Posts Tagged ‘accounting’
Several Tips for a Wonderful Wedding Plan
New York is the home to millions of people from diverse culture and religion. Being the world’s most important center for world trade and commerce, there are a number of businessmen, corporate professionals and executives visiting the place. It is also among the most popular tourist destinations and draws thousands of tourists every year from all corners of the world.
Wedding is the most important day for the bride and the groom. A person waits for that special day to come with a lot of excitement and dreams. Every year, thousands of marriages are being held in New York. This include not only the Americans, but also the couples from other countries who dream of getting married in one of the most popular places in the world.
Planning for a wedding requires a lot of time and dedication. The preparation has to start at least weeks before the wedding day, if not months. Everything has to be perfectly planned and coordinated in order to ensure that the wedding is remembered by all. You should remember that a person doesn’t get married every day and hence you should make sure that it turns out to be a perfect day for the bride and the groom. Even the minute details have to be taken care of and coordinated perfectly. Planning for weddings can be extremely stressful, frustrating and requires a lot of time in selecting the venue, clothes, menu, flowers, catering and the decoration.
Revenue and receivables
In most businesses, what drives the balance sheet are sales and expenses. In other words, they cause the assets and liabilities in a business. One of the more complicated accounting items are the accounts receivable. As a hypothetical situation, imagine a business that offers all its customers a 30-day credit period, which is fairly common in transactions between businesses, (not transactions between a business and individual consumers).
An accounts receivable asset shows how much money customers who bought products on credit still owe the business. It’s a promise of case that the business will receive. Basically, accounts receivable is the amount of uncollected sales revenue at the end of the accounting period. Cash does not increase until the business actually collects this money from its business customers. However, the amount of money in accounts receivable is included in the total sales revenue for that same period. The business did make the sales, even if it hasn’t acquired all the money from the sales yet. Sales revenue, then isn’t equal to the amount of cash that the business accumulated.
To get actual cash flow, the accountant must subtract the amount of credit sales not collected from the sales revenue in cash. Then add in the amount of cash that was collected for the credit sales that were made in the preceding reporting period. If the amount of credit sales a business made during the reporting period is greater than what was collected from customers, then the accounts receivable account increased over the period and the business has to subtract from net income that difference.
If the amount they collected during the reporting period is greater than the credit sales made, then the accounts receivable decreased over the reporting period, and the accountant needs to add to net income that difference between the receivables at the beginning of the reporting period and the receivables at the end of the same period.
Inventory and Expenses
Inventory is usually the largest current asset of a business that sells products. If the inventory account is greater at the end of the period than at the start of the reporting period, the amount the business actually paid in cash for that inventory is more than what the business recorded as its cost of good sold expense. When that occurs, the accountant deducts the inventory increase from net income for determining cash flow from profit.
the prepaid expenses asset account works in much the same way as the change in inventory and accounts receivable accounts. However, changes in prepaid expenses are usually much smaller than changes in those other two asset accounts.
The beginning balance of prepaid expenses is charged to expense in the current year, but the cash was actually paid out last year. this period, the business pays cash for next period’s prepaid expenses, which affects this period’s cash flow, but doesn’t affect net income until the next period. Simple, right?
As a business grows, it needs to increase its prepaid expenses for such things as fire insurance premiums, which have to be paid in advance of the insurance coverage, and its stocks of office supplies. Increases in accounts receivable, inventory and prepaid expenses are the cash flow price a business has to pay for growth. Rarely do you find a business that can increase its sales revenue without increasing these assets.
The lagging behind effect of cash flow is the price of business growth. Managers and investors need to understand that increasing sales without increasing accounts receivable isn’t a realistic scenario for growth. In the real business world, you generally can’t enjoy growth in revenue without incurring additional expenses.