payable. In the following table, the accounts receivable... Read more
When entering into a loan agreement, the lender may provide a copy of the amortization schedule (or at least have identified the term of the loan in which payments must be made). The receipt of cash dividend of $1,200 may be classified as either ope... Read more
These options differentiate the amount of depreciation expense a company may recognize in a given year, yielding different net income calculations based on the option chosen. Depreciation is an accounting method for allocating the cost of a tangible... Read more
Each year, the depreciation expense is $10,000 and four years have passed, so the accumulated depreciation to date is $40,000. Therefore, the salvage value of the machinery after its effective life of usage is Nil. BHEL Limited installed Engineering... Read more
To compensate for this problem, accountants have developed “allowance methods” to account for uncollectible accounts. Importantly, an allowance method must be used except in those cases where bad debts are not material (and for tax purpo... Read more
Therefore, it falls under the liabilities section in the balance sheet. Instead, suppliers may term it as advances from customers or treat it as deferred earnings. A transaction between two parties involves some form of compensation. As the amount... Read more
Do not withhold payroll taxes from an independent contractor’s wages. However, you need to report nonemployee compensation to the IRS. There are a few forms you must be aware of if you pay independent contractors, including Forms W-9, 1099, an... Read more
The intuition is that if the accrued liabilities balance increases, the company has more liquidity (i.e. cash on hand) since the cash payment has not yet been met. The entry reverses at the beginning of the following reporting period, assuming the c... Read more
This way, employees that have no business with credit sales or accounts receivable cannot access your business’ accounts receivable ledger. Note though that while it isn’t required, it’s still recommended that you prepare and maint... Read more
Check and monitor the creditworthiness of your prospective and existing customers, and implement a defined system for monitoring changes in financial wealth—particularly signs of financial distress. This process should be informed of the relati... Read more
