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Financial Statements & Taxes

Short-term v. long-term classification

Posted on Dec 15, 2008 in Financial Statements & Taxes No Comments »

Careful attention to balance sheet classification is imperative for proper ratio analysis. Short-term assets and liabilities are generally to be turned into cash or spent during the next 12 months. Correspondingly, long-term assets are depreciated or amortized and long-term liabilities are paid over a timeframe greater than one year.

Sales Tax 101

Posted on Dec 15, 2008 in Financial Statements & Taxes No Comments »

Ship it to an out-of-state customer, not required to collect sales tax. Ship it to an in-state, in-county or in-city customer, collect applicable sales tax. Customer picks it up, collect maximum applicable sales tax. Remember, based on shipping address, not billing address. And always review instructional materials for exceptions, inclusions and allowances.

Monthly reports are good; Quarterly reports are better

Posted on Dec 15, 2008 in Financial Statements & Taxes 1 Comment »

While monthly benchmarks are critical to most businesses, analysis of monthly financial information is generally skewed due to special circumstances – days open for business or frequency of payroll runs. Quarterly analysis proves much smarter as the positive or negative monthly spikes are flattened by a longer reporting period. Thus, true trends can be spotted, [...]

Cash Basis v. Accrual Basis

Posted on Dec 15, 2008 in Financial Statements & Taxes No Comments »

While accounting and tax regulations permit cash basis presentation, all companies would be best served to account for transactions under the accrual basis of accounting. This latter method reflects the complete operating picture of the business. Accrual basis reflects customer receivables, vendor bills and personnel payables rather than just incoming receipts and outgoing disbursements as [...]

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