Management Accounting

Nobody is quite sure where accounting, in its narrowest sense, leaves off and where management accounting in the active sense begins.  First, we ought to argue that any accounting that is not helpful in some way should not be pursued.  …

Cost Effectiveness

Information is like other commodities in that it must be worth more then the cost of providing it to consumers.  This concept is referred to as cost effectiveness.  Too often government regulators and others assume that information is “free” good.  …

The Tax Year

A new regular corporation may elect almost any tax year that is desired.  Partnerships, S corporations, and personal service corporations have certain restrictions in this regard in order to coordinate the tax year of the business with that of the …

Serial Bonds

Serial bonds mature in installments at various dates.  Usually, each bond indicates when it will mature.  Because of the difference in time and maturity, the interest rate often varies depending on the due date.  In some instances, the stated interest …

What is a Pension?

A pension is a sum of money paid to a retired or disabled employee, the amount of which is usually determined by the employee’s years of service.  For most large companies, pension plans are an important part of the employees’ …

Equity and Revenue Accounts

In order to use the terms debit and credit as accountants do, we must apply the rules for assets, expenses and dividends to the opposite side of the coin…meaning apply it to the equity accounts and the revenue accounts, where …

Measuring Current Assets

The relative size of current assets differ significantly across companies in different industries.  Current assets as a percentage of total assets varies from industry to industry.  Current assets vary from an average of 32 percent in the telephone communications industry …

Detecting Inventory Fraud

Today lets look at an ethical question.  Consider an auditor who has a large client in danger of being lost due to fee competition.  (i.e., a competitor has agreed to provide an audit for a lower fee.)  Is it ethical …

Recording Recievables

When accounting for short term receivables, two general questions are of significant financial importance.  (1) When should receivables be recorded on the books? and (2) At what dollar amount should a receivable be valued on a balance sheet?  Below we …

International Investments and Currency

U.S. Businesses are increasingly investing in foreign markets and operations.  Such investments introduce certain risks and opportunities that are different from those characterizing domestic business activities.  The following quote from Coca-Cola’s annual report provides and illustration. “The company distributes its …