Pay Now, Accrue Later

When cash outflow is not expensed entirely in the month of its occurrence, there could be various reasons. Insurance, dues and subscriptions, event planning for conferences, software. These are all instances of cash outflows that need to be divvied up over the months of the year.

This is due to the fact these are termed prepaid expenses or prepayments on the current asset section of the balance sheet. The reason these are "assets" is that the business has paid for these in advance, and therefore, will accrue benefit for this outflow at a later period, or for the remaining eleven months of the year.

It is extremely important that prepaid expenses are reconciled at year-end. For year-end reconciliation, please contact me #TrushaDesai.com

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The Magic Number

As a small business owner, it is important to study our business financial statement package on an ongoing basis: it could be monthly (preferably) or quarterly. The annual audited statements that are provided by the accountant are extremely important, but if we wait for an entire year before analyzing our cash flow, budgetary variance and profit, it might be too late to prevent a ship from floundering.

The financial statement package consists of two important documents: the balance sheet and the income statement. There is one magic number that is the same on both statements. And that is, profit.

Please contact me #TrushaDesai.com for discussion of your financial statements.

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They Move Too

Fixed assets on a Balance Sheet are not exactly fixed. A laptop is mobile, and so is a tablet or a high-end smartphone. Vehicles when used for business purposes are termed fixed, with a sub-category to expedite depreciation calculation.

Emoji copyright Trusha Desai Innovation Management Inc.

The Canada Revenue Agency has different classes for fixed assets and schedules have to be carried forward from year-to-year so that the accumulated depreciation reconciles on the T2 tax return.

And most importantly, we must always ensure that we have correctly captured the half-year rule.

For discussion of your financial statements or for bookkeeping, GST, tax and management consulting issues, please contact me #TrushaDesai.com

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