Kenneth Boyd's Blog, page 56

Warning: Is Your Auditor Documenting Correctly?

When it comes to a financial statement audit, timing is critically important.

 

Auditors must perform a certain amount of audit procedures, and the timing of those procedures can impact the accuracy of the audit opinion.

 

This article defines a financial statement audit, discusses some key audit procedures and assertions, and explains why timing is so important.

What Happened

 

I was spurred to write this post after reading about a former BDO audit manager who backdated audit work papers. As explained in Accounting Today, the BDO audit team fell behind while auditing AmTrust Financial Services, a publicly traded company. Some audit procedures were not completed by the time that AmTrust filed its annual report with the SEC.

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An audit senior manager instructed audit staff to backdate audit work papers. This decision made it appear that the work was completed before the annual report was filed.

 

And it’s a huge problem. Here’s why:

 

What’s An Audit?

 

An audit is an opinion as to whether or not the financial statements are free of material misstatement, and an audit is performed by a CPA firm. The term materiality refers to a dollar amount of error that is judged to be meaningful for a financial statement reader.

 

Assume, for example, that a CPA firm is auditing a $5 million inventory balance and notes a $50 error in the balance. A $50 error in a $5 million balance may not change the financial statement reader’s opinion- but a $20,000 error may be a red flag.

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Auditors use judgment to determine materiality.

 

Assertions

 

Management is responsible for creating the financial statements, and accounting rules assume that management is making assertions regarding the statements they issue. The valuation assertion, for example, states that the dollar value assigned to assets is correct- usually based on the historical cost of the asset.

 

Auditors plan the audit procedures to address these basic assertions.

 

Timing Is Everything

 

Now, here’s where the rubber meets the road.

 

When procedures are performed is critically important. In fact, if the date of some procedures is altered, the accounting information is largely worthless- it doesn’t support the audit opinion. Here an example:

 

For many companies, particularly retailers and manufacturers, inventory is the biggest asset balance on the balance sheet. The best audit evidence for auditing inventory is perform a physical inventory count as close to the balance sheet date as possible.

 

An inventory count requires the auditor to compare each inventory item listed in the accounting records to a physical item in the company warehouse. During the count, the auditor compares the number of items, the cost per item, and a description to the inventory listing.

 

Assume that the audit work papers state that the inventory count was performed on December 30th– the day before the 12/31 balance sheet date. In reality, however, the count was perform on December 5th– and the date listed on the inventory count was altered to state 12/30.

 

The Impact

 

Well, do you think a great deal of inventory count be purchased, manufactured, or sold between the 5th and the 31st?

 

Of course.

 

Now, there are other procedures that can be performed to audit inventory, but no step is as reliable as an inventory count to confirm the existence assertion.

 

Existence: Is the inventory in the warehouse?

 

The bottom line: few, if any, auditors would rely on an inventory count 26 days before a 12/31 balance sheet date. Sure, the company may have great internal controls, but 26 days is too much time to account for by using other audit procedures.

 

Food for thought. This post is for educational purposes only.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

Image: Bullseye, Jeff Turner CC by 2.0

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3 Warning Signs: You’re Adding Too Much Debt

When it comes to personal finances, are you reactive or proactive?

Most of us tend to be reactive to a crisis, and don’t take preemptive action to address a potential issue. By assessing possible risks before they occur, you’re more likely to create a plan and lessen the impact of a financial problem.

Here are a few scenarios to consider, and reactive/proactive approaches for each one.

Injury

You have an injury that affects your ability to work.

Proactive: Prepare for this event by building an emergency fund of at least 3-6 months of expenses, which enables you to sustain your lifestyle if you can’t work for a period of time.

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Reactive: Without an emergency fund, you must consider other options: do you have any savings, family support, or access to retirement savings? If the injury from a car accident in a company car wasn’t your fault, you call a company vehicle accident attorney for legal advice.

How About Insurance?

Proactive: Speak with an insurance agent, so that you understand your insurance coverage, including the dollar amount of coverage for life, health, and care insurance.

Reactive: If you don’t understand your insurance policy and the coverage amounts, you can’t determine if your need more coverage to be protected in the event of an accident. In the short term, you can make use of your emergency fund to help with financial support- but that doesn’t solve the long-term problem of an injury or illness.

Issues of Divorce

In the US, 40% to 50% of marriages end in divorce, and divorce can have a serious financial impact on both spouses.

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You may not see a divorce coming, but it could leave you without a partner and in debt.

Proactive: Many couple write a prenuptial agreement to avoid the potential of future losses in the event you separate later in life. You could argue this ruins romance, but divorces are common.

Reactive: Facing the loss of your partner’s income in your financial planning, you may simply panic.

A Plan

Here are some steps you can consider, in order to avoid the scenarios listed above:

• Create a budget, even if that budget is simply on notebook paper. If you’re more of a tech person, you can find some great mobile apps to create a budget.

• Separate your expenses between fixed and variable, and take a hard look at your variable spending.

• Take steps to cut your variable expenses each month and put the amount you save into a separate savings account.

This is a starting point to get your finances back on track.

Change is hard

The reason that people don’t diet, don’t exercise, and don’t resolve bad personal relationships is that change is hard. As a result, we don’t really, truly change and grow unless we’re in real pain. When we’re at that point, the pain of change is less severe than that pain of not changing.

Discipline and time

With discipline and time, I think most people can accumulate far more wealth than they think is possible. But growing wealth requires change- which is precisely why most people don’t make the effort.

You can do it!

This post is for educational purposes only.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

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Making Your Earnings Go Farther

Tell your money what you want it to do.

 

If you want to improve your financial situation, make your income go as far as possible.

Your wage might be more substantial than you think, if you make some changes to your spending and saving habits.

 

Consider these tips to make your earnings go farther.

What’s Really Necessary?

 

Take a look at how you’re currently spending your money.

 

A bigger salary would be nice, but you can increase your available income by reducing unnecessary costs. Make the decision to track and moderating your spending.

 

Take a look at your monthly bills. You could save money on your utilities by getting a tankless water heater, and by insulating your windows to reduce your electricity bills. Carefully review each spending category, and make some cuts.

 

To stay on track, document your spending each week by using a mobile app, or by making a note on your phone each day. At the end of each week, review your spending, and decide if you need to make any adjustments.

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Squeeze The Lemon

 

To squeeze the most out of your current level of income, you need to consider cuts to many areas of spending. To accomplish this task, you need a formal budget.

 

Review your credit card statements and bank statements for the past few months, and group your spending into categories. Now, some spending categories are fixed, such as your car payment and insurance premiums. Meals, entertainment and food, however, are variable costs, and you can make some reductions.

 

By eating out less and making smart spending decisions, you can reduce your spending and start to save money.

 

Fill the Bucket

 

Start investing some of your money on a regular basis.

 

If you don’t earn a high level of income, you can boost your savings rate by earning some money outside of your full-time job. Start by funding a savings account for emergencies, then move on to investing. One simple way to invest in stocks and bond is to use mutual funds. When you start to consider investing, look into your employer’s retirement plans, including 401(k) retirement accounts.

 

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In addition to stock and bond investing, some investors choose to buy property as an investment. Real estate agencies such as William Pitt can help you to promote your properties to potential buyers. This can help you build your real estate portfolio and earn a reasonable return on your property investments.

The point here is that to start expanding your wealth by making smart investments.

 

Be Cautious

 

Protect your credit score by using credit in moderation.

 

Card companies will always try to encourage you to use credit, but it should be avoided if you want to make your earnings go farther. Otherwise, you’ll accumulate debt that you’ll have to pay off – with gradually increasing interest rates.

 

Make your earnings go farther by using credit in moderation. Use your credit cards if you want to boost your credit rating, but make sure you only borrow what you can afford to repay. Most of the time, you should rely on the money you actually own so that you don’t end up spending even more of your earnings on debt repayments.

 

You Got This

 

With proper planning and self-discipline, you can get more out of your monthly income.

 

You got this!

 

This post is for educational purposes only.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

 

 

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The Worst Financial Mistakes- And How To Avoid Them

Nearly everyone makes mistakes with money.

 

You can make a financial mistake simply by being young and uninformed, or later in life by not paying close attention.

 

Not a problem- it happens to everybody (or just about everybody).

But not all money regrets are made equal. It’s one thing spending a bit more than you should on a night out with friends or skipping a month of savings when you have a big occasion to pay for.

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It’s quite another to not pay essential bills or rack up costly debt on a high interest credit card.

 

Avoid Snowballs

 

If you’ve made a financial mistake, don’t let it snowball. You can take steps to get out of any financial mess and improve your situation. The important thing is to recognize and accept responsibility for your mistake, and have a plan to get things back on track.

 

Here are some common financial messes, and you can correct them.

 

Saving?

 

A lot of people say that they can’t afford to save, and live to the limits of their means or beyond.

 

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In financial terms, not having any savings is a huge mistake. If you’re living from paycheck to paycheck, without putting anything away, it’s a big issue. It only takes a couple of life’s curveballs, like losing your job or an expensive car repair, to tip you over into debt.

 

The solution? Stop thinking of savings as a chore and reframe saving for what it really is – a cushion that can protect you from financial emergencies.

 

You need to adjust your lifestyle so that you aren’t spending every penny that comes in. Set up a direct debit to take money automatically from your account the day after you get paid, so you can’t run out of cash before you’ve put some in savings. Or, use a money management app that takes regular amounts for savings, plus rounds up all your card transactions and saves the remainder.

 

What About Bill Payment?

 

In life, there are negotiable expenses and non-negotiable ones, so if you get into a mess one month and don’t have enough to cover everything, make sure you prioritize.

 

Immediately cancel the non-essentials: things like subscriptions and large online orders. Next, make sure you do cover rent, utilities and taxes, especially if you’re self-employed. If not, you could find yourself in serious legal trouble and needing a specialist like NTC Tax Relief or damage your credit rating, making it harder to borrow money in the future.

 

Show Me The Money

 

Good money management comes down to the basics of creating a budget and sticking to it.

 

It’s surprising how many people drift through the month without keeping a track of what they are spending and how much money they have left. This can lead to serious problems if it carries on.

 

Find a monthly budget template online and fill out exactly what you have to spend. You may even want to transfer your disposable income – the amount you have left after essential costs – into a separate account, so that you only spend what you can afford.

 

Get into the habit of making a note on your phone of what you’re spending each day, and then it’s easy to see where you could cut back, if you need to create more savings.

 

You Got This!

 

Use these tips to get your finances back on track. You got this!

 

This post is for educational purposes only.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

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Lottery tickets, Mark Ou

Day Two hundred and seven: It’s nice to dream sometimes

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Portfolio Rebalancing: Does It Matter?

Does rebalancing your portfolio really matter?

 

Will portfolio rebalancing increase your rate of return, or reduce risk?

 

Let’s discuss.

Rebalancing: Defined

 

Rebalancing is process of realigning the weightings of a portfolio of assets, and this realigning requires the investor to buy or sell stocks and bonds in the portfolio to maintain a desired level of asset allocation.

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Most investors create a portfolio with a certain blend of stocks, bonds, and other investments. Stock and bonds offer a variety of investing options, depending on your risk tolerance, your need to generate income, and your desired rate of return. Assume, for example, that Jill has the following investment portfolio in her Individual Retirement Account (IRA) on September 30th:

 

Investment
Dollar Amount
Percentage


Aggressive Growth Stock Fund
$20,000
20%


Mid-Cap Stock Fund
$25,000
25%


Large Cap Stock Fund
$25,000
25%


Corporate Bond Fund
$30,000
30%


Total
$100,000
 

 

The percentages invested in each category were determined with the help of her investment advisor. Jill is young, and therefore invests 70% of the portfolio in stock mutual funds, and 30% in bonds. This 70%/ 30% mix is referred the asset allocation.

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She is willing to take a moderate level of risk, and you’ll note that 20% of her total portfolio is invested in an aggressive growth stock fund- the stock fund category that offers the highest risk and potential return.

 

Dealing With Changes

 

Assume that, between September 30th and November 30th, stocks in the aggressive growth category increase by 20% in price. The mid-cap and large cap stock funds grow by 5%, and the corporate bond fund grows by 3%. Here’s how the same portfolio looks as of November 30th, assuming no additional investments or withdrawals:

 

 

Investment
Dollar Amount
Percentage


Aggressive Growth Stock Fund
$24,000
22.3%


Mid-Cap Stock Fund
$26,250
24.4%


Large Cap Stock Fund
$26,250
24.4%


Corporate Bond Fund
$30,900
28.8%


Total
$107,400
 

 

As you can see, the percentages of asset mix have changed. The aggressive growth fund, for example, is now greater than 20% of the total portfolio, while the corporate bond fund has declined below 30%.

 

Rebalancing requires the investor to sell some of the aggressive growth fund and add those available dollars to the other categories.

 

How Mutual Funds Can Help

 

Fortunately, mutual fund companies and other money managers can automate this process for you. American Funds, for example, explains how you can have your mutual fund portfolio automatically rebalanced.

 

What If You Don’t Rebalance?

 

Over time, different funds (or individual stocks and bonds) will change in price at different rates. The longer you put off rebalancing, the more the asset mix in your portfolio will change.

 

You may end up with an asset mix that is far different than your investing goals.

 

Jill, for example, wants a 70% stock/ 30% bond mix. If stock prices increase greatly over 18 months, while bond prices remain flat, she may end up with an 85% stock/ 15% bond mix.

 

That asset mix doesn’t match Jill’s investing goals.

 

A Different View

 

Now, the Wall Street Journal has an interesting take on rebalancing. The author suggests that, once an investor reaches a specific dollar amount in a particular category, they may not choose to rebalance. If, for example, Jill wants $300,000 in her bond category by retirement, she may not add to the bond fund once she reaches that specific dollar amount.

 

My Take

 

I think all investors should rebalance each month, until the dollar amounts reach pre-determined dollar amount in the future. Once that dollar amount is reached in a particular category, it’s time for an assessment.

 

Have a conversation with your financial advisor, and get some objective advice before your stop the rebalancing process. If, for example, Jill keeps investing in stocks and doesn’t add in the bond category, for example, a growing percentage of her portfolio is in a riskier category- stocks.

 

If that really what she wants?

 

Food for thought.

 

This post is for educational purposes only.

 

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

Image: Bullseye, Jeff Turner CC by 2.0

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A Night Out- Without Taking On Debt

So, you go for a night out. You have a fantastic time.

 

Then, you check your bank balance.

 

Somehow, it’s into negative figures, and you’re staring down the barrel of a debt you didn’t see coming. You vow never to go out drinking again. Heck, you couldn’t afford it if you wanted to. You drank so much last night that you can’t even afford the heating bill this month!

We’ve all been there, and this is one of the worst ways to find yourself in debt. You have a horrible hangover and nothing else to show for this expenditure. Spending too much on entertainment can mean paying more in interest costs on a credit card balance.

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But, does this mean you should lock the doors and never go out past eight o’clock? Not at all. As with any financial risk, you simply need to take steps to protect yourself during a night out.

Lucky for you, here are some pointers which could help you do precisely that.

 

Taxi, or Uber?

A taxi or Uber trip sounds a lot like spending money instead. In reality, making travel plans at a reasonable cost and save you money- and prevent bigger problems.

 

In the worst case scenario, skipping this step could see you behind the wheel. That’s terrible news for all manner of reasons, including financial ones. A crash could cost you in repairs. Not to mention that you would need to seek representation from criminal defense lawyers like those found at attorney-fisher.com.

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The best-case scenario is that you spend a fortune trying to navigate public transport. Don’t let it happen. Use Uber or a taxi to pay a reasonable fee and not a penny more.

What About a Debit Card?

 

Leave your debit card at home.

 

It’s a simple step that can save you a fortune.

 

When we’ve had a few too many, we don’t think twice of cracking out the bank card and keeping the party going. But, this way leads to debt. Instead, keep your spending sensible by taking out a set amount. When that money runs out, you’ll just have to come home. You’ll avoid spending money that you need for other things.

It’s as simple as that.

Be Selfish

This may seem cruel, but it’s also necessary. When we go out with friends, it’s all too easy to slip into the habit of buying rounds. They buy you drinks; you buy them drinks. It’s one big happy family.

 

Until you realize that you’ve had two drinks and it’s cost your upwards of $80. As can be seen from sites like thewanderingbroski.com, rounds are bad news for all manner of reasons. One thing’s sure; a night of being generous will ruin your finances faster than anything else. So, be selfish. You owe it to your bank account.

 

Do You Budget?

 

Before you head out the door for any social event, check your personal budget.

 

You should maintain a budget, either by using a mobile app like Mint, or by writing down your budget in a notepad. The budget must have a line item for each category of spending, including entertainment.

 

If there’s no more money available in your entertainment budget, stay home and have friends over.

This post is for educational purposes only.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

 

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Ouch! Don’t Let That Injury Bruise Your Credit Score

Injuries happen for a variety of reasons, and an injury can have a huge impact on your personal finances.

 

Over time, you may face unpaid time off work, on top of hefty medical bills, and this financial situation can damage your credit score. A lower credit score will make it more difficult to borrow money, and you’ll pay a higher interest rate on any new loans.

 

If you don’t keep an eye on your credit rating, your personal finances can suffer. In fact, a bad credit rating can follow you down any avenue you wish to take in later life.

Here are some tips to help you recover financially after an injury.

Health Insurance?

Medical bills can put your credit rating at risk.

 

You should seek medical treatment the moment you’re injured, so that you can recover quickly. At the same time, however, a friend of family member should help you contact your insurance agent and file any available insurance claims.

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From your first hospital visit, you need to contact your insurance agent, so you understand your coverage, including the hospitals and doctors who should be providing care.

 

These initial steps will help you maximize the benefits available under your insurance policies, and minimize out-of-pocket medical expenses.

 

Legal Options

 

If you suspect that your injuries were caused by someone else’s negligence, you may call Richard Vadnal or some other attorney contact. This is important, because your insurance policy may not cover all of your medical costs, and you’ll have to pay your policy’s deductible amount.

 

Speak with an attorney, who can suggest a reasonable course of action.

Recordkeeping

 

Get into the habit of keeping copies of every bill you receive that relates to your injury, and carefully track whether or not each bill is paid for by your insurance coverage. If the process starts to feel overwhelming, get help from a friend or family member.

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If you need to dispute an unpaid bill with your insurance company, you’ll need an organized set of files.

 

Financial Recovery

In spite of your best efforts, an injury may impact your credit rating.

 

Don’t dwell on this issue- you can take steps to get back on track financially.

 

Something as simple as ensuring you pay bills on time can help to get you back on sound footing. Equally, taking out a credit card and never missing a payment could start to boost you back up.

 

Once you get the medical bills paid, you can use the available funds to pay down other debt, fund a savings account, and improve your credit score.

 

You Got This

Everyone can recover from a financial setback, due to a medical issue. If you ask for help and create a plan you can do it.

For educational purposes only.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

Image: Bullseye, Jeff Turner CC by 2.0

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3 Financial Challenges That Can Hit At Any Time

Controlling of your finances is difficult to do, and it takes a lot of hard work and dedication.

 

If you’ve to a point where you’re debt free and you’ve got a working budget that allows you to save, you might think that financial problems are a thing of the past.

 

Unfortunately, life is rarely that simple.

Regardless of how well you manage your finances, you can always get hit by financial challenges that are completely out of your control. The key to financial security isn’t avoiding these challenges because, often, you can’t.

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It’s important know how to deal with financial troubles before they happen, so you can limit the damage and manage them before things get worse. These are some of the most common financial challenges that could hit you at any time, and how you should deal with them.

 

Injury

If you’re injured badly and you can’t work for a while, it can put a real strain on your finances. Being out of work for a long period will mess up your budget, and you’ll soon start eating into your savings.

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Hopefully, you have an emergency fund which should help you to get by for a while, but if you’re out of work for a particularly long time, it might not be enough.

The first thing to do is see whether you can get compensation. If the accident wasn’t your fault and you think that somebody else is directly to blame, you should get in touch with a legal company like GJEL to see whether you have a case.

 

In addition, contact your insurance agent to determine the amounts you can claim on your medical insurance, car insurance, or other policies.

 

You also need to adjust your budget immediately and cut out any unnecessary expenses so your money goes further.

 

Bereavement

 

Losing a loved one is always tough, and finances are probably the last thing on your mind. But if you lose a partner or spouse, you need to consider your financial situation quickly. If a death means that you’ve lost half of your household income, your finances will need to change.

Nobody wants to plan ahead for these things, but it’s the most sensible thing to do. That’s why it’s always a good idea to take out a life insurance policy. It’ll offer you some financial protection during a difficult time.

 

Home Repairs

 

Serious damage to the home must be repaired. Any small cosmetic issues aren’t urgent, but if you’ve got a leak in the roof or your boiler breaks down, you need to pay out for it right away. Your emergency fund comes in handy here too, but you can take steps before you get to that stage. You can avoid having to cover expensive repairs if you keep up with regular maintenance and fix small issues before they get out of hand.

 

Plan Ahead

 

These financial challenges can hit you without warning, but if you’re prepared for them, you can make it through without getting into financial difficulty.

For educational purposes only.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

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What a CEO Firing Teaches Us About Accounting Charges

Wait- the CEO of GE got fired?

 

It’s true.

And, for GE, firing a CEO is unusual, because the prior two CEOs, Jack Welch and Jeffrey Immelt, had long tenures as head of this global company. John Flannery was fired by the board after less than two years.

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What I was particularly interested in was this quote, which was one of the reasons given for the firing:

 

“GE also will take a $23 billion noncash charge for its struggling power business.”

 

I thought this was a great example to explain the purpose of an accounting charge.

 

What Happened

 

The accounting charge relates to GE’s power business, which was struggling for a variety of reasons. Trends in power production were moving against GE, and sales of turbines to gas and coal-fired power plants were stagnant. Lower sales meant higher inventory levels (GE produced too much inventory), and the firm couldn’t make as much money servicing new equipment that was sold.

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Fewer sales, fewer turbines to service.

Goodwill

 

Accounting defines goodwill as the dollar amount paid for an acquired company that is greater than the fair market value of the assets purchased. GE stated that its current (Oct 2018) goodwill balance on the GE Power division’s books is $23 billion and that the “goodwill impairment charge is likely to constitute substantially all of the balance.”

 

Adjusting Entry

 

If goodwill, or the value of some other asset, is impaired, the value of the asset is permanently reduced. The accounting principle of conservatism requires assets to be stated at their true value- and if an asset is impaired, the amount of the impairment should be reclassified to an expense account.

 

Debit (increase) expenses, credit (decrease) the asset.

 

 

Keep this in mind, the next time you come across an accounting charge.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

The post What a CEO Firing Teaches Us About Accounting Charges appeared first on Accounting Accidentally.

Why Freelancing Can Be A Smart Financial Decision

Do you feel a little stuck in your job?

 

Do you have a skill or ability that other people would pay you for?

 

If your answer to both questions is “yes”, you might consider a career as a freelancer.

 

For many people, freelancing is a way of life and a career path that they choose. They decide that they don’t want a boss, they want to work their own hours, and they want more freedom to do what they want and when they want.

 

But you don’t have to go full time immediately.

 

Freelancing can be a smart financial decision, if you want to continue in your current job. It’s an alternate source of income that can help you pay for a new computer or funding a vacation. It’s also a brilliant way to pick up a new skill and practice it, while also building a professional portfolio.

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Eventually, you may go full-time as a freelancer.

 

In this article, we’ll discuss why freelancing is a smart financial decision, even if you’re not planning to make it a full-time job anytime soon.

 

More Income?

 

Many people rely on freelancing for their work, but thanks to the ability to work however much you want, it’s also a fantastic way to fill voids in your income or provide extra money for expenses.

 

For instance, you could work just an hour each day after work, or you could work over the weekend for extra money to fund a savings account for emergencies. Essentially, working part-time as a freelancer can help you create a financial safety net.

 

Pays For Itself

 

Whether you go through face-to-face Illustrator training or online courses, the money you pay to acquire skills will easily pay for itself when you start freelancing. This makes freelancing a very quick and affordable way to pick up new skills that can be marketed as a service and eventually used to make money.

 

Future Opportunities

 

One of the biggest problems we face is redundancy. No one wants to lose their job over something trivial, and most people rely on income from a day job. If you lose your main source of income, freelancing allows you to quickly secure more work.

 

Freelancing is a great way to continue making money, even if you lose your job due to unfortunate circumstances. You can build a career out of it, or you could just use it as a second source of income to help you stay afloat before you find another job.

 

Steps to Prepare

 

Before you jump into part-time freelancer work, do your homework. Consider the product or service that you can provide, and the demand in the marketplace. Check with existing companies that offer the same product, and find out how they price their product.

 

Once you do this research, consider the time and expense you’ll incur to market yourself, and the costs related to delivering your product or service. Finally, decide if your proposed price will allow you to earn a reasonable profit on your efforts.

 

With a proper amount of research, part-time freelancing can be a money maker.

This post is for educational purposes only.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

 

Image: Bullseye, Jeff Turner CC by 2.0

The post Why Freelancing Can Be A Smart Financial Decision appeared first on Accounting Accidentally.