Accrual Accounting vs Cash-Basis Accounting

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Managers want to earn a profit. Investors search for companies whose stock prices will increase. Banks seek borrowers who’ll pay their debts. Accounting provides the information these people use for decision making. Accounting can be based on either the

Accrual accounting records the impact of a business transaction as it occurs. When the business performs a service, makes a sale, or incurs an expense, the accountant records the transaction even if it receives or pays no cash.

Cash-basis accounting records only cash transactions cash receipts and cash payments. Cash receipts are treated as revenues, and cash payments are handled as expenses. Generally accepted accounting principles (GAAP) require accrual accounting. The business records revenues as the revenues are earned and expenses as the expenses are incurred not necessarily when cash changes hands. Consider a sale on account. Which transaction increases your wealth making an $800 sale on account, or collecting the $800 cash? Making the sale increases your wealth by $300 because you gave up inventory that cost you $500 and you got a receivable worth $800. Collecting cash later merely swaps your $800 receivable for $800 cash no gain on this transaction. Making the sale not collecting the cash increases your wealth.

The basic defect of cash-basis accounting is that the cash basis ignores important information. That makes the financial statements incomplete. The result People using the statements make decisions based on incomplete information, which can lead to mistakes. Suppose your business makes a sale on account. The cash basis does not record the sale because you received no cash. You may be thinking, let’s wait until we collect cash and then record the sale. After all, we pay the bills with cash, so ignore transactions that don’t affect cash. What’s wrong with this argument? There are two defects one on the balance sheet and the other on the income statement.

Balance Sheet Defect If we fail to record a sale on account, the balance sheet reports no account receivable. Why is this so bad? The receivable represents a claim to receive cash in the future, which is a real asset, and it should appear on the balance sheet. Without this information, assets are understated on the balance sheet. Income Statement Defect a sale on account provides revenue that increases the company’s wealth. Ignoring the sale understates revenue and net income on the income statement. The take-away lessons from this discussion are as follows:

Companies that use the cash basis of accounting do not follow GAAP. Their financial statements omit important information. All but the smallest businesses use the accrual basis of accounting.

Accrual accounting is more complex and, in terms of the Conceptual Foundations of Accounting, is a more faithful representation of economic reality than Cash-basis accounting.

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Use Crowdsourcing to Help Accounting Websites in Winning New Clients to Your CPA Firm

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Crowdsourcing is an Internet marketing buzzword that has become increasingly widespread lately and it’s a construct you can utilize to optimize accounting websites, draw visitors to it, and improve your online profile to grow your firm. Before we get started, though, it’s essential that you acquire a working knowledge of the concept; then you’ll be set to ascertain how to apply it on your accounting website.

Really, the construct that is “crowdsourcing” is a logical continuation of the precept that marketers can make use of the general population–consisting of current customers and the people that frequent your website–to heighten your understanding of customer needs and position your practice as a strong solution. There’s no one right way to do this. Crowdsourcing is a broad term and uses lots of different online tools including forums, blogs, wikis, and even direct email.

So how does this help you sign prospects? You can use these strategies in conjunction with good accounting websites to better understand your market. Crowdsourcing is basically a trick marketers use to gather free research data. Businesses and individuals alive will willingly provide you with tons of usefull marketing information if you know how to ask for it.

For example, if you write a blog posting about little-known tax loopholes that private individuals can use to reduce their tax burdens and allow readers to comment, you may find that the information you posted has struck a chord with visitors to your blog site. Then, you might choose to add a content page to your accounting website that is optimized for relevant and related keywords in addition to linking the blog post to your site (or, better yet, to the optimized page you create). Crowdsourcing is like using knowledge gained from reader feedback as a kind of free advertising; understand what your readers want and need, then position your firm as the answer.

Crowdsourcing can also be used to generate feedback on the services your accounting firm offers, helping you better meet the needs of existing customers and improving your relationships with them. This takes some time and energy. You need to take some time to launch each discussion and keep watch over the outcomes but if this can inform you about concerns your clients are worrying about it’s worth every moment. If you’re just starting out with online promotion, it’s recommended that you draw on the skills of an accomplished online marketing pro.

What’s New in Accounting for Mortgage Servicing Rights

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Are you into mortgage business? Planning to take your business to the next level? Then you must stay updated with your 401K account. The most important thing here is that you have to make sure that you know what’s new and hot about Accounting for Mortgage Servicing Rights. Read this article and get it all.

It was almost a decade ago when the Financial Accounting Standards Board issued Statement of Financial Accounting Standards. This brings new sets of rules for accounting for certain mortgage banking activates in order to remove the differences associated with Accounting for Mortgage Servicing Rights. This is why many new things started hit the business and those who by mistake didn’t follow the rules were screwed up. This is why you can get started easily. Many experts encourage early adoption. However, retroactive capitalization of mortgage servicing before transactions is prohibited.

What’s new?

Many, by now, know it well that mortgage banking activities have two major parts. They are correlated to each other however. The first part deals with the origination or the first acquisition of these loans to the regular investors. And the second part deals with the servicing of loans that spans for a long time. There are many business entities that want to retain the servicing rights in order to get the cash flow come in. The most important thing here is that banks or other financial institutes get a hefty amount of payments while administering the servicing rights. This is why they take a great liking in retaining accosting and servicing rights. And this is where the mortgage business owners want to take this accounting for mortgage servicing rights. This is really something really good for the growth and development of business of all sizes.

Before this, there were certain other sets of rules, what you need to do here is that get along and talk to an expert, you have to make sure that you are going to get started as early as possible. There are many experts who say that you have to get started early in order to stay ahead of what your competitors are planning to do. The most important things here are that you have started the thing as soon as possible and you get the best ways for making your job done.

To Conclude-

In order to get started with your job, you have to make sure that you are doing what you are planning to do. In Accounting for Mortgage Servicing Rights business, you have to stay focused and this will help you get started sooner or later. This is where you need an expert and you have to be careful about it all the times.

Here you get the latest updated on Accounting for Mortgage Servicing Rights. This piece to stay updated and get started with your accounting projects easily. It would be better if you get started as soon as possible. Take expert’s advice and start today.

ACCA Nigeria Serving Many Industry-Oriented Accounting Courses Worldwide

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Most people, who are basically from the accountancy background, have heard about Association of Chartered Certified Accountants (ACCA), which dedicatedly strives to offer quality education to accounting aspirants of all over the world. Quite obviously, the ACCA global body through its many centers located at more than 170 countries is primarily concerned with helping those who want to get trained in the accountancy profession. As a result, working for around for over 100 years, this global body has now set new benchmarks in offering world-class accountancy training courses to the employers of accountants worldwide. Like its other offices or centers, the Nigeria center of the Association of Certified Chartered Accountants has also earned the great attention of accounting aspirants. Hence, these days, the ACCA Nigeria center is also busy in serving a lethora of industry-oriented accounting courses to people of Nigeria.

The ACCA diploma or degree holders are now serving different industry verticals. In general, the accounting professionals opt to learn any ACCA course to have a deep and precise knowledge on the accounting profession. This institute helps these people to get any diploma or degree course at very reasonable prices. For instance, it is up to you that whether you choose a scholarship program or ask from your employer to fund your education.,p> Apart from it, there are other options available to serve your urgent account education learning needs. For example, if you have low budget then choosing the self-studying option would be wise for you as it will save your thousands of bucks. To get free study material for any of such courses, you can sign up for ACCA membership. There are various online or offline book store that also provides you with the used books at rock bottom prices. You can easily get the relevant information on ACCA Nigeria center over the internet in order to get enrolled yourself in any of the desired ACCA courses.

About the Author

Chuck Hartman has a broad experience of writing on popular and advanced institutions which primarily deal in offering CIM (Marketing), ACCA (Accounting), CAM (Marketing Communications) and CTH (Tourism and Hotel Management) programs.To visit for, ACCA Nigeria

Details About The Accounting Profession Of Singapore

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The Institute of Certified Public Accountants of Singapore (ICPAS) is the national body representing the accounting profession in Singapore.It maintains a register of qualified accountants comprising mainly local graduates.Membership is open to members of the Institutes of Chartered Accountants of England and Wales, Australia, Scotland, Ireland and some number of other accounting bodies.Generally, prior to being admitted as a full member, they must attend a week-long pre-admission course.After they became members, they will now be considered as certified public accountants.

It is the The Public Accountants Board who is responsible for issuing licenses as well as registering aspiring accountants. They are also responsible in managing practice monitoring, disciplinary matters and regulations on professional conduct.

Facts about Accounting Records in Singapore

The law requires all incorporated company to submit books with complete details of financial transactions of the company.

The said book will now be placed in the company’s address or wherever the director might think would be the best place.If the books are maintained outside Singapore, sufficient records must be maintained in Singapore to facilitate the preparation and/or audit of financial statements that reflect accurately the company’s financial position.

Sources of Accounting Principles

Financial Periods Commencing before 1 January 2003

The principal source of accounting principles in Singapore, namely Statements of Accounting Standards (SAS) and Interpretation of Statements of Accounting Standards (INT), are issued by ICPAS. These standards are essentially International Accounting Standards (IAS) modified for certain transitional provisions. Guidelines on the accounting measurements and announcement of requirements are provided by them. If for some reasons, ethics conflict with disclosure exemptions granted by law, certain company may go wayward from the expected ethics. In that case, it is required for CPAS to take whatever disciplinary action appropriate against members who are responsible in violating the standards. It is SAS and INT who are responsible in establishing rules on accounting measurements. Proclamation of requirements are done by SAS, INT and the Companies Act.

ICPAS is a member of the International Accounting Standards Committee (IASC). Compliance with IASC standards are not mandatory, but the institute supports the IASC objectives of formulating and publishing standards for observance during presentation of audited financial statements and promoting worldwide acceptance of such standards.

Financial Periods Beginning on or after 1 January 2003

With the implementation of section 37 of the Companies (Amendment) Act 2002, SAS issued by ICPAS will not be used with effect from annual financial periods commencing on or after 1 January 2003. Rather, Singapore Financial Reporting Standards (FRS), released by the new accounting standards-setting body, the Council on Corporate Disclosure and Governance (CCDG), are being used instead. In essence, FRS are are acquired from International Financial Reporting Standards (IFRS). The former SAS were acquired from the same set of IFRS (formerly referred to as IAS) however, with some changes to some provisions. Consequently, there are differences between FRS and SAS. Understanding of Standards are considered a legitimate guide on the application of the pertinent rules. CCDG accepted all international interpretations as Interpretations of FRS (INT FRS) effective beginning on or after 1 January 2003.

Compliance with FRS is a statutory requirement whereby any non-compliance amounts to a breach of the Companies Act by the directors.

Singaporean Financial Report

There is a requirement of audit to the financial statements up to six months prior to the Annual General Meeting by the shareholders. Generally if a company incorporated in Singapore has one or more subsidiaries, it must prepare consolidated financial statements unless it meets certain criteria as provided for in FRS 27 Consolidated and Separate Financial Statements. Currently, financial statements under the Companies Act consist of the balance sheet, income statement together with explanatory notes. With the Companies (Accounting Standards) Regulations 2002 coming into operation for financial periods on or after 1 January 2003, a complete set of financial statements will comprise the balance sheet, income statement, statement of changes in equity, cash flow statement and explanatory notes.

The financial statements must be accompanied by the directors’ and auditors’ reports and by a statement from the directors declaring that the financial statements show a true and fair view and that it is reasonable to believe that the company can reasonably pay its debts as they become due. Although companies that have complied with the requirements are not audited, they are still oblige to procure their financial statements in compliance with the Companies Act.

Requirements for Singaporean Companies on a Yearly Basis

One or more auditors should be appointed that are qualified for appointment under the Accountants Act to responsible in reporting the company’s financial statements.All auditors that are appointed are accountable on keeping and maintaining all the important files and documents of the company.They will then report on the fairness of the financial statements to the shareholders at the Annual General Meeting.Audit Exemption Starting with the financial year beginning on or after 15 May 2003, the following companies are no longer required to have their accounts audited.But then, they are still obliged to prepare accounts that comply with FRS.

Small exempt private companies

Companies with a annual revenue of below S$5m are given exemption to appoint auditors as well as comply audit requirements. It is according to the legal accounting standards such as FRS that revenue is defined.

Dormant companies

An inactive company is not required to appoint auditors as well as accomplish audit requirements if it has been inactive either (a) during its creation or (b) from the end of the last financial year. It is considered an inactive company if it stop engaging its accounting transactions as well as it continues to be as such when transactions occur. With this regard, business affairs commencing from the ones below are ignored:
Getting of shares in the company by a subscriber to the memorandum
Appointment of company secretary
Nomination of an auditor
Maintaining an office that has been registered
Safekeeping of registers and books
Payment of bills, fines or default penalties to the Registrar of Companies