Category Archives: Bookkeeping

Par value is required for a bond or a fixed-income instrument and defines its maturity value and the value of its required coupon payments. A financial instrument’s par value is determined by the institution that issues it. Market value is the current price at which a bond or stock can be traded on the open […]

For example, if a company returns defective goods to a supplier, the value of the returned goods is credited to a purchase returns and allowances account, a type of contra expense account. This reduces the total cost of goods purchased, thereby adjusting the expense to reflect only the net cost. Examples of contra expenses include […]

You need to make up for that time by charging a sufficient rate for your billable hours. When you’re first starting out, hourly billing is usually the best way to go, but at some point in your career, you may want to transition to fixed-fee pricing for the Certified Public Accountant services you provide clients. […]

To calculate the ratio in Year 1, we’ll divide Year 1 sales ($300m) by the average between the Year 0 and Year 1 total asset balances ($145m and $156m). We now have all the required inputs, so we’ll take the net sales for the current period and divide it by the average asset balance of […]

The ability to honor payment obligations allows companies to negotiate better credit terms. An accurate example depends on the pricing strategy the factoring company uses. After all, you want to be 100% comfortable with the process and be aware of how it will work for your business. We’re going to go over using factoring receivables […]

More reliance on the safety margin can lead to missed investment opportunities and a narrow focus on just one part of an investment decision, which could lead to less-than-ideal results. Another problem with the margin of safety is that it often uses data from the past, which may not be a good indicator of how […]

If the ARR is equal to 5%, this means that the project is expected to earn five cents for every dollar invested per year. Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models […]

Therefore, the acid test ratio does not consider inventories to be liquid. Another way to calculate the numerator is to take all current assets and subtract illiquid assets. Most importantly, inventory should be subtracted, keeping in mind that this will negatively skew the picture for retail businesses because of the amount of inventory they carry. […]

The Construction Industry Scheme (CIS) essentially requires contractors to deduct taxes from subcontractors and then pass this money onto HMRC. These deductions are then counted as advanced payment towards the subcontractor’s overall tax and National Insurance. Most companies can quickly identify the difference between the cost of goods sold and overheads. Most items a regular […]

Even if you are able to easily calculate your commissions with a traditional spreadsheet, creating all the necessary reports for your team is very difficult to execute with Excel. For instance, if you and your colleague closed a deal at 10% commission with the split being done at a 50/50 share, remove 50% of the […]