Category: Blog

10 Feb

Income tax explanation

Timely and full payment of taxes is the key to the stable development of any state. In the entire system of taxation, direct taxes are the most important and bring the highest income to the general treasury. Income tax is one of the most important taxes among directly paid deductions.

Income tax definition

Legal entities pay a portion of their profits to the state treasury each year based on the results of their financial activities, while individuals pay income tax. In fact, it is a tax paid on the amount of all received amounts or dividends (interest). This is an income tax definition. 

31 Jan

How to make an income statement?

Many businesses are required to produce a document, such as an income statement. This source assumes the inclusion of figures that reflect how effectively the company is operating — in terms of revenue generation and business profitability. It is quite easy to prepare the income statement. 

Income statement preparation in few steps

Some bookkeepers often ask, “What goes on an income statement?”. The income statement includes the following main items: profit (loss) as the results of the sale of goods or services, operating revenue, and expenses, income, and expenses incurred as a result of non-operating activities, expenses of the organization for the production of products. 

31 Jan

Main Types of Income Statement

Since making a profit is a goal of most organizations, the most important function of the accounting system is to provide information on the profitability of its activities. Funds received from profitable work may remain at the enterprise in order to finance the diversification of its activities, or be distributed in the form of dividends between owners of shares.

Both the owners and managers of the enterprise want to know the size of the profit or loss incurred. The income statement is what people focus the most when they analyze the company. This statement tells how much a company might earn in a given period, and it is always related to a period (week, month, year). 

30 Jan

Formats of an income statement

There are many types of income statement. Some of them are used often, and others are used quite rarely. The most experienced accountants are acquainted well with the following types:

  • Classified income statement;
  • Comparative income statement;
  • Condensed income statement; 
  • Contribution margin income statement;
  • Cash basis income statement
  • Partial income statement.

All of them have a different structure. Thus, one should use different methods and techniques of accounting to work with them. 

27 Jan

What is the income statement?

The income statement analysis reveals the structure of the company's revenues and expenses, which allows them to be controlled in terms of items, types (areas) of an activity, product groups, and managers. Thus, the income statement definition is very simple. 

Income statement simple definition

Based on the analysis obtained in the context of various analysts, it is possible to prepare corrective measures to modify the pro forma income statement. For example, you can conclude the feasibility of developing or discontinuing any business lines, changing the product line or implementing KPI. Key Performance Indicators – a key indicator of performance results, the degree of achievement, and the cost of getting results for managers and departments.

27 Jan

What is a ledger account?

Ledger account is a way of the current interconnected reflection and grouping of property on structure and placement, on sources of its formation, and also economic operations on qualitatively homogeneous signs expressed in natural, monetary, and labor measures.

The nature of economic impacts on the object of accounting has only two directions: increase or decrease, the essence of which is considered in the balance sheet generalization of information. In this regard, the ledger account is divided into two informative zones (accounting coordinates) - debit and credit. Each side (depending on the object of accounting reflected in the account) is intended to account for changes aimed at increasing or decreasing the initial indicator of the state of the accounted object. Now, you know, “What is a ledger account?” and why it is necessary.

24 Dec

When are tax returns due

Some people don’t know, “When are tax returns due?”. Taxpayers declare in the established form about the received income, taking into account privileges and discounts during the specific accounting period. Taxes, according to the established rate, are paid by private entrepreneurs, organizations, entities operating on the territory of the country, including religious, educational, etc. Enterprises with zero income are not exempt from tax returns and tax reporting.

24 Dec

What is a Journal Entry?

What is a journal entry? This is an entry that shows all the results of a business transaction, taking into account its reflection on the debit and credit, and explains this operation. Accounting posting is the registration of business transactions through the use of two different but economically interrelated accounts in equal amounts.

The accounting transaction should have a description of the debited and credited transaction entry, as well as indicate the numerical characteristics used, for example, cost and quantity. The sequence of a compilation of a journal entry:

  • The economic content of the entry is determined;
  • It is recognized as related to accounting;
  • The debit and credit entry is reflected in the respective accounts.
24 Dec

The notion of Payroll

Every accountant must know, “What is payroll?”. When the company pays any wages (wages, bonuses, advances) to employees, the payroll is issued. You can make payments and cash receipts and expense orders, but they are valid only for one working day, which is a large enterprise with a large number of employees is merely inconvenient.

In accounting, printed (or filled electronically and then printed) form is the prescribed form. The document contains a table of four to six columns and rows based on the number of workers who will receive cash, as well as the total line. A sample of filling in the payroll, if desired, can be viewed on the internet.

11 Dec

Why is accounting important for small and medium businesses?

Accounting is important for every company. The first thing that comes to mind for most business people in response to this question is that the need for accounting is spelled out in the law. Indeed, the law obliges all organizations to keep records and submit financial statements to the tax and statistical authorities. The tax, criminal, and administrative codes provide for severe sanctions for violations in this area.

Accounting is important in all kinds of business. Without accounting, it is impossible to:

  • Pay dividends. They can be paid only from net profit, which must be confirmed by accounting records;
  • Get a bank loan. Financial statements are included in the list of mandatory documents for obtaining a mortgage;
  • Attract investors. They need to analyze the investment attractiveness of the company based on accounting data and reports.