Category: Bookkeeping

We can differentiate annuities even further based on whether they are deferred or immediate annuities. This type of annuity operates as a pension plan and is designed for people who are already retired and are looking for a guaranteed retirement income. The present value of an annuity represents the current worth of all future payments…

In this journal entry, total liabilities on the balance sheet decrease by $5,000 while total revenues on the income statement increase by $5,000. Likewise, the remaining balance of unearned rent is $10,000 (15,000 – 5,000) as of January 31, 2021. If the rent is due on the first day of every month, and you bear…

It sold 500,000 units of the product in each of the first three years, leaving a total of 1.5 million units on hand. Assuming that demand will remain constant, it only purchases 500,000 units in year four at $15 per unit. Since LIFO liquidation profit increases your profits, it also increases your taxable income. AccountingTools…

The payment made will be applied against the outstanding balance as a whole. At a later date, the payments can be partially or fully matched to the related invoice. Usually, customers are given a specific period in which to make full payment on a specific invoice, even when credit is extended. Each purchase invoice is…

Common allocation bases are direct labor hours, machine hours, direct labor dollars, or direct materials dollars. At the end of the year, the estimated applied overhead costs and actual overhead costs incurred are reconciled and any difference is adjusted. In some cases, organizations choose when do you need a certified public accountant not to use…

It mandates that all parties in a legal matter provide complete and honest information that could influence the outcome. This principle is particularly significant in contract law, such as in real estate transactions, where sellers must disclose known property defects to potential buyers. Companies that are publicly traded must provide all relevant information about their…

We often see higher payout ratios in sectors like utilities or consumer staples. These industries tend to have stable cash flows and low reinvestment needs, which allows them to return a larger portion of their earnings to shareholders as dividends. The dividend payout ratio helps investors in determining the companies that best align with their…

Because spreadsheets are not inherently built for bookkeeping, they’re not the best bookkeeping tool for every business. Whether you sell products or offer services, you need a way to show your clients how they interact with your business. Also, your clients want to be sure that they’re being charged correctly for every product or service…

Integrate DOL calculations into your financial planning strategies for better long-term decision-making. Understanding how changes in sales volume affect your operating income allows for more precise forecasting and budgeting. Use the calculator as a strategic tool for enhancing your financial planning efforts. DOL = Contribution margin / Operating Income In our example, we are going…

The second is the deferral entry, which is used to defer a revenue or expense that has been recorded, but which has not yet been earned or used. The final type is the estimate, which is used to estimate the amount of a reserve, such as the allowance for doubtful accounts or the inventory obsolescence…