Accounting

This is usually 20% of the leftover invoice, net of fees. Should there be any outstanding invoices that a customer has not paid back within the agreed upon time period, the factoring lender may require the company to buyback that invoice AND still charge a fee. This type of situation is called “with recourse” because the lender can force the company to “buy back” delinquent invoices. Invoice Factoring (sometimes called “accounts receivable financing”) is an a […]

However, in most examples, organizations experience uneven cash flows in a multiple-year ownership period. For example, an uneven cash flow distribution might be a return of $10,000 in year one, $20,000 in years two and three, $15,000 in years four and five, and $20,000 in year six and beyond. The initial investment cost of $150,000 is divided by the annual cash flow of $20,000 to compute an expected payback period of 7.5 years. Depending on the company’s payback period requirements for t […]

Revenues should be recognized in the accounting period in which they become available and measurable. Expenditures should be recognized in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest on general long-term liabilities, which should be recognized when due. A clear distinction should be made between fund long-term liabilities and general long-term liabilities. Long-term liabilities directly related to and expected to be paid from propr […]

This means the company is only out of pocket cash for 15 days before receiving full payment. Because businesses are so complex with many moving parts, it is virtually impossible to have all of your transactions occur on the same day or period. This is where the working capital cycle formula comes into play.
A positive working capital cycle balances incoming and outgoing payments to minimize net working capital and maximize free cash flow. For example, a company that pays its suppliers in 30 day […]

Hence, the credit balance in the account Accumulated Depreciation cannot exceed the debit balance in the related asset account. After the 5-year period, if the company were to sell the asset, the account would need to be zeroed out because the asset is not relevant to the company anymore. Therefore, there would be a credit to the asset account, a debit to the accumulated depreciation account, and a gain or loss depending on the fair value of the asset and the amount received. The units-of-produ […]

For example, an accountant in the U.S. always use printer toner, but might use more of it in the first quarter of the year when preparing and printing tax forms for clients. Overhead and operating expenses are two types of costs that businesses must incur to run their business.

Is overhead the same as burden?

Burden Rate vs.
Overhead refers to an ongoing expense associated with operating a business. This can include anything from administrative to marketing costs. The key difference is th […]