Running a day care center is challenging enough without financial accounting problems. Picking the best day care accounting software is an important decision, as it will store all of the critical business accounting data and client data of your day care center.
The first step in picking the best software is to survey what is currently available.
There are many generic financial accounting solutions available, but they will not provide the day care industry-specific features that specialized day care accounting software may provide.
Start by researching in industry publications and talking with other day care owners, but also use the power of the Internet to find and research all available options.
Look at the system requirements for each of the software options you have found. If any of them will not run on your current computer system, you will eventually have to either rule them out or factor in the cost of upgrading your system. But first, you need to determine what features and benefits you really need your day care accounting software to provide.
Ease of use is an important benefit. Unless you are very computer savvy and have no other employees who will need to use it, you need your software to be extremely user-friendly and intuitive so that little or no training is necessary.
But there is often a trade-off of ease of use versus power and flexibility. You need the day care accounting software you pick to be as easy to use as possible while still being powerful and flexible enough to provide the general financial accounting capabilities you need as well as specialized features to fill the needs of a day care center.
Obviously you need your accounting software to provide financial accounting capabilities like:
- General ledger
- Balance sheets
- Profit and loss statements
- Billing
- Invoicing
- Accounts receivable
- Payroll
- Tax forms and reporting
You may also want your accounting software to provide extra features like:
- Automated billing
- Automated invoicing
- An online bill payment interface
- Instant receipts when payments are recorded
- Employee work schedules
But day care accounting software also needs to be flexible enough to deal with more complex billing. For example, your rates may vary depending on the days or hours a child is in day care, or you may have to split bills between two divorced parents.
Your software will need to maintain contact information and a comprehensive payment history for every client. You may also need to be able to provide families a detailed statement of their yearly childcare expenses for their taxes.
In addition, specialized day care accounting software may be able to provide extra features like tracking:
- Immunizations
- Attendance, with automated recording of check-in and check-out times
- Food programs
- Calendars of events
System requirements, features, and benefits are not the only consideration when picking the best day care accounting software, though.
You need to be fully aware of any possible licensing issues, software add-on or upgrade needs, and support details. These can all affect your initial or long-term cost.
You need to consider:
- How many client records can the software handle?
- Is there a limit on the number of clients per family?
- How often is the software upgraded?
- Do software upgrades cost extra?
- How long is technical support available for old versions if you do not upgrade?
- Will you need to purchase extra modules or add-ons to get the features you need?
- If you have more than one computer that will run the software, do you need additional licenses?
- Is any training necessary? If so, what will it cost to train your entire staff?
- Is there a charge for technical support?
- How do you contact technical support?
- What are the hours for technical support?
- Will the software provider do any necessary custom programming?
- What is the charge for custom programming?
- How do you get the software (disk, download, etc.)?
- Is there a free trial of the software available before you purchase it?
You should also research what others think of the day care accounting software you are considering. First, check if it is recommended, accredited, or certified by any accounting agencies or accountancy organizations. Next, go to your favorite search engine and enter the name of the software along with keywords such as:
- review
- problem
- bug
- complaint
Do not skip this, as it can save you from a potential disaster! Software always sounds great on the vendor 's site, but you need to know if there are many end user complaints.
No complaints? Great, but now you need to find out whether you can get a better price on the day care accounting software you have chosen.
Go back to your favorite search engine and again enter the name of the software or software vendor along with keywords such as:
- discount
- coupon
- coupon code
- special offer
- rebate
Now repeat the search with the same keywords with the term "site:" followed by the vendor 's domain name, like in this example:
discount site:www.example.com
You might be surprised how often you can save 20% or 25% on any online purchase with these two extra steps.
Purchasing day care accounting software is a major investment. Your decision, good or bad, may affect your business for years. Following the steps above, you should be able to pick the best day care accounting software to fulfill your needs. And you should be able to get it at the best price possible.
Tuesday, April 1, 2008
Tape Adding Machines - Bad Habit, Addiction Or Comfy Loafers?
The next time you're in an office where personal computers are used, look on the desks. Chances are pretty good that you will see a mechanical tape adding machine sitting next to many of the computers. That makes no sense to me whatsoever. Why are such antiquated pieces of equipment, that do little more than simple arithmetic, sitting next to very powerful, perhaps very expensive computing devices?
In my opinion, the advantages of a full featured adding machine program should convince most people that mechanical adding machines are expensive dinosaurs that have long outlived their usefulness for personal computer users. To illustrate, here are a few of the advantages a person realizes from using a well written electronic paper tape (etape) program instead of a mechanical adding machine.
* An etape is editable. With a mechanical machine, an error on a printed tape often means re-running the entire tape. Etape entries can be changed, inserted and removed.
* Etapes can be saved to disc and reopened. There is no need to commit an electronic tape to paper unless needed. And etapes on disc can be shared with anyone in the world who has an email address.
* Etapes saved to disc are encrypted to prevent "back door" viewing and changes.
* Electronic tapes that must be stored to satisfy statutory requirements can be saved on media, such as CDs, that will ensure the integrity of the stored etapes almost indefinitely. In additon, multiple backup copies of stored etapes can easily be created. With backup copies stored off-site, the expense of fireproof storage can be avoided. (While the life expectancy for data stored on CDs is not yet known, I imagine an electronic tape saved on a CD may last longer than a tape printed on paper.)
* Editable notes can be added to each entry and subtotal on an etape. Each etape can also have a caption. Etapes saved on disc can be searched based on file names, captions and/or etape notes.
* Entire etapes and single etape values can be copied and then pasted into any other program that supports the clipboard. This means an electronic adding machine program works with just about all office and finance software.
* With a Master/Derived Value feature, a person can re-use multi-sectioned etapes for often performed calculations. To re-do a calculation, the re-usable etape is opened from disc and key values are changed. Linked subtotals cascade to following etape sections automatically so that all sections of the etape are correctly recalculated.
* An optional subtotal column on an etape displays the current running subtotal throughout the entire etape.
* An unlimited number of memories can be created in a well written adding machine program. Switching between memories at any time is a matter of a few mouse clicks.
* Adding sales tax calculations to an etape can be done by pressing one button.
* A Biz Wizard feature simplifies the calculations of annuities, loans and depreciation. The results of these types of calculations, including entire loan amortization schedules, can be placed on an etape with one mouse click.
With these, and several other advantages of electronic adding machine etapes, why have mechanical tape adding machines managed to avoid the same fate of paper and pencil spreadsheets? In my opinion, habit is a large factor. People have been using adding machines for a long time; long before the advent of personal computers. Whenever an arithmetic calculation needs to be done, muscle memory kicks in subconsciously. The arm extends past the keyboard and the fingers begin to punch very familiar buttons.
I imagine there is also a certain amount of addiction to the whir and clickity-clackity sounds of a paper tape being printed. When I asked one person why she still used a mechanical paper tape machine she said, "I like the sound it makes." There is also the intimidation many people still feel with personal computers. A mechanical adding machine, compared to software, may feel like a pair of well broken in loafers.
Be it habit, addiction or a comfort factor, mechanical adding machines have managed to survive technological advances despite the fact that they deprive people of valuable functionality and incur unnecessary costs. A well written electronic adding machine, which can sound just like a mechanical machine, pays for itself quickly with reduced office supply expenses and fewer purchases of replacement equipment. It is no longer necessary to buy cases of adding machine tape or boxes of ribbon cartridges. And, since software doesn't wear out, the expense of replacing worn out and broken adding machines is eliminated. Not buying paper tape and ribbons in cardboard packaging also means less pressure on our forests. And not throwing out broken machines and exhausted print cartridges means fewer non-degradable plastics going into our landfills.
Using etapes, in my opinion, is a win-win-win situation for personal computer users, the bottom line and the environment.
In my opinion, the advantages of a full featured adding machine program should convince most people that mechanical adding machines are expensive dinosaurs that have long outlived their usefulness for personal computer users. To illustrate, here are a few of the advantages a person realizes from using a well written electronic paper tape (etape) program instead of a mechanical adding machine.
* An etape is editable. With a mechanical machine, an error on a printed tape often means re-running the entire tape. Etape entries can be changed, inserted and removed.
* Etapes can be saved to disc and reopened. There is no need to commit an electronic tape to paper unless needed. And etapes on disc can be shared with anyone in the world who has an email address.
* Etapes saved to disc are encrypted to prevent "back door" viewing and changes.
* Electronic tapes that must be stored to satisfy statutory requirements can be saved on media, such as CDs, that will ensure the integrity of the stored etapes almost indefinitely. In additon, multiple backup copies of stored etapes can easily be created. With backup copies stored off-site, the expense of fireproof storage can be avoided. (While the life expectancy for data stored on CDs is not yet known, I imagine an electronic tape saved on a CD may last longer than a tape printed on paper.)
* Editable notes can be added to each entry and subtotal on an etape. Each etape can also have a caption. Etapes saved on disc can be searched based on file names, captions and/or etape notes.
* Entire etapes and single etape values can be copied and then pasted into any other program that supports the clipboard. This means an electronic adding machine program works with just about all office and finance software.
* With a Master/Derived Value feature, a person can re-use multi-sectioned etapes for often performed calculations. To re-do a calculation, the re-usable etape is opened from disc and key values are changed. Linked subtotals cascade to following etape sections automatically so that all sections of the etape are correctly recalculated.
* An optional subtotal column on an etape displays the current running subtotal throughout the entire etape.
* An unlimited number of memories can be created in a well written adding machine program. Switching between memories at any time is a matter of a few mouse clicks.
* Adding sales tax calculations to an etape can be done by pressing one button.
* A Biz Wizard feature simplifies the calculations of annuities, loans and depreciation. The results of these types of calculations, including entire loan amortization schedules, can be placed on an etape with one mouse click.
With these, and several other advantages of electronic adding machine etapes, why have mechanical tape adding machines managed to avoid the same fate of paper and pencil spreadsheets? In my opinion, habit is a large factor. People have been using adding machines for a long time; long before the advent of personal computers. Whenever an arithmetic calculation needs to be done, muscle memory kicks in subconsciously. The arm extends past the keyboard and the fingers begin to punch very familiar buttons.
I imagine there is also a certain amount of addiction to the whir and clickity-clackity sounds of a paper tape being printed. When I asked one person why she still used a mechanical paper tape machine she said, "I like the sound it makes." There is also the intimidation many people still feel with personal computers. A mechanical adding machine, compared to software, may feel like a pair of well broken in loafers.
Be it habit, addiction or a comfort factor, mechanical adding machines have managed to survive technological advances despite the fact that they deprive people of valuable functionality and incur unnecessary costs. A well written electronic adding machine, which can sound just like a mechanical machine, pays for itself quickly with reduced office supply expenses and fewer purchases of replacement equipment. It is no longer necessary to buy cases of adding machine tape or boxes of ribbon cartridges. And, since software doesn't wear out, the expense of replacing worn out and broken adding machines is eliminated. Not buying paper tape and ribbons in cardboard packaging also means less pressure on our forests. And not throwing out broken machines and exhausted print cartridges means fewer non-degradable plastics going into our landfills.
Using etapes, in my opinion, is a win-win-win situation for personal computer users, the bottom line and the environment.
The Salvage Truth - Boat Insurance Buying Tips
The water may be your element. You may find the sea quite stirring yet in here you find your own serenity. Yes, the mere sight of the vast sea may stir in you quite a number of various emotional responses. Not a few of people from all walks of life are motivated to build their dream houses near the beach where an overlooking view of the sea is possible. Of course, there are also those who truly enjoy riding on a boat. Some would even resort to buying and owning their own craft such as a yacht or motor boat. These sea vessels are not only bought and owned for the sole purpose of joyride or sea adventures but they are also employed for business reasons.
1. Boat Insurance - Just Like Car Insurance
It is wise to secure boat insurance for security reasons. You may never know what may happen to you and your boat 's occupants when it fares out into the vast sea. Cases of theft, salvage, and natural disasters are some of the problems you may be faced with and they can be truly irritating on one 's part. It may be a real challenge to be looking for the best boat insurance that will cover all of your needs and demands. Remember to be smart. Be inquisitive. Make the right choice with your boat insurance.
2. One Size Does Not Fit All
Each of the types of the sea vessels requires different boat insurance policies. It is best for you to conduct a thorough research before contacting any insurer. Go for the advice of friends and colleagues. Ask them which boat insurance provider will best satisfy you.
3. Know Your Insurer Well
Boat insurance can be procured from either an independent insurance agent or from a direct marine insurance specialist. The purchase of boat insurance from either of the two proves to be a good and wise move. It is necessary to be buying the boat insurance policy from none other than a reputable agent or provider in order to save yourself from the annoying possibilities of scam.
4. Use the Laymen 's Terms in All Business Affairs
Always listen well to the boat insurance agent. Treat the conversation as you would to a daily discourse. And if you come across some unfamiliar terms, ask for an explanation in the language you will best understand. It is important to know what your boat insurance policy will cover as well as those that will not be covered. If you see some loopholes, then be inquisitive.
5. Look Over Coverage Closely
It is best to secure that your boat insurance policy will work out to be not just fine, but it will be perfect to cater to all your claims. Essential coverage includes salvage recovery, accidental damage, fire, flood, and storm damage, theft, vandalism or malicious acts, liability cover, and most importantly, an easy access to a 24-hour helpline in case of emergency.
6. The Agreed Value versus the Actual Cash Value
These two are the choices in terms of the mode of payment on the boat insurance policy that a boater will want to avail. However, it is the depreciation that sets the difference between the two. For the Agreed Value Policy, the boater will have to pay more for the boat insurance. In the event of total loss, the insurer will not only pay you but will also replace most items with new ones. On the other hand, the Actual Cash Value costs less yet in the event of loss, the insurer will only be paying the actual cash amount that is at hand during the time of the property 's loss. This mode is best for clients who don't really give a deal about total loss and for least expensive purchased boats.
7. The Salvage Truth
In case you have decided to stick with the Agreed Value boat insurance policy, then make sure that you do stay away from those that limit salvage coverage. Salvage coverage policy ensures the payment to the salvor for saving the boat from danger or by bringing it to a repair yard. You would want a handsome amount to fix the damages done to your property and surely enough you would not want some deductions from the agreed value just because some payments are to be made to the salvage costs. Definitely, this scheme of payment will leave your budget short for some of the repairs that you will need.
1. Boat Insurance - Just Like Car Insurance
It is wise to secure boat insurance for security reasons. You may never know what may happen to you and your boat 's occupants when it fares out into the vast sea. Cases of theft, salvage, and natural disasters are some of the problems you may be faced with and they can be truly irritating on one 's part. It may be a real challenge to be looking for the best boat insurance that will cover all of your needs and demands. Remember to be smart. Be inquisitive. Make the right choice with your boat insurance.
2. One Size Does Not Fit All
Each of the types of the sea vessels requires different boat insurance policies. It is best for you to conduct a thorough research before contacting any insurer. Go for the advice of friends and colleagues. Ask them which boat insurance provider will best satisfy you.
3. Know Your Insurer Well
Boat insurance can be procured from either an independent insurance agent or from a direct marine insurance specialist. The purchase of boat insurance from either of the two proves to be a good and wise move. It is necessary to be buying the boat insurance policy from none other than a reputable agent or provider in order to save yourself from the annoying possibilities of scam.
4. Use the Laymen 's Terms in All Business Affairs
Always listen well to the boat insurance agent. Treat the conversation as you would to a daily discourse. And if you come across some unfamiliar terms, ask for an explanation in the language you will best understand. It is important to know what your boat insurance policy will cover as well as those that will not be covered. If you see some loopholes, then be inquisitive.
5. Look Over Coverage Closely
It is best to secure that your boat insurance policy will work out to be not just fine, but it will be perfect to cater to all your claims. Essential coverage includes salvage recovery, accidental damage, fire, flood, and storm damage, theft, vandalism or malicious acts, liability cover, and most importantly, an easy access to a 24-hour helpline in case of emergency.
6. The Agreed Value versus the Actual Cash Value
These two are the choices in terms of the mode of payment on the boat insurance policy that a boater will want to avail. However, it is the depreciation that sets the difference between the two. For the Agreed Value Policy, the boater will have to pay more for the boat insurance. In the event of total loss, the insurer will not only pay you but will also replace most items with new ones. On the other hand, the Actual Cash Value costs less yet in the event of loss, the insurer will only be paying the actual cash amount that is at hand during the time of the property 's loss. This mode is best for clients who don't really give a deal about total loss and for least expensive purchased boats.
7. The Salvage Truth
In case you have decided to stick with the Agreed Value boat insurance policy, then make sure that you do stay away from those that limit salvage coverage. Salvage coverage policy ensures the payment to the salvor for saving the boat from danger or by bringing it to a repair yard. You would want a handsome amount to fix the damages done to your property and surely enough you would not want some deductions from the agreed value just because some payments are to be made to the salvage costs. Definitely, this scheme of payment will leave your budget short for some of the repairs that you will need.
Simple Company Accounting Software That Produces Final Accounts For Publication
This whole small business accounting software for a limited liability company can be written on excel spreadsheets which means all bookkeeping transactions are visible at the click of a button. Each excel workbook being arranged in 12 monthly worksheets. Prime data entry excel spreadsheets being provided for sales, purchases, cash, bank, savings account and credit card account.
Financial transactions such as sales or expenses are listed on the appropriate month. And should a change be necessary any item can be easily changed. This simple listing process is a definite advantage to non accountants as no previous bookkeeping or accountancy software knowledge is required.
Bank spreadsheets can be entered by listing the items that appear on the bank statement and include a box to enter the statement balance each month. The formulae within the excel spreadsheet then automatically checks that the entries made agree with the statement balance producing effective bank reconciliation. This feature that ensures entries are recorded accurately in the companies accounts.
From the lists of sales and purchases plus the bank statement entries all the information is automatically transferred to the financial accounts file. A trial balance with embedded formulae automating all the double entry accounting transactions. No entries are required from the user removing the need for accounting experience. The trial balance is purely an accounting solution, visible, transparent and contains an audit check to ensure the company accounts are accurate.
The financial accounting software file should contain an automated monthly profit and loss account to enable limited companies to track their financial performance and very important, the package also produces a balanced profit and loss account and balance sheet in the correct format for submission of the final accounts. This set of final accounts automatically gathering the financial information from the basic entries made with the final accounts also including the statutory notes required for a set of company accounts being published.
While quarterly vat returns are generated for vat registered business the accounting package is also suitable for non vat registered business. To produce a vat return clients open the vat returns file and select the vat quarter end date from a drop down menu and the figures for the vat return are automatically generated. The vat calculations can be disabled by non vat registered small businesses by changing the standard vat rate from 17.5 to zero making the accounting software suitable for both vat registered and non vat registered businesses.
The fixed asset schedule is preset with the capital allowance tax rates to automatically calculate capital allowances when fixed assets are entered. Depreciation calculation are also automated being preset with depreciation percentages that can be changed as required.
The limited company corporation tax liability is calculated within the package in such a way that all the calculations; additions and deductions are both automated and visible. Capital allowances on both existing and new assets being shown on the corporation tax calculation.
Accountancy knowledge required
The limited liability company accounting software is based upon single entry of transactions requiring no accountancy or bookkeeping knowledge. All the accounting knowledge required to perform the double entry of transactions which is a required feature to produce a balance sheet automated through the accounting software formulae and linking structure. The company accounts package has a feature so that the figures for the previous year may be entered and lists of opening debtors and creditors recorded. A minimal level of accounting knowledge is required to correctly list the closing debtors and creditors and check the totals of those lists agrees with the automated balances shown on the company accounts balance sheet
Other features
The product has a stock control feature to monitor any stock losses. The limited company accounting software reviewed contained a wages interface that fully integrates the payroll software when the payroll files are saved into the same folder as the accounting software files. Being written on excel spreadsheets all transactions are visible and capable of being changed by for example overwriting any errors as opposed to a database system that requires new transactions to be entered to reverse previous entries.
The sales and purchase spreadsheets include columns for entering CIS tax deductions and payments and the certificate numbers. The CIS tax being then automatically entered on the self assessment tax return. As the small business accounting software is written on excel spreadsheets then it is essential that users have a version of excel from 1998 onwards installed to use the program. The accounting software also works fine with an Open Source spreadsheet package.
Excel packages can be easier to use than database systems and produce the end products every small limited company requires in a small business accounting software package, automated accounts requiring no bookkeeping skills and no previous financial accountancy software experience with the valuable end product of a fully automated final set of accounts for the limited liability company.
Financial transactions such as sales or expenses are listed on the appropriate month. And should a change be necessary any item can be easily changed. This simple listing process is a definite advantage to non accountants as no previous bookkeeping or accountancy software knowledge is required.
Bank spreadsheets can be entered by listing the items that appear on the bank statement and include a box to enter the statement balance each month. The formulae within the excel spreadsheet then automatically checks that the entries made agree with the statement balance producing effective bank reconciliation. This feature that ensures entries are recorded accurately in the companies accounts.
From the lists of sales and purchases plus the bank statement entries all the information is automatically transferred to the financial accounts file. A trial balance with embedded formulae automating all the double entry accounting transactions. No entries are required from the user removing the need for accounting experience. The trial balance is purely an accounting solution, visible, transparent and contains an audit check to ensure the company accounts are accurate.
The financial accounting software file should contain an automated monthly profit and loss account to enable limited companies to track their financial performance and very important, the package also produces a balanced profit and loss account and balance sheet in the correct format for submission of the final accounts. This set of final accounts automatically gathering the financial information from the basic entries made with the final accounts also including the statutory notes required for a set of company accounts being published.
While quarterly vat returns are generated for vat registered business the accounting package is also suitable for non vat registered business. To produce a vat return clients open the vat returns file and select the vat quarter end date from a drop down menu and the figures for the vat return are automatically generated. The vat calculations can be disabled by non vat registered small businesses by changing the standard vat rate from 17.5 to zero making the accounting software suitable for both vat registered and non vat registered businesses.
The fixed asset schedule is preset with the capital allowance tax rates to automatically calculate capital allowances when fixed assets are entered. Depreciation calculation are also automated being preset with depreciation percentages that can be changed as required.
The limited company corporation tax liability is calculated within the package in such a way that all the calculations; additions and deductions are both automated and visible. Capital allowances on both existing and new assets being shown on the corporation tax calculation.
Accountancy knowledge required
The limited liability company accounting software is based upon single entry of transactions requiring no accountancy or bookkeeping knowledge. All the accounting knowledge required to perform the double entry of transactions which is a required feature to produce a balance sheet automated through the accounting software formulae and linking structure. The company accounts package has a feature so that the figures for the previous year may be entered and lists of opening debtors and creditors recorded. A minimal level of accounting knowledge is required to correctly list the closing debtors and creditors and check the totals of those lists agrees with the automated balances shown on the company accounts balance sheet
Other features
The product has a stock control feature to monitor any stock losses. The limited company accounting software reviewed contained a wages interface that fully integrates the payroll software when the payroll files are saved into the same folder as the accounting software files. Being written on excel spreadsheets all transactions are visible and capable of being changed by for example overwriting any errors as opposed to a database system that requires new transactions to be entered to reverse previous entries.
The sales and purchase spreadsheets include columns for entering CIS tax deductions and payments and the certificate numbers. The CIS tax being then automatically entered on the self assessment tax return. As the small business accounting software is written on excel spreadsheets then it is essential that users have a version of excel from 1998 onwards installed to use the program. The accounting software also works fine with an Open Source spreadsheet package.
Excel packages can be easier to use than database systems and produce the end products every small limited company requires in a small business accounting software package, automated accounts requiring no bookkeeping skills and no previous financial accountancy software experience with the valuable end product of a fully automated final set of accounts for the limited liability company.
Small Business Accounting Software That Fills In Your Tax Return
Most accounting software package are used by non accountants often with little or no previous accounting knowledge. Bookkeeping is best in these circumstances reduced to making a list of sales and a list of purchases on preset excel spreadsheets. Each workbook is arranged as 12 monthly spreadsheets with preset columns and uses an entry code letter to analyse both sales and expenditure.
Cash and bank spreadsheets are included as optional extras for those businesses that require them with a built in automated bank reconciliation. The sheet designed to be completed by copying the figures from the bank statement into the bank spreadsheet and the bank reconciliation is achieved by entering the statement total which is automatically checked against the entries made.
Monthly profit and loss account can include a financial health check based upon an automated tax forecast to enable businesses to monitor their financial performance. By entering drawings the package then compares the net profit made with the likely tax liability plus the drawings.
Quarterly vat returns can be generated for vat registered business and should also suitable for non vat registered business. To produce a vat return clients simply go to the vat file and select the quarter end date from a drop down menu and the figures for the vat return are automatically generated.
The vat calculations can be disabled by non vat registered small businesses by simply changing the standard vat rate from 17.5 to zero making the accounting software suitable for both vat registered and non vat registered businesses.
The accounting package includes a stand alone sales invoice generator which requires invoices generated to be manually input into the sales sheet.
The fixed asset schedule is preset with the capital allowance tax rates to automatically calculate capital allowances when fixed assets are entered. Depreciation is automatically calculated with preset percentages that can be changed as required.
The excel templates in the small business bookkeeping software being arranged to automatically generate an excel copy of the self assessment tax return. The excel self assessment tax return being arranged in the same layout as the official inland revenue form with the same box numbers making it easy to copy the figures from one to the other for submission.
Self-employed accounting software based upon single entry of transactions does not produce a balance sheet which is an optional requirement for self employed and therefore not a problem for the vast majority of businesses. Self employed businesses should consider using a limited company accounts package if a balance sheet is required. A limited company accounts package would produce a balance sheet being based not on single entry but on double entry bookkeeping principles.
The small business accounting software is suitable for a single tax year, the latest being 2007-08 and does not cater for accounting periods other than April to April. There are benefits in anyone self employed adopting the standard April to April financial year as this avoids tax allowances from two separate years being a feature of the accounts.
When used by small businesses using the cash accounting system the bookkeeping entries to the sales and purchase sheets must be entered according to the dates money is paid or received rather than the dates invoices were issued. At the end of the financial year any invoices not yet entered require to be listed to adjust the final profit and loss account figures. This a major disadvantage if using the vat cash accounting scheme rather than the accounting software being reviewed.
The product has a stock control feature to monitor any stock losses. The small business accounting software contains a wages interface that fully integrates the with the payroll software when the payroll files are saved into the same folder as the accounting software files. Being written on excel spreadsheets all transactions are visible and capable of being changed by for example overwriting any errors as opposed to a database system that requires new transactions to be entered to reverse previous entries.
The sales and purchase spreadsheets include columns for entering CIS tax deductions and payments and the certificate numbers. The CIS tax being then automatically entered on the self assessment tax return.
As the small business accounting software is written on excel spreadsheets then it is essential that users have a version of excel from 1998 onwards installed to use the program. Accounting software written on excel spreadsheets also works fine with an Open Source spreadsheet package.
Essential requirements of accounting software for the self-employed should produce a set of accounts for the small business requiring no bookkeeping skills and no previous accounting experience with the desired end product of a fully automated self assessment tax return.
Cash and bank spreadsheets are included as optional extras for those businesses that require them with a built in automated bank reconciliation. The sheet designed to be completed by copying the figures from the bank statement into the bank spreadsheet and the bank reconciliation is achieved by entering the statement total which is automatically checked against the entries made.
Monthly profit and loss account can include a financial health check based upon an automated tax forecast to enable businesses to monitor their financial performance. By entering drawings the package then compares the net profit made with the likely tax liability plus the drawings.
Quarterly vat returns can be generated for vat registered business and should also suitable for non vat registered business. To produce a vat return clients simply go to the vat file and select the quarter end date from a drop down menu and the figures for the vat return are automatically generated.
The vat calculations can be disabled by non vat registered small businesses by simply changing the standard vat rate from 17.5 to zero making the accounting software suitable for both vat registered and non vat registered businesses.
The accounting package includes a stand alone sales invoice generator which requires invoices generated to be manually input into the sales sheet.
The fixed asset schedule is preset with the capital allowance tax rates to automatically calculate capital allowances when fixed assets are entered. Depreciation is automatically calculated with preset percentages that can be changed as required.
The excel templates in the small business bookkeeping software being arranged to automatically generate an excel copy of the self assessment tax return. The excel self assessment tax return being arranged in the same layout as the official inland revenue form with the same box numbers making it easy to copy the figures from one to the other for submission.
Self-employed accounting software based upon single entry of transactions does not produce a balance sheet which is an optional requirement for self employed and therefore not a problem for the vast majority of businesses. Self employed businesses should consider using a limited company accounts package if a balance sheet is required. A limited company accounts package would produce a balance sheet being based not on single entry but on double entry bookkeeping principles.
The small business accounting software is suitable for a single tax year, the latest being 2007-08 and does not cater for accounting periods other than April to April. There are benefits in anyone self employed adopting the standard April to April financial year as this avoids tax allowances from two separate years being a feature of the accounts.
When used by small businesses using the cash accounting system the bookkeeping entries to the sales and purchase sheets must be entered according to the dates money is paid or received rather than the dates invoices were issued. At the end of the financial year any invoices not yet entered require to be listed to adjust the final profit and loss account figures. This a major disadvantage if using the vat cash accounting scheme rather than the accounting software being reviewed.
The product has a stock control feature to monitor any stock losses. The small business accounting software contains a wages interface that fully integrates the with the payroll software when the payroll files are saved into the same folder as the accounting software files. Being written on excel spreadsheets all transactions are visible and capable of being changed by for example overwriting any errors as opposed to a database system that requires new transactions to be entered to reverse previous entries.
The sales and purchase spreadsheets include columns for entering CIS tax deductions and payments and the certificate numbers. The CIS tax being then automatically entered on the self assessment tax return.
As the small business accounting software is written on excel spreadsheets then it is essential that users have a version of excel from 1998 onwards installed to use the program. Accounting software written on excel spreadsheets also works fine with an Open Source spreadsheet package.
Essential requirements of accounting software for the self-employed should produce a set of accounts for the small business requiring no bookkeeping skills and no previous accounting experience with the desired end product of a fully automated self assessment tax return.
How To Produce Taxi Driver Accounts Plus Tax Returns In Less Than 2 Hours
Since the majority of taxi drivers, but certainly not all, have little accounting or bookkeeping knowledge the lower the level of expertise required the more suitable such an accounts package will be. Data entry basically consists of just 3 records, being an excel spreadsheet for taxi receipts; another for taxi expenses plus a further worksheet in which assets such as a vehicle can be recorded.
Taxi receipts are entered on a series of excel worksheets within the taxi income work book preset with each day of the financial year. Weekly and monthly totals are added and transferred through the linking system from the taxi bookkeeping sheets to the taxi financial accounts sheet.
Taxi expenses are listed on a series of twelve monthly spreadsheets which have preset columns with appropriate headings for taxi drivers to record office and rental costs, fuel bills, other vehicle costs and licence fees. The total of each expense is entered on each row and a single letter used to then analyse the taxi expense to the column required. As with the taxi income sheet the columns are then automatically added which includes a check on data entry accuracy before being transferred to the taxi driver accounts sheet.
Cash and bank spreadsheets are not provided as not required by taxi drivers as taxi drivers do not need to produce a balance sheet.
In addition to entering purchases on the taxi expense sheet the only other entries required from the taxi driver to produce a set of taxi driver accounts is to also enter vehicle and any other assets purchased on the fixed asset spreadsheet. The fixed asset spreadsheet having already been preset with both depreciation rates and the capital allowances that taxi drivers can claim. The taxi accounts software is then complete.
The financial accounts file contains formulae to produce a monthly profit and loss account that includes the taxi capital allowances from the fixed asset schedule.
A unique feature is that both mileages covered and vehicle running costs can be entered. The tax rules in the UK state that drivers cannot claim both mileage allowances and vehicle running costs. It has to be one or the other and only at the end of the financial year when it becomes clear which is the most tax efficient.
This taxi accounts package compares both the mileage cost and the vehicle running cost and automatically selects the most expensive. This ensures the highest costs are selected into the calculation of the net taxable profits and highest cost equals lowest tax bill.
Also in the taxi accounts file is an excel spreadsheet designed with the same layout, colour codes and box numbers as the inland revenue self assessment tax return. The taxi self assessment tax return is completed automatically by the cabsmart taxi accounts software. No entries are required leaving the taxi driver only to click print to produce the self assessment tax return.
Finally having calculated the net taxable profit for the year the accounting package also has a tax calculator that calculates the amount of income tax and national insurance to be paid.
The taxi driver accounts package has been tested many times and the annual receipts and expenses for a full year take approximately 2 to 3 hours to enter, and have been completed in less than 2 hours. The end product is a full set of taxi driver accounts including the self assessment tax return.
Both couriers and van drivers have similar businesses to taxi drivers in that they move items from one place to another in a similar way in which taxi drivers move people from one location to another. And because of the similarity in business activity then this taxi accounting package would be equally suitable for couriers and van drivers.
Taxi receipts are entered on a series of excel worksheets within the taxi income work book preset with each day of the financial year. Weekly and monthly totals are added and transferred through the linking system from the taxi bookkeeping sheets to the taxi financial accounts sheet.
Taxi expenses are listed on a series of twelve monthly spreadsheets which have preset columns with appropriate headings for taxi drivers to record office and rental costs, fuel bills, other vehicle costs and licence fees. The total of each expense is entered on each row and a single letter used to then analyse the taxi expense to the column required. As with the taxi income sheet the columns are then automatically added which includes a check on data entry accuracy before being transferred to the taxi driver accounts sheet.
Cash and bank spreadsheets are not provided as not required by taxi drivers as taxi drivers do not need to produce a balance sheet.
In addition to entering purchases on the taxi expense sheet the only other entries required from the taxi driver to produce a set of taxi driver accounts is to also enter vehicle and any other assets purchased on the fixed asset spreadsheet. The fixed asset spreadsheet having already been preset with both depreciation rates and the capital allowances that taxi drivers can claim. The taxi accounts software is then complete.
The financial accounts file contains formulae to produce a monthly profit and loss account that includes the taxi capital allowances from the fixed asset schedule.
A unique feature is that both mileages covered and vehicle running costs can be entered. The tax rules in the UK state that drivers cannot claim both mileage allowances and vehicle running costs. It has to be one or the other and only at the end of the financial year when it becomes clear which is the most tax efficient.
This taxi accounts package compares both the mileage cost and the vehicle running cost and automatically selects the most expensive. This ensures the highest costs are selected into the calculation of the net taxable profits and highest cost equals lowest tax bill.
Also in the taxi accounts file is an excel spreadsheet designed with the same layout, colour codes and box numbers as the inland revenue self assessment tax return. The taxi self assessment tax return is completed automatically by the cabsmart taxi accounts software. No entries are required leaving the taxi driver only to click print to produce the self assessment tax return.
Finally having calculated the net taxable profit for the year the accounting package also has a tax calculator that calculates the amount of income tax and national insurance to be paid.
The taxi driver accounts package has been tested many times and the annual receipts and expenses for a full year take approximately 2 to 3 hours to enter, and have been completed in less than 2 hours. The end product is a full set of taxi driver accounts including the self assessment tax return.
Both couriers and van drivers have similar businesses to taxi drivers in that they move items from one place to another in a similar way in which taxi drivers move people from one location to another. And because of the similarity in business activity then this taxi accounting package would be equally suitable for couriers and van drivers.
Vital Importance Of Small Business Accounting Software
Every business functions through a range of disciplines, sales and marketing, operational skills, purchasing and management. A small business accounting software is also an essential tool to bring financial discipline to the business. No matter how skilled and well trained the business every small business needs a full range of functions to reach the highest levels of success.
The first lesson in business is to ensure that business has sufficient cash to trade the next day. Failing to meet this target and the business is finished which is why accounting and in particular accounting software should be regarded by the small business management as an essential piece of kit.
Small business accounting software comes in many guises some of which will be more suitable for a particular business than others. Nevertheless the choice to adopt a solid form of financial control is vital to ensure sales are higher enough to generate profits, margins are sufficient, costs are controlled, net profits are generated, cash flow is under control and losses can be identified and reversed or halted. No large business would survive without a sophisticated system of financial control and small businesses have the same requirements albeit on a different scale.
Many entrepreneurs who run a small business regard the accounting function and the recording of financial transactions as an administrative burden. Small business accounting software should not be viewed in this way but instead as a tool to assist the generation of safer stringer profits and the early warning system of dealing with problems if the business does not perform.
Use the small business accounting software to update the financial records at least once each month. With sales recorded every month peaks and troughs in performance are obvious and can then be examined to replicate those actions that produced higher sales levels and cut out those actions which produced lesser results. The result hopefully being sustained sales growth.
Record all the costs each month and as with sales the trend to higher costs or more efficient cost control will be evident from the financial accounts. Also of importance will be the profit margin being achieved and this can be viewed against the level of sales and justified. Statistically small businesses run by born salesmen achieve high sales but at the cost of lower margins while businesses run by accountants tend to achieve higher profit margins but with lower sales.
This statistical fact is true as is also the fact that most small businesses are run by neither accountants nor salesmen but by the skilled worker applying their trade or area of expertise. By using a small business accounting software the entrepreneur can judge what he would like the figures to show against what they actually show and take the necessary action to change the future and produce the desired result. Without accounting software the entrepreneur works in the dark depending on hunches rather than financial facts.
No matter how good or bad a business is the cash flow or lack of it might well determine future growth or in the worst case scenario, survival. Many small businesses that do not use a small business accounting solution package and run into difficulties have often been in financial problems for many months before it is obvious as reductions in profitability are hidden by extended credit from suppliers or tightening credit lines with customers.
Small business accounting software can indicate which parts of the business are doing well, where action is needed if underperforming and may also indicate where action needs to be taken. Accurate control of money owed in and money owed out is extremely difficult without the information to know how significant these figures are. But they can be critical for some businesses and using a small business accounting software that provides this information is crucial.
A disadvantage of small business accounting software is that it may sound like a foreign language but it does not have to be so difficult. Accounting software using a database can require some bookkeeping skills to get the most out of the system but there are other alternatives. A small business accounting software solution written on excel spreadsheets that produces all the main requirements with all transactions visible can be an ideal solution for small businesses with little or no bookkeeping or accounting knowledge.
The first lesson in business is to ensure that business has sufficient cash to trade the next day. Failing to meet this target and the business is finished which is why accounting and in particular accounting software should be regarded by the small business management as an essential piece of kit.
Small business accounting software comes in many guises some of which will be more suitable for a particular business than others. Nevertheless the choice to adopt a solid form of financial control is vital to ensure sales are higher enough to generate profits, margins are sufficient, costs are controlled, net profits are generated, cash flow is under control and losses can be identified and reversed or halted. No large business would survive without a sophisticated system of financial control and small businesses have the same requirements albeit on a different scale.
Many entrepreneurs who run a small business regard the accounting function and the recording of financial transactions as an administrative burden. Small business accounting software should not be viewed in this way but instead as a tool to assist the generation of safer stringer profits and the early warning system of dealing with problems if the business does not perform.
Use the small business accounting software to update the financial records at least once each month. With sales recorded every month peaks and troughs in performance are obvious and can then be examined to replicate those actions that produced higher sales levels and cut out those actions which produced lesser results. The result hopefully being sustained sales growth.
Record all the costs each month and as with sales the trend to higher costs or more efficient cost control will be evident from the financial accounts. Also of importance will be the profit margin being achieved and this can be viewed against the level of sales and justified. Statistically small businesses run by born salesmen achieve high sales but at the cost of lower margins while businesses run by accountants tend to achieve higher profit margins but with lower sales.
This statistical fact is true as is also the fact that most small businesses are run by neither accountants nor salesmen but by the skilled worker applying their trade or area of expertise. By using a small business accounting software the entrepreneur can judge what he would like the figures to show against what they actually show and take the necessary action to change the future and produce the desired result. Without accounting software the entrepreneur works in the dark depending on hunches rather than financial facts.
No matter how good or bad a business is the cash flow or lack of it might well determine future growth or in the worst case scenario, survival. Many small businesses that do not use a small business accounting solution package and run into difficulties have often been in financial problems for many months before it is obvious as reductions in profitability are hidden by extended credit from suppliers or tightening credit lines with customers.
Small business accounting software can indicate which parts of the business are doing well, where action is needed if underperforming and may also indicate where action needs to be taken. Accurate control of money owed in and money owed out is extremely difficult without the information to know how significant these figures are. But they can be critical for some businesses and using a small business accounting software that provides this information is crucial.
A disadvantage of small business accounting software is that it may sound like a foreign language but it does not have to be so difficult. Accounting software using a database can require some bookkeeping skills to get the most out of the system but there are other alternatives. A small business accounting software solution written on excel spreadsheets that produces all the main requirements with all transactions visible can be an ideal solution for small businesses with little or no bookkeeping or accounting knowledge.
Accounting Software Can Be Sophisticated Or Simple But Rarely Both
Accounting software is a system of recording financial transactions on a computer across a full range of accounting options almost invariably dependent upon the size of business being catered for. Accounting software can vary from multi million pound solutions for major public companies to simple managed lists of income and expenses.
The requirements from accounting software are diverse with the most complex and comprehensive financial accounting packages incorporating financial reporting information and managed by teams of qualified accountants supported by accounts clerks, bookkeepers and substantial input from automated data sources. At the other end of the scale a self employed sole trader might use accounting software themselves and produce a set of financial accounts for the year in an afternoon.
Different accounting standards are required from accounting software dependent upon the fitness for purpose and client needs. Double entry bookkeeping automated through a database system and probably arranged in financial modules would normally be the choice of the majority of public companies. Single entry bookkeeping would not be an acceptable accounting solution for a limited company due to audit requirements and statutory obligations.
Single entry bookkeeping does however have its place in the market place for the smaller less complex businesses who maintain financial control through a close intimate knowledge of every financial transaction. The main objective of a sole trader is more likely to be the production of the tax accounts and complete the periodic and annual tax return forms.
The most sophisticated level of accounting software in the largest companies mirrors the accounting functions in those organisations with various financial modules for accounts receivable, accounts payable, stock control, general ledger and fixed assets. These accounting modules may also be integrated with non accounting functions such as production and dispatch functions and also divided into separate modules within the accounting function.
In larger companies the sales daybook and data entry of sales turnover would often be the responsibility of one department while the accounts receivable function might be split with a specialist credit control function within that accounting module. A further division may also include sales administration and customer records. Similarly the accounts payable function might be split between the purchasing department, accounts purchase invoice department and a legal function for overdue payments.
Accounting software for smaller companies and organisations is commonly a system of data entry of prime transactions which include sales income, purchase expenses and cash and bank transactions. The prime entry of these documents being to a database which automates the double entry accounting principles and produces both accounts receivable, accounts payable and general ledger databases.
Some accounting knowledge is usually required tom operate a database accounting software system and that financial knowledge is usually available within the company as most companies that use database accounting software also employ a bookkeeper or accounts clerks to input data and in slightly larger small companies also qualified accountants to manage the accounting function.
The need for accounting knowledge in a database system is partially to understand the data entry principles and the relevancy of the rules that need to be followed but essentially understanding of accounting principles is required to understand what is happening ton the information after input. And most important, a qualified accountant has the financial knowledge, training and experience to know what the system should be producing and how to query the database to retrieve that information.
In addition to inputting the prime income and expenditure details the most benefit of a database accounting system is the level of financial control the information it contains can provide the company management and financial directorship. The accounting function also has the security of producing trial balances, periodic profit and loss accounts, balance sheets and other financial and statements for tax and control purposes.
Accounting software packages requiring little or no accounting knowledge are available.
Small limited companies must obtain accounting software based upon double entry accounting principles as in addition to producing a profit and loss account and a trial balance to demonstrate accuracy and integrity of the financial records plus a balance sheet is required for reporting purposes. Accounting standards require the limited company to have a system of financial control and accounting software is an essential tool in achieving this.
Some accounting knowledge either from the management or outsourcing the bookkeeping services is usually required with even the simplest database accounting solutions eve3n if this requires the understanding of what accounts receivable ledgers, accounts payable ledger and control accounts mean.
There are other possibilities and those businesses with a minimum of accounting knowledge can consider spreadsheet based accounting software. Accounting software compiled from spreadsheets is less flexible and often does not have the range of options a database system has due to the lack of database queries available. These disadvantages of flexibility being compensated by the fact that all entries are visible, transparent and changes can be made more easily.
Financially at the sole trader and self employed end of the business spectrum then the requirements from accounting software may be completely different. Gone are the sophistications of control accounts, trial balances and many aspects of financial control. The most important aspect of self employed accounting software is often to produce a set of accounts for tax purposes.
Self employed small business that do not require a balance sheet can use accounting software based upon single entry bookkeeping rather than double entry and with the reduced requirement for financial control then less financial queries to the system are required. In these respects the simpler an accounting solution the better and in this market an accounting solution written on spreadsheets that can produce the net taxable profit would meet the requirements.
The requirements from accounting software are diverse with the most complex and comprehensive financial accounting packages incorporating financial reporting information and managed by teams of qualified accountants supported by accounts clerks, bookkeepers and substantial input from automated data sources. At the other end of the scale a self employed sole trader might use accounting software themselves and produce a set of financial accounts for the year in an afternoon.
Different accounting standards are required from accounting software dependent upon the fitness for purpose and client needs. Double entry bookkeeping automated through a database system and probably arranged in financial modules would normally be the choice of the majority of public companies. Single entry bookkeeping would not be an acceptable accounting solution for a limited company due to audit requirements and statutory obligations.
Single entry bookkeeping does however have its place in the market place for the smaller less complex businesses who maintain financial control through a close intimate knowledge of every financial transaction. The main objective of a sole trader is more likely to be the production of the tax accounts and complete the periodic and annual tax return forms.
The most sophisticated level of accounting software in the largest companies mirrors the accounting functions in those organisations with various financial modules for accounts receivable, accounts payable, stock control, general ledger and fixed assets. These accounting modules may also be integrated with non accounting functions such as production and dispatch functions and also divided into separate modules within the accounting function.
In larger companies the sales daybook and data entry of sales turnover would often be the responsibility of one department while the accounts receivable function might be split with a specialist credit control function within that accounting module. A further division may also include sales administration and customer records. Similarly the accounts payable function might be split between the purchasing department, accounts purchase invoice department and a legal function for overdue payments.
Accounting software for smaller companies and organisations is commonly a system of data entry of prime transactions which include sales income, purchase expenses and cash and bank transactions. The prime entry of these documents being to a database which automates the double entry accounting principles and produces both accounts receivable, accounts payable and general ledger databases.
Some accounting knowledge is usually required tom operate a database accounting software system and that financial knowledge is usually available within the company as most companies that use database accounting software also employ a bookkeeper or accounts clerks to input data and in slightly larger small companies also qualified accountants to manage the accounting function.
The need for accounting knowledge in a database system is partially to understand the data entry principles and the relevancy of the rules that need to be followed but essentially understanding of accounting principles is required to understand what is happening ton the information after input. And most important, a qualified accountant has the financial knowledge, training and experience to know what the system should be producing and how to query the database to retrieve that information.
In addition to inputting the prime income and expenditure details the most benefit of a database accounting system is the level of financial control the information it contains can provide the company management and financial directorship. The accounting function also has the security of producing trial balances, periodic profit and loss accounts, balance sheets and other financial and statements for tax and control purposes.
Accounting software packages requiring little or no accounting knowledge are available.
Small limited companies must obtain accounting software based upon double entry accounting principles as in addition to producing a profit and loss account and a trial balance to demonstrate accuracy and integrity of the financial records plus a balance sheet is required for reporting purposes. Accounting standards require the limited company to have a system of financial control and accounting software is an essential tool in achieving this.
Some accounting knowledge either from the management or outsourcing the bookkeeping services is usually required with even the simplest database accounting solutions eve3n if this requires the understanding of what accounts receivable ledgers, accounts payable ledger and control accounts mean.
There are other possibilities and those businesses with a minimum of accounting knowledge can consider spreadsheet based accounting software. Accounting software compiled from spreadsheets is less flexible and often does not have the range of options a database system has due to the lack of database queries available. These disadvantages of flexibility being compensated by the fact that all entries are visible, transparent and changes can be made more easily.
Financially at the sole trader and self employed end of the business spectrum then the requirements from accounting software may be completely different. Gone are the sophistications of control accounts, trial balances and many aspects of financial control. The most important aspect of self employed accounting software is often to produce a set of accounts for tax purposes.
Self employed small business that do not require a balance sheet can use accounting software based upon single entry bookkeeping rather than double entry and with the reduced requirement for financial control then less financial queries to the system are required. In these respects the simpler an accounting solution the better and in this market an accounting solution written on spreadsheets that can produce the net taxable profit would meet the requirements.
Managing Stock Levels Can See Off The Credit Crunch By Improving Cash Flow
The first sign of problems is often a reduction in net profit while the last post, literally the last post is a severe cash flow deficiency. Sound accounting procedures should produce financial control information on stock levels, debtors and creditors and financial investment to provide early warning systems of impending cash flow problems.
Larger businesses have accountants producing financial information who also review and monitor all major financial influences within the business. Smaller businesses often do not have these finance details and financial controls and put themselves at risk since as the credit crunch tightens the businesses that are most at risk are those which fail to manage their liquidity until it is too late.
Major significant areas where businesses produce or purchase goods for resale are the stock levels. Finished stock, raw materials, work in progress and consumable stock all require attention to ensure adequate stock levels are available to the business and overstock positions are eliminated.
All stock has to be financed and funded from either the working capital of the business or external funding. If the business has no external funding costs then high stock levels may be advantageous in obtaining better supplier discounts when purchasing. When the value of stock has to be financed then it is important the stock levels are managed to use up the minimum financial resources.
Stock management is not just about reducing the volume but is about always having just enough for the level of sales without stock shortages. Businesses employing accountants set a stock policy while this duty is left to the business owner in small businesses.
The first step would be to carry out a stock audit through a physical stocktaking and produce financial statistics of the sales volume for each item in the stores. Where appropriate the accounting system adopted should produce easily accessible stock figures so the situation can be constantly monitored.
Monitoring stock quantities by including sales and purchases can also provide indications of abnormal stock losses through loss and theft. Valuable stock especially with a potential resale value should be kept separately, protected and access restricted.
Armed with the stock levels and turnover figures policies can then be developed to manage the stock investment by initially eliminating or reducing purchase orders for those items over stocked and increasing the stock levels of those items under stocked to maintain maximum sales volume by eliminating shortages.
In addition other factors affecting stock levels include purchase order quantities and delivery schedules and reliability of the supply chain. By ordering less more frequently and arranging better delivery schedules stock quantities can be reduced saving valuable cash resources and improving liquidity without reducing sales.
Commercially, minimum stock levels are not always prudent. Advantage has to be taken of bargains, volume discounts and the risks of stock shortages but these decisions should always be taken based upon the financial advantages of over stocking outweighing the cost of financing that stock. High stock values affect cash flow.
Sales policy can also have a strong influence on stock levels and should be managed with a view not just to achieving maximum sales but also to minimise the business financial investment in working capital. Sales can achieve this by directing policy towards a higher turnover of goods, selling goods bought at bargain prices faster and clearing slow moving items.
If goods are bought at a cheap price there is every chance such items are at higher volumes than normally required and sales policy can move these items faster to reduce the cash flow requirement and improve business liquidity.
Every business has slow moving items and products that become obsolete. Such items are using valuable cash resources required in a credit crunch and turning such stock into cash benefits the business and provides additional funding for more profitable items.
Delivery policy affects stock levels and might be reviewed. Delivering faster and perhaps outsourcing the delivery function can get the goods to the clients faster. That reduces the stock levels and should result in cash being received faster as the customers can be invoiced earlier improving cash flow.
Retail businesses often have limited policies of stock quantities other than filling the shelves while retaining a back room full of goods which are not available for sale until displayed. Every stock item in the back room is costing money while sitting there. That cost can only be justified in commercial terms if the quantities being held will be required before the next delivery is due or has been purchased at an abnormally lower price.
Every different type of business has its own inventory requirements with many different factors being applicable. The important message is not what should be done about this item or that item but the fact that there is an overall stock policy appropriate to the type of business to enable the business to function at maximum volume with minimum financial investment in stock.
Reviewing stores and inventory policy can reduce the cash flow and working capital requirements of business. The increased cash flow can then be used to improve the purchasing policy to take advantage of market conditions and offers as they arise to increase overall profitability.
A lack of inventory control can result in a fire sale operation should cash flow and liquidity be so strained that the financial cash resources of the business run out. Good stock control can avoid such drastic measures
Larger businesses have accountants producing financial information who also review and monitor all major financial influences within the business. Smaller businesses often do not have these finance details and financial controls and put themselves at risk since as the credit crunch tightens the businesses that are most at risk are those which fail to manage their liquidity until it is too late.
Major significant areas where businesses produce or purchase goods for resale are the stock levels. Finished stock, raw materials, work in progress and consumable stock all require attention to ensure adequate stock levels are available to the business and overstock positions are eliminated.
All stock has to be financed and funded from either the working capital of the business or external funding. If the business has no external funding costs then high stock levels may be advantageous in obtaining better supplier discounts when purchasing. When the value of stock has to be financed then it is important the stock levels are managed to use up the minimum financial resources.
Stock management is not just about reducing the volume but is about always having just enough for the level of sales without stock shortages. Businesses employing accountants set a stock policy while this duty is left to the business owner in small businesses.
The first step would be to carry out a stock audit through a physical stocktaking and produce financial statistics of the sales volume for each item in the stores. Where appropriate the accounting system adopted should produce easily accessible stock figures so the situation can be constantly monitored.
Monitoring stock quantities by including sales and purchases can also provide indications of abnormal stock losses through loss and theft. Valuable stock especially with a potential resale value should be kept separately, protected and access restricted.
Armed with the stock levels and turnover figures policies can then be developed to manage the stock investment by initially eliminating or reducing purchase orders for those items over stocked and increasing the stock levels of those items under stocked to maintain maximum sales volume by eliminating shortages.
In addition other factors affecting stock levels include purchase order quantities and delivery schedules and reliability of the supply chain. By ordering less more frequently and arranging better delivery schedules stock quantities can be reduced saving valuable cash resources and improving liquidity without reducing sales.
Commercially, minimum stock levels are not always prudent. Advantage has to be taken of bargains, volume discounts and the risks of stock shortages but these decisions should always be taken based upon the financial advantages of over stocking outweighing the cost of financing that stock. High stock values affect cash flow.
Sales policy can also have a strong influence on stock levels and should be managed with a view not just to achieving maximum sales but also to minimise the business financial investment in working capital. Sales can achieve this by directing policy towards a higher turnover of goods, selling goods bought at bargain prices faster and clearing slow moving items.
If goods are bought at a cheap price there is every chance such items are at higher volumes than normally required and sales policy can move these items faster to reduce the cash flow requirement and improve business liquidity.
Every business has slow moving items and products that become obsolete. Such items are using valuable cash resources required in a credit crunch and turning such stock into cash benefits the business and provides additional funding for more profitable items.
Delivery policy affects stock levels and might be reviewed. Delivering faster and perhaps outsourcing the delivery function can get the goods to the clients faster. That reduces the stock levels and should result in cash being received faster as the customers can be invoiced earlier improving cash flow.
Retail businesses often have limited policies of stock quantities other than filling the shelves while retaining a back room full of goods which are not available for sale until displayed. Every stock item in the back room is costing money while sitting there. That cost can only be justified in commercial terms if the quantities being held will be required before the next delivery is due or has been purchased at an abnormally lower price.
Every different type of business has its own inventory requirements with many different factors being applicable. The important message is not what should be done about this item or that item but the fact that there is an overall stock policy appropriate to the type of business to enable the business to function at maximum volume with minimum financial investment in stock.
Reviewing stores and inventory policy can reduce the cash flow and working capital requirements of business. The increased cash flow can then be used to improve the purchasing policy to take advantage of market conditions and offers as they arise to increase overall profitability.
A lack of inventory control can result in a fire sale operation should cash flow and liquidity be so strained that the financial cash resources of the business run out. Good stock control can avoid such drastic measures
What Work These Accounting And Bookkeeping Departments Do?
People assume both bookkeeping and accounting are one and the same. In reality both differs. Bookkeeping is a function of accounting while accounting includes many tasks involved in managing the financial affairs of a business. Any income statements or financial records are initially prepared by bookkeepers and then it is given to accountants for the corrections and final approval.
Bookkeepers carry out all manner of record-keeping tasks. Some of them contain the following:
They set up source documents for all the process of a business - the buying, selling, transferring, paying and collecting. The documents consist of papers like purchase orders, invoices, credit card slips, time cards, time sheets and expense reports. Bookkeepers also enter financial effects of the transactions and other business events. Those contain making sales buying products, borrowing money or raw materials for production.
Bookkeepers also make entries of the financial consequences into journals and accounts.
These are two different things. A journal is the record of transactions in chronological order. An account is a separate record, or page for each asset and each liability. One transaction can affect several accounts.
Bookkeepers set up reports at the end of definite period of time, such as daily, weekly, monthly, quarterly or annually. To do this, all the accounts need to be up to date. Inventory records must be updated and the reports checked and double-checked to make sure that they are as error-free as possible.
The bookkeepers also gather entire listings of all accounts. This is called the adjusted trial balance. While a small business may have a hundred or so accounts, very large businesses can have more than 10,000 accounts. The final step is for the bookkeeper to close the books, which means bringing all the bookkeeping for a fiscal year to a close and summarized.
Well, Payroll is a terribly important thing that they do in both accounting and bookkeeping departments. They record all the salaries and taxes earned and paid by every employee in every pay period. Federal, state and local taxes has to be deducted appropriately so, the payroll department has to take care of this. These taxes are recorded in the pay stub attached to your paycheck. Income tax, social security taxes paid, employment taxes that have to be paid to federal and state government are also included. Retirement, vacation, sick pay or medical benefits are the personal ones which are included in the other deductions. It is a critical function.
The accounting department collects and reports any payments or cash received from customers of the business or service. The accounting department has to make sure that the money is sourced precisely and deposited in the suitable accounts. They also supervise where the money goes; how much of it is kept on-hand for areas like payroll, or how much of it goes out to pay what the company owes its banks, vendors and other obligations.
On the other hand cash disbursements are key area of the receivables business. A company writes many checks throughout the course of year to pay for purchases, supplies, salaries and taxes. The accounting department plans all these checks and records to whom they were disbursed, how much and for what. Accounting departments also record purchase orders located for inventory, like products that will be sold to customers or clients. They also record assets like business 's property and equipment.
Bookkeepers carry out all manner of record-keeping tasks. Some of them contain the following:
They set up source documents for all the process of a business - the buying, selling, transferring, paying and collecting. The documents consist of papers like purchase orders, invoices, credit card slips, time cards, time sheets and expense reports. Bookkeepers also enter financial effects of the transactions and other business events. Those contain making sales buying products, borrowing money or raw materials for production.
Bookkeepers also make entries of the financial consequences into journals and accounts.
These are two different things. A journal is the record of transactions in chronological order. An account is a separate record, or page for each asset and each liability. One transaction can affect several accounts.
Bookkeepers set up reports at the end of definite period of time, such as daily, weekly, monthly, quarterly or annually. To do this, all the accounts need to be up to date. Inventory records must be updated and the reports checked and double-checked to make sure that they are as error-free as possible.
The bookkeepers also gather entire listings of all accounts. This is called the adjusted trial balance. While a small business may have a hundred or so accounts, very large businesses can have more than 10,000 accounts. The final step is for the bookkeeper to close the books, which means bringing all the bookkeeping for a fiscal year to a close and summarized.
Well, Payroll is a terribly important thing that they do in both accounting and bookkeeping departments. They record all the salaries and taxes earned and paid by every employee in every pay period. Federal, state and local taxes has to be deducted appropriately so, the payroll department has to take care of this. These taxes are recorded in the pay stub attached to your paycheck. Income tax, social security taxes paid, employment taxes that have to be paid to federal and state government are also included. Retirement, vacation, sick pay or medical benefits are the personal ones which are included in the other deductions. It is a critical function.
The accounting department collects and reports any payments or cash received from customers of the business or service. The accounting department has to make sure that the money is sourced precisely and deposited in the suitable accounts. They also supervise where the money goes; how much of it is kept on-hand for areas like payroll, or how much of it goes out to pay what the company owes its banks, vendors and other obligations.
On the other hand cash disbursements are key area of the receivables business. A company writes many checks throughout the course of year to pay for purchases, supplies, salaries and taxes. The accounting department plans all these checks and records to whom they were disbursed, how much and for what. Accounting departments also record purchase orders located for inventory, like products that will be sold to customers or clients. They also record assets like business 's property and equipment.
UK Accounting Reference Dates For Private Limited Companies
When a private limited company is incorporated companies house advise the company of the accounting reference date and a set of financial accounts are required to be made up and submitted from the day of incorporation to this accounting reference date. The accounting reference date is set by companies house as the last day of the month 12 months after the date of incorporation.
For example a company registered on 7 January would have an accounting reference date of 31 January the following year. Financial accounts are required for the period from 7 January one year to the 31 January the following year.
The financial accounting period for a limited company which has been trading in previous years starts on the day after the accounting reference date and continues until the next accounting reference date. In the example above the final accounts including profit and loss account, balance sheet and notes to the accounts including audit report where required would be prepared from 1 February until 31 January.
The accounting reference date can be changed by a limited company by sending to companies house form 225. There is a time limit on when the form can be submitted which in any financial year is the day before the accounts are due for delivery to companies house.
There are a number of reasons why the directors of a limited company might wish to change its financial year end although in the vast majority of cases the financial year is not changed.
Common reasons for changing the financial year end date would be to bring the year end date into line with other business interests such as an associated company. Seasonal and trading factors may make one month end more appropriate or the company might wish more time to prepare a particular set of final accounts although it can be a problem if the date is changed more than once in a 5 year period.
A significant reason for changing the financial year end of a limited company would be to bring the company financial accounting period into line with the tax year as tax rules change from year to year and accounting and tax alignment simplifies the tax calculation as only one years tax rules would apply instead of two tax years rules when the tax year end is straddled.
For limited companies in the UK the practise in recent years has been for tax rules and capital tax allowances changes to be announced in the budget each year which is the third week of March and the tax rules to be applied from the 1 April the following year. An accounting year in line with the tax year end would then be 1 April to 31 March each year.
A new private company filing its first set of annual accounts must do so within 22 months of incorporation. In subsequent years the financial accounts need to be submitted to companies house within 10 months of the company accounting reference date. Companies house normally send a reminder of when the accounts need to be filed 6 to 8 weeks prior to the deadline date.
Companies house automatically impose an escalating scale of civil penalties on private companies for the late filing of the annual accounts as follows
Up to 3 months late the penalty fine is 100 pounds.
Over 3 months and up to 6 months the penalty fine is 250 pounds.
Over 6 months and up to 12 months the penalty fine is 500 pounds.
Over 12 months the penalty fine is 1000 pounds.
The accounting documents to be sent to companies house which are required to be prepared in a specific format and in addition to stating the registered office of the company and the company registration number for identification purposes must also send
Profit and loss account or income and expenditure account for a non profit organisation.
Balance sheet signed and dated by a company director stating the company asset and liabilities balances.
Directors report signed by a director or company secretary describing the companies activities and also including for companies not classified as small and exempt a business review of future performance.
Auditors report signed by the auditor unless the company is exempt from audit under the small companies exemption rules.
When a small private company submits abbreviated accounts and takes advantage of the exemptions then the accounts must also contain the statutory statements as notes to the accounts advising the basis and exemptions under which the annual accounts have been prepared.
For example a company registered on 7 January would have an accounting reference date of 31 January the following year. Financial accounts are required for the period from 7 January one year to the 31 January the following year.
The financial accounting period for a limited company which has been trading in previous years starts on the day after the accounting reference date and continues until the next accounting reference date. In the example above the final accounts including profit and loss account, balance sheet and notes to the accounts including audit report where required would be prepared from 1 February until 31 January.
The accounting reference date can be changed by a limited company by sending to companies house form 225. There is a time limit on when the form can be submitted which in any financial year is the day before the accounts are due for delivery to companies house.
There are a number of reasons why the directors of a limited company might wish to change its financial year end although in the vast majority of cases the financial year is not changed.
Common reasons for changing the financial year end date would be to bring the year end date into line with other business interests such as an associated company. Seasonal and trading factors may make one month end more appropriate or the company might wish more time to prepare a particular set of final accounts although it can be a problem if the date is changed more than once in a 5 year period.
A significant reason for changing the financial year end of a limited company would be to bring the company financial accounting period into line with the tax year as tax rules change from year to year and accounting and tax alignment simplifies the tax calculation as only one years tax rules would apply instead of two tax years rules when the tax year end is straddled.
For limited companies in the UK the practise in recent years has been for tax rules and capital tax allowances changes to be announced in the budget each year which is the third week of March and the tax rules to be applied from the 1 April the following year. An accounting year in line with the tax year end would then be 1 April to 31 March each year.
A new private company filing its first set of annual accounts must do so within 22 months of incorporation. In subsequent years the financial accounts need to be submitted to companies house within 10 months of the company accounting reference date. Companies house normally send a reminder of when the accounts need to be filed 6 to 8 weeks prior to the deadline date.
Companies house automatically impose an escalating scale of civil penalties on private companies for the late filing of the annual accounts as follows
Up to 3 months late the penalty fine is 100 pounds.
Over 3 months and up to 6 months the penalty fine is 250 pounds.
Over 6 months and up to 12 months the penalty fine is 500 pounds.
Over 12 months the penalty fine is 1000 pounds.
The accounting documents to be sent to companies house which are required to be prepared in a specific format and in addition to stating the registered office of the company and the company registration number for identification purposes must also send
Profit and loss account or income and expenditure account for a non profit organisation.
Balance sheet signed and dated by a company director stating the company asset and liabilities balances.
Directors report signed by a director or company secretary describing the companies activities and also including for companies not classified as small and exempt a business review of future performance.
Auditors report signed by the auditor unless the company is exempt from audit under the small companies exemption rules.
When a small private company submits abbreviated accounts and takes advantage of the exemptions then the accounts must also contain the statutory statements as notes to the accounts advising the basis and exemptions under which the annual accounts have been prepared.
Accounting Periods And Basis Periods For Self Employed Business
Self employed business in the UK is required to produce a set of financial accounts for a 12 month trading period. The format of the accounts is the personal decision of the proprietor and can be a full set of annual accounts including profit and loss account and balance sheet including using control accounts and cash and bank records and the self assessment tax return.
An appropriate accounting system for many self employed business would not be to prepare a full set of annual accounts but instead to prepare a simple income and expenditure account. Preparing an income and expenditure account allows a much simpler accounting or bookkeeping system where simple accounting software can be used.
The objective of any bookkeeping software being to maintain accurate financial records and produce the accounting records and totals required to complete the inland revenue self assessment tax return each year. Financial control is very important and the bookkeeping software should also produce regular financial statements showing the profit and loss of the business throughout the accounting trading periods.
The financial tax year varies depending upon which country business is conducted. In the US accounts are prepared during an accounting period from 1 January to 31 December each year. In the UK the standard financial year adopted by the inland revenue is from 6 April each year to the 5 April the following year.
In the UK tax rules are set for each financial year and by adopting the standard tax year a small business can benefit by preparing the financial accounts under a single set of tax rules and preparing the self assessment tax return accordingly. Adopting a different financial period involves straddling the official tax year and more than one set of tax rules might be applicable to the tax calculation resulting from the net profit being declared.
After choosing the April to April financial tax year accounts are required to be submitted by the submission deadline of 31 January the following year. Earlier submission is recommended as by submitting the final accounts and tax returns online by 31 October each year the inland revenue will calculate the income tax and national insurance payable.
When a self employed business has been in business for two or three years and has chosen a different 12 month accounting period to the financial tax year the 12 month tax is calculated according to a basis period. Up until that point the accounts may be subject to apportionment to calculate the tax due.
The basis period under which the business tax is calculated is the 12 month accounting period ending in the specific tax year. A business which has a 12 month trading period ending 31 December 2007 would be taxed under the basis period 2007 to 2008 being the basis period 6 April 2007 to 5 April 2008. The same rules apply if the accounting periods are shorter or longer than the standard 12 month period.
If the accounting date is changed by a sole trader the inland revenue are informed of the change on the self assessment tax return and the re3asons for the change. If as a result the self assessment tax return arrives late the tax will be assessed on the previous basis period.
Changing an accounting date that overlaps two basis years results in the business being taxed twice for the same accounting profit as the business would be taxed under both basis years. The extra tax paid can be highly unwelcome but can be reclaimed at a later date through the self assessment tax return.
The penalty for late submission of the self assessment tax return in the UK is 100 pounds and interest is also charged on any outstanding income tax and national insurance from the first day after submission was due.
An appropriate accounting system for many self employed business would not be to prepare a full set of annual accounts but instead to prepare a simple income and expenditure account. Preparing an income and expenditure account allows a much simpler accounting or bookkeeping system where simple accounting software can be used.
The objective of any bookkeeping software being to maintain accurate financial records and produce the accounting records and totals required to complete the inland revenue self assessment tax return each year. Financial control is very important and the bookkeeping software should also produce regular financial statements showing the profit and loss of the business throughout the accounting trading periods.
The financial tax year varies depending upon which country business is conducted. In the US accounts are prepared during an accounting period from 1 January to 31 December each year. In the UK the standard financial year adopted by the inland revenue is from 6 April each year to the 5 April the following year.
In the UK tax rules are set for each financial year and by adopting the standard tax year a small business can benefit by preparing the financial accounts under a single set of tax rules and preparing the self assessment tax return accordingly. Adopting a different financial period involves straddling the official tax year and more than one set of tax rules might be applicable to the tax calculation resulting from the net profit being declared.
After choosing the April to April financial tax year accounts are required to be submitted by the submission deadline of 31 January the following year. Earlier submission is recommended as by submitting the final accounts and tax returns online by 31 October each year the inland revenue will calculate the income tax and national insurance payable.
When a self employed business has been in business for two or three years and has chosen a different 12 month accounting period to the financial tax year the 12 month tax is calculated according to a basis period. Up until that point the accounts may be subject to apportionment to calculate the tax due.
The basis period under which the business tax is calculated is the 12 month accounting period ending in the specific tax year. A business which has a 12 month trading period ending 31 December 2007 would be taxed under the basis period 2007 to 2008 being the basis period 6 April 2007 to 5 April 2008. The same rules apply if the accounting periods are shorter or longer than the standard 12 month period.
If the accounting date is changed by a sole trader the inland revenue are informed of the change on the self assessment tax return and the re3asons for the change. If as a result the self assessment tax return arrives late the tax will be assessed on the previous basis period.
Changing an accounting date that overlaps two basis years results in the business being taxed twice for the same accounting profit as the business would be taxed under both basis years. The extra tax paid can be highly unwelcome but can be reclaimed at a later date through the self assessment tax return.
The penalty for late submission of the self assessment tax return in the UK is 100 pounds and interest is also charged on any outstanding income tax and national insurance from the first day after submission was due.
Product Guides For Cookware
Most people will make a natural assumption that all cookware can be used over open heat. If they had consulted the product information that came with the cookware set, the manufacturers might have alerted cookware owners that certain parts would not be suitable for use in an oven. Product guides found through internet searches might have provided more information on product use and other alerts from owners of the same type of cookware that state the cookware is also not considered safe to use in a microwave ovens.
When this cookware style is sold brand new, many retailers will fail to guide customers on the proper methods of using cookware and are surprised when the customer returns it to the store. Customers gain a lot of information about cookware from store demonstrators that are marketing a certain brand name of cookware for a short while. Bargain shoppers cannot expect to find product guides for cookware that has been gently used because the product information has been removed by that time and only the cookware remains.
The product guides for cookware are very useful in preventing accidents in the kitchen. Some cooks assume that cookware with locking lids will prevent spills and are dumbfounded when burns occur. The person would find a paper guide very useful after bringing the cookware home because product demonstrations are very brief and it is hard for some cooks to retain such intricate information about cookware safety features. The product guide would have provided a pictorial view of the cookware and the correct sequence to use when securing locking devices.
Some people love the cookware sets they have purchased but are astonished to find that the outer surface of the cookware has become dull and dingy. Many product guides will provide a varying assortment of cleaning options that will ensure that the stainless steel or aluminum metals retain luster for many years. Some product guides might recommend a certain type or brand of cleanser to be used on cookware and stovetop range surfaces. Some will be direct and honest when they tell cookware owners which cleaners to avoid entirely because the research laboratories have spent considerable time testing the products.
Every cookware brand will recommend certain types of cookware because they are commonly used every day. Product guides for these selective pieces of cookware will often provide how many cups of food can be produced using various cooking temperatures. Some cookware will outperform others when it comes to sauteeing onions or shallots, but the same cookware would not be a good choice to braise meats in or for shimmering foods for long periods.
People use the information contained in product guides to get more value for the money that it cost. Those pieces of cookware that are used everyday will be valued highly and cooks will use the information to learn everything they can in order to cook delicious foods in them for their families. Improper use of cookware wastes money and families prefer to use those resources to buy foods that are easily prepared with the right cookware in a cookware set. Economical meals can be prepared all the time from recipes in the product guides. Any extras can be placed in the freezer to give the cook a night off occasionally if freezing temperatures listed in the product guides are followed.
When this cookware style is sold brand new, many retailers will fail to guide customers on the proper methods of using cookware and are surprised when the customer returns it to the store. Customers gain a lot of information about cookware from store demonstrators that are marketing a certain brand name of cookware for a short while. Bargain shoppers cannot expect to find product guides for cookware that has been gently used because the product information has been removed by that time and only the cookware remains.
The product guides for cookware are very useful in preventing accidents in the kitchen. Some cooks assume that cookware with locking lids will prevent spills and are dumbfounded when burns occur. The person would find a paper guide very useful after bringing the cookware home because product demonstrations are very brief and it is hard for some cooks to retain such intricate information about cookware safety features. The product guide would have provided a pictorial view of the cookware and the correct sequence to use when securing locking devices.
Some people love the cookware sets they have purchased but are astonished to find that the outer surface of the cookware has become dull and dingy. Many product guides will provide a varying assortment of cleaning options that will ensure that the stainless steel or aluminum metals retain luster for many years. Some product guides might recommend a certain type or brand of cleanser to be used on cookware and stovetop range surfaces. Some will be direct and honest when they tell cookware owners which cleaners to avoid entirely because the research laboratories have spent considerable time testing the products.
Every cookware brand will recommend certain types of cookware because they are commonly used every day. Product guides for these selective pieces of cookware will often provide how many cups of food can be produced using various cooking temperatures. Some cookware will outperform others when it comes to sauteeing onions or shallots, but the same cookware would not be a good choice to braise meats in or for shimmering foods for long periods.
People use the information contained in product guides to get more value for the money that it cost. Those pieces of cookware that are used everyday will be valued highly and cooks will use the information to learn everything they can in order to cook delicious foods in them for their families. Improper use of cookware wastes money and families prefer to use those resources to buy foods that are easily prepared with the right cookware in a cookware set. Economical meals can be prepared all the time from recipes in the product guides. Any extras can be placed in the freezer to give the cook a night off occasionally if freezing temperatures listed in the product guides are followed.
Accounting outsource
Trends in Small Business Financial and Accounting (F&A) Outsourcing
For the past couple of years small businesses started using accounting outsource services like accounts payable, account receivable, and general bookkeeping services. As they started seeing business benefits beyond cost savings now they started outsourcing other higher-value accounting projects like accounting and financial process innovation, real-time accounting integration, budgeting and forecasting. Some small businesses are considering outsourcing their entire accounting and financial operations to outsource vendors. Increasing confidence in accounting outsource providers skills, availability of tools and technologies, and accounting process standardization are making the shift for the small businesses on outsourcing higher-value accounting projects.
Small Business accounting outsourcing maturity
Both the accounting outsourcing buyer and the provider relationship is matured for the past several years. Now several small businesses are considering their accounting outsource providers as the strategic partners. They are not using the accounting outsource providers just to save cost but to introduce innovation and efficiency in their accounting and financial business processes. Small business Accounting outsource providers have been continuously improving their service offerings using both technology and accounting business process reengineering. These accounting outsource providers have been working with several small businesses and CPA firms for several years. Each small business has its own accounting software packages and use different accounting processes to record their business transactions. By working with the small businesses the accounting outsource providers learned to standardize and reuse the accounting process improvements across different vertical domains like retailing, manufacturing, and service based industries.
As the accounting outsource providers gain accounting business knowledge for a particular vertical industry, now they are started marketing their services to other small businesses on that business domain. For example accountings outsource provider gained significant knowledge on various real estate accounts and financial transactions started marketing to other real estate companies. As they gain accounting process experience naturally they are finding their own niche in vertical business domains to sell their services.
Financial Accounting Integration
Financial accounting business processes integration is another important trend in small business accounting outsourcing started happening. Most of the small businesses have been using more than one software package to mange their financial and other business data:
Accounting software like QuickBooks, Sage and Netsuite
ERP systems like Epicor and IQMS
CRM software like Microsoft Dynamics CRM and Onyx CRM software
Small businesses use many other homegrown software tools and technologies to manage their day-to-day operations. All these software are running in silos, and small business owners have difficult time in consolidating all their business data. They need the integrated view of all the data to produce various reports and to set strategic directions for their company. They’ve two choices to integrate all their financial and account data:
Upgrade from different software technologies to use enterprise software like SAP or Oracle to mange all their financial data and business transactions.
Develop custom interfaces using in-house IT team to integrate all their software systems
Outsource their financial and business data management
Among the three choices, outsourcing is the cost-effective choice for the small businesses. Small businesses are already outsourcing their general bookkeeping, accounts payable, and accounts receivable tasks to outsource vendors. It is logical step to outsource integrating various accounting software systems to a qualified outsource vendor.
Need for Financial Accounting Integration in Small businesses
For decades, most of the small businesses have been developed stand-alone accounting applications to automate specific accounting and financial tasks. This type of stand-alone applications provide benefits only to specific departments within a small business but fails to give a complete picture of their business to the management. For example, the financial transactions in the accounting software package will give the detailed picture of the financial status of the company. But often small businesses need to analyze trends to see where improvements can be made in customer service, sales, and payments. Most of the small businesses are manually mining the data from different software sources to produce the reports for the management.
Following are some of common problems you see in small businesses:
Change of customer data in CRM but it doesn’t show up in their accounting software
When orders are taken by the sales department it has to be reentered in the accounting software
Salespeople couldn’t see how many orders are already shipped to the customer and how many of them are already paid by the customers.
Now this is where the technology savvy accounting outsource providers can step in to help the small businesses in achieving their goals. The accountings outsource providers write custom interfaces to retrieve the data from different sources to produce various financial reports needed for the small business management’s team. Developing custom interfaces may not be cost effective for some small businesses. In this case accounting outsource providers with offshore presence can use their offshore locations to manually key the data from one software to other. This helps the small businesses in achieving their business goals without costly software upgrade or in-house IT team.
Outsourcing in CPA Firms
CPA firms serving small businesses have been outsourcing tax and other general accounting services for some time. Now these CPA firms are considering outsource providers for other higher-value accounting services. CPA firms can leverage their relationship with small businesses and help them in outsourcing their higher value accounting projects. For example projects like real-time accounts integration needs process knowledge specific to a small business, IT skills, and accounting process standardization skills. CPA firms may not have all the skills needed for the real-time account integration projects. They can act as a liaison between the small business owners and outsource providers in outsourcing real-time account integration projects.
CPA firms that partner with outsource providers gain a competitive advantage over those that don't. By aligning with an accounting outsource provider, an accounting firm can virtually tap into several different small business markets without making a heavy investment of time and capital. This means the CPA firm minimizes its risk while maximizing its potential for significant market gain. Currently many small CPA firms are not embracing these types of projects for their small business customers, but this trend is happing in several big accounting firms. As the need increases for accounting integration projects in small businesses, more small business focused CPA firms will start partnering with accounting outsource providers.
For the past couple of years small businesses started using accounting outsource services like accounts payable, account receivable, and general bookkeeping services. As they started seeing business benefits beyond cost savings now they started outsourcing other higher-value accounting projects like accounting and financial process innovation, real-time accounting integration, budgeting and forecasting. Some small businesses are considering outsourcing their entire accounting and financial operations to outsource vendors. Increasing confidence in accounting outsource providers skills, availability of tools and technologies, and accounting process standardization are making the shift for the small businesses on outsourcing higher-value accounting projects.
Small Business accounting outsourcing maturity
Both the accounting outsourcing buyer and the provider relationship is matured for the past several years. Now several small businesses are considering their accounting outsource providers as the strategic partners. They are not using the accounting outsource providers just to save cost but to introduce innovation and efficiency in their accounting and financial business processes. Small business Accounting outsource providers have been continuously improving their service offerings using both technology and accounting business process reengineering. These accounting outsource providers have been working with several small businesses and CPA firms for several years. Each small business has its own accounting software packages and use different accounting processes to record their business transactions. By working with the small businesses the accounting outsource providers learned to standardize and reuse the accounting process improvements across different vertical domains like retailing, manufacturing, and service based industries.
As the accounting outsource providers gain accounting business knowledge for a particular vertical industry, now they are started marketing their services to other small businesses on that business domain. For example accountings outsource provider gained significant knowledge on various real estate accounts and financial transactions started marketing to other real estate companies. As they gain accounting process experience naturally they are finding their own niche in vertical business domains to sell their services.
Financial Accounting Integration
Financial accounting business processes integration is another important trend in small business accounting outsourcing started happening. Most of the small businesses have been using more than one software package to mange their financial and other business data:
Accounting software like QuickBooks, Sage and Netsuite
ERP systems like Epicor and IQMS
CRM software like Microsoft Dynamics CRM and Onyx CRM software
Small businesses use many other homegrown software tools and technologies to manage their day-to-day operations. All these software are running in silos, and small business owners have difficult time in consolidating all their business data. They need the integrated view of all the data to produce various reports and to set strategic directions for their company. They’ve two choices to integrate all their financial and account data:
Upgrade from different software technologies to use enterprise software like SAP or Oracle to mange all their financial data and business transactions.
Develop custom interfaces using in-house IT team to integrate all their software systems
Outsource their financial and business data management
Among the three choices, outsourcing is the cost-effective choice for the small businesses. Small businesses are already outsourcing their general bookkeeping, accounts payable, and accounts receivable tasks to outsource vendors. It is logical step to outsource integrating various accounting software systems to a qualified outsource vendor.
Need for Financial Accounting Integration in Small businesses
For decades, most of the small businesses have been developed stand-alone accounting applications to automate specific accounting and financial tasks. This type of stand-alone applications provide benefits only to specific departments within a small business but fails to give a complete picture of their business to the management. For example, the financial transactions in the accounting software package will give the detailed picture of the financial status of the company. But often small businesses need to analyze trends to see where improvements can be made in customer service, sales, and payments. Most of the small businesses are manually mining the data from different software sources to produce the reports for the management.
Following are some of common problems you see in small businesses:
Change of customer data in CRM but it doesn’t show up in their accounting software
When orders are taken by the sales department it has to be reentered in the accounting software
Salespeople couldn’t see how many orders are already shipped to the customer and how many of them are already paid by the customers.
Now this is where the technology savvy accounting outsource providers can step in to help the small businesses in achieving their goals. The accountings outsource providers write custom interfaces to retrieve the data from different sources to produce various financial reports needed for the small business management’s team. Developing custom interfaces may not be cost effective for some small businesses. In this case accounting outsource providers with offshore presence can use their offshore locations to manually key the data from one software to other. This helps the small businesses in achieving their business goals without costly software upgrade or in-house IT team.
Outsourcing in CPA Firms
CPA firms serving small businesses have been outsourcing tax and other general accounting services for some time. Now these CPA firms are considering outsource providers for other higher-value accounting services. CPA firms can leverage their relationship with small businesses and help them in outsourcing their higher value accounting projects. For example projects like real-time accounts integration needs process knowledge specific to a small business, IT skills, and accounting process standardization skills. CPA firms may not have all the skills needed for the real-time account integration projects. They can act as a liaison between the small business owners and outsource providers in outsourcing real-time account integration projects.
CPA firms that partner with outsource providers gain a competitive advantage over those that don't. By aligning with an accounting outsource provider, an accounting firm can virtually tap into several different small business markets without making a heavy investment of time and capital. This means the CPA firm minimizes its risk while maximizing its potential for significant market gain. Currently many small CPA firms are not embracing these types of projects for their small business customers, but this trend is happing in several big accounting firms. As the need increases for accounting integration projects in small businesses, more small business focused CPA firms will start partnering with accounting outsource providers.
Do You Have the Right Business Structure For Where Your Business Is Now?
With so many baby boomers retiring or quickly approaching the time where they'd like to, and seeking a way out of the rat race, there is a glutton of information suddenly available about starting a home-based or internet business. One of the leading benefits promoted is the tax deductions and other advantages available to business owners. However, it is critical that you are in the right business structure for your unique situation to truly take advantage of those benefits.
Recently a leading and highly respected tax strategist and CPA met with a bunch of her fellow CPA cohorts to discuss common problems they saw their clients facing with their taxes and believe it or not, one of the main issues was having the wrong business structure in place. In other words, their clients were operating their business in the wrong structure for where their business was at that moment in time. And the problem was that despite these CPA 's best efforts it was costing their clients a bundle in unnecessary taxes at tax time. And a few were at risk of losing everything.
We've all met those folks, who "just have a little 'ole teeny business, they don't think they need to worry about taking measures to protect, until it 's too late". They make a mistake and get taken to the cleaners.
Now, if you've been reading my newsletter for any length of time, you already know not to use a sole proprietorship or general partnership to operate your business. But what about the other business entities? How do you know which one is right for where your business is right now?
So, you know I have to preface this by saying, it depends very much on your particular situation and you should consult your individual advisors to determine what 's best for you. However, having said that, I will also say that for most U.S. business start-ups by U.S. residents there are really only two ways to go:
The first is an "S" Corporation. The second is an LLC (Limited Liability Company) that elects to be taxed as an "S" Corporation.
I recommend these two options because very few businesses, home-based or otherwise, start out making any taxable income from day one and many businesses may even lose money for the first year or longer, even companies that may eventually become giants in their fields like "Google" and "Amazon". Even those business that do actually generate income from day one, in this stage of your business, if you have a good tax advisor, you are just beginning to find and take advantage of all those wonderful new tax deductions you now get to write-off on your taxes.
Oftentimes, we get so overloaded with stories of easy, make money while you sleep, get-rich-quick schemes, and overnight successes that here, in the US, we have a tendency to expect to make money from day one in our businesses, and then give up on the business when we discover we can't do that.
The problem with this type of thinking is that it doesn't allow us to plan realistically for our success, which means we don't give our advisors the right information to help us form the proper business structures for where we are and often times end up actually hurting our efforts to create success. This is critical when it comes to using your business to build wealth, because reducing your taxes to create money to invest is a key element to making that strategy work.
So how realistic are your projections? If you're just starting out and you've painted wonderful pictures of huge profits for your business for your advisors, or just left them to guess, you're probably going to get a business structure for that type of business. Now here 's the problem, that 's probably going to be a "C" Corporation, which is great if it all really goes that way. But, suppose it doesn't? Suppose it goes like most start-ups do and doesn't make a lot of money or even loses money and you have to keep working on the side and putting money into it?
That 's where "the problem" kicks in, because in a "C" Corporation there is no tax benefit to you. You don't get to take a deduction for all the money you've put into the business, or any of its losses, plus if you've personally earned income, either as salary from the business or otherwise, you now have to report and pay taxes on that income, even though your business is losing money and you're supplementing its existence.
If you had planned for this possibility, and used the "S" Corporation, then you could have applied all those deductions to your personal tax return and used them to offset your income from the business or other sources, like a 9-5 job. Plus with an "S" Corporation you minimize the 15.3% self-employment tax, protect your personal assets from business activities that go astray, and get maximum flexibility as you learn how to work with your business and discover all the new deductions available to you.
You've Survived Start-Up ... Now What?
You stuck with it and now your business is starting to make money. Not just a few hundred dollars or a thousand bucks now & then kind of money. But serious, consistent income you can count on. You're probably still a one-man or woman show, maybe a few independent contractors, now what do you do? Again, it depends on your particular circumstances, you don't want to jump to a "C" Corporation to soon, or set-up other structures that you don't need. But you definitely want to revisit the whole business structure question.
Are you still operating in the entity type that 's best for you? Do you need to have other business structures in place to continue to maximize your tax reduction strategies? For example suppose you decided to branch out to invest some of your money into long- term real estate holdings. Now you would want to add an LLC or possibly a Land-Trust to your business structures and preferably, one for each piece of property you hold.
You also want to take another look at your tax deductions, are you getting everything, are there new areas where you may be able to take a deduction where maybe you didn't qualify before, or that you overlooked? Look at everything you're spending money on and ask yourself "how can this be made into a valid deductible expense?" Remember the key, use the guideline: is it ordinary and necessary to the production of income for your business. Not everything you're spending money on will past the test, but you may be surprised at how much of your ordinary expenses can.
Also, at this stage as the money starts to build up begin to look into and think about maximizing your pension plan. If you don't have one, you can start now. There are all kinds of things out there now, traditional and Roth IRAs, Sep IRA, Solo 401ks and they even have a Roth 401k now and you even get to choose between self-directed or regular plans.
Of course there are qualifications to all of this stuff you'll need to discuss with your personal advisors, but the great thing is with these plans you either get a tax deferment now, or tax free income for life later, plus you'll be putting yourself in position for the next level of your business where you can take advantage of more advanced strategies.
Playing In The Big Leagues
In the U.S. Small business is actually defined as a business that makes under $50,000,000.00 per year. No, that 's not a misprint. Many companies you think of as huge are actually considered small businesses. You may not be at that level, especially if you want to maintain a small home-based business. But, you can still grow your business pretty large.
As your business moves into this stage, it 's very important for you to have good advisors around you, especially a CPA that 's a proven tax strategist and an attorney that 's familiar with the strategic use of business structures to create wealth and provide asset protection and has the ability to communicate effectively with your CPA & vice versa.
This is the stage of your business where your use of business structures will be the most complicated, you will most definitely find that you will need more than one and in some cases several to minimize your earned income and really maximize your tax deductions. It is also the stage of your business where you will have the most opportunities to put multiple tax strategies into play that can let you live virtually tax free. Legally; this is where you truly begin to discover the true wealth building power of having your own business.
There are two reasons why you set up a business structure:
(1) To pay less in taxes and
(2) To protect your assets.
There are literally hundreds of tax deductions available once you start a business or start investing in real estate. However, in order to take full advantage of them you have to be in the right structure for your business, where it is now. Otherwise, you will probably end up paying more taxes than you should and sabotaging your efforts to build wealth.
Recently a leading and highly respected tax strategist and CPA met with a bunch of her fellow CPA cohorts to discuss common problems they saw their clients facing with their taxes and believe it or not, one of the main issues was having the wrong business structure in place. In other words, their clients were operating their business in the wrong structure for where their business was at that moment in time. And the problem was that despite these CPA 's best efforts it was costing their clients a bundle in unnecessary taxes at tax time. And a few were at risk of losing everything.
We've all met those folks, who "just have a little 'ole teeny business, they don't think they need to worry about taking measures to protect, until it 's too late". They make a mistake and get taken to the cleaners.
Now, if you've been reading my newsletter for any length of time, you already know not to use a sole proprietorship or general partnership to operate your business. But what about the other business entities? How do you know which one is right for where your business is right now?
So, you know I have to preface this by saying, it depends very much on your particular situation and you should consult your individual advisors to determine what 's best for you. However, having said that, I will also say that for most U.S. business start-ups by U.S. residents there are really only two ways to go:
The first is an "S" Corporation. The second is an LLC (Limited Liability Company) that elects to be taxed as an "S" Corporation.
I recommend these two options because very few businesses, home-based or otherwise, start out making any taxable income from day one and many businesses may even lose money for the first year or longer, even companies that may eventually become giants in their fields like "Google" and "Amazon". Even those business that do actually generate income from day one, in this stage of your business, if you have a good tax advisor, you are just beginning to find and take advantage of all those wonderful new tax deductions you now get to write-off on your taxes.
Oftentimes, we get so overloaded with stories of easy, make money while you sleep, get-rich-quick schemes, and overnight successes that here, in the US, we have a tendency to expect to make money from day one in our businesses, and then give up on the business when we discover we can't do that.
The problem with this type of thinking is that it doesn't allow us to plan realistically for our success, which means we don't give our advisors the right information to help us form the proper business structures for where we are and often times end up actually hurting our efforts to create success. This is critical when it comes to using your business to build wealth, because reducing your taxes to create money to invest is a key element to making that strategy work.
So how realistic are your projections? If you're just starting out and you've painted wonderful pictures of huge profits for your business for your advisors, or just left them to guess, you're probably going to get a business structure for that type of business. Now here 's the problem, that 's probably going to be a "C" Corporation, which is great if it all really goes that way. But, suppose it doesn't? Suppose it goes like most start-ups do and doesn't make a lot of money or even loses money and you have to keep working on the side and putting money into it?
That 's where "the problem" kicks in, because in a "C" Corporation there is no tax benefit to you. You don't get to take a deduction for all the money you've put into the business, or any of its losses, plus if you've personally earned income, either as salary from the business or otherwise, you now have to report and pay taxes on that income, even though your business is losing money and you're supplementing its existence.
If you had planned for this possibility, and used the "S" Corporation, then you could have applied all those deductions to your personal tax return and used them to offset your income from the business or other sources, like a 9-5 job. Plus with an "S" Corporation you minimize the 15.3% self-employment tax, protect your personal assets from business activities that go astray, and get maximum flexibility as you learn how to work with your business and discover all the new deductions available to you.
You've Survived Start-Up ... Now What?
You stuck with it and now your business is starting to make money. Not just a few hundred dollars or a thousand bucks now & then kind of money. But serious, consistent income you can count on. You're probably still a one-man or woman show, maybe a few independent contractors, now what do you do? Again, it depends on your particular circumstances, you don't want to jump to a "C" Corporation to soon, or set-up other structures that you don't need. But you definitely want to revisit the whole business structure question.
Are you still operating in the entity type that 's best for you? Do you need to have other business structures in place to continue to maximize your tax reduction strategies? For example suppose you decided to branch out to invest some of your money into long- term real estate holdings. Now you would want to add an LLC or possibly a Land-Trust to your business structures and preferably, one for each piece of property you hold.
You also want to take another look at your tax deductions, are you getting everything, are there new areas where you may be able to take a deduction where maybe you didn't qualify before, or that you overlooked? Look at everything you're spending money on and ask yourself "how can this be made into a valid deductible expense?" Remember the key, use the guideline: is it ordinary and necessary to the production of income for your business. Not everything you're spending money on will past the test, but you may be surprised at how much of your ordinary expenses can.
Also, at this stage as the money starts to build up begin to look into and think about maximizing your pension plan. If you don't have one, you can start now. There are all kinds of things out there now, traditional and Roth IRAs, Sep IRA, Solo 401ks and they even have a Roth 401k now and you even get to choose between self-directed or regular plans.
Of course there are qualifications to all of this stuff you'll need to discuss with your personal advisors, but the great thing is with these plans you either get a tax deferment now, or tax free income for life later, plus you'll be putting yourself in position for the next level of your business where you can take advantage of more advanced strategies.
Playing In The Big Leagues
In the U.S. Small business is actually defined as a business that makes under $50,000,000.00 per year. No, that 's not a misprint. Many companies you think of as huge are actually considered small businesses. You may not be at that level, especially if you want to maintain a small home-based business. But, you can still grow your business pretty large.
As your business moves into this stage, it 's very important for you to have good advisors around you, especially a CPA that 's a proven tax strategist and an attorney that 's familiar with the strategic use of business structures to create wealth and provide asset protection and has the ability to communicate effectively with your CPA & vice versa.
This is the stage of your business where your use of business structures will be the most complicated, you will most definitely find that you will need more than one and in some cases several to minimize your earned income and really maximize your tax deductions. It is also the stage of your business where you will have the most opportunities to put multiple tax strategies into play that can let you live virtually tax free. Legally; this is where you truly begin to discover the true wealth building power of having your own business.
There are two reasons why you set up a business structure:
(1) To pay less in taxes and
(2) To protect your assets.
There are literally hundreds of tax deductions available once you start a business or start investing in real estate. However, in order to take full advantage of them you have to be in the right structure for your business, where it is now. Otherwise, you will probably end up paying more taxes than you should and sabotaging your efforts to build wealth.
Implications for Corporations
Facts:
Company A operates in the United States and owns 100% of UK Subsidiary B, a controlled foreign corporation (CFC). Subsidiary B owns 30% of the outstanding stock of Irish Investee C and does not have the ability to exercise control over Investee C. Accordingly, Subsidiary B carries Investee C on its books using the equity method of accounting.
Additional facts:
Dividends remitted by Investee C to Subsidiary B will be taxable to Company A under the U.S. Subpart F rules. In other words, even if the cash from the dividend payment were to remain with Subsidiary B, the income would be immediately taxable in the U.S.
Company A has asserted its intention to indefinitely reinvest all of the accumulated unremitted earnings of Subsidiary B.
The entire difference between Company A 's book and tax basis in Subsidiary B relates to unremitted earnings.
Investee C has not had a history of making distributions.
Question:
As Company A intends to indefinitely reinvest all of Subsidiary B 's s accumulated unremitted earnings, can Company A utilize the APB 23 exception to not record deferred taxes on the portion of Subsidiary B 's unremitted earnings that relate to Investee C?
Analysis/Conclusion:
Answer: No.
APB 23, paragraph 12 states:
Indefinite reversal criteria. The presumption that all undistributed earnings will be transferred to the parent company may be overcome, and no income taxes should be accrued by the parent company, if sufficient evidence shows that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation.
In order for Company A to invoke the APB 23 exception, Company A must not only have the intent, but also the ability to control the reversal of the portion of the outside basis difference for which deferred taxes are not recorded. To the extent that activities of a CFC constitute Subpart F income for tax purposes, the Subpart F includable amounts are treated as deemed distribution followed by a subsequent reinvestment of the proceeds back to the CFC. This reinvestment of proceeds results in an increase in the U.S. parent 's tax basis in the CFC and also results in causing part of the difference between the book and tax outside basis in the CFC to reverse with a tax consequence -- exactly what the APB 23 exception requires Company A to assert it is able to avoid from occurring.
In the fact pattern noted above, because Subsidiary B does not control Investee C, and because a dividend or certain other transactions involving Investee C will be taxable in the U.S. to Company A as Subpart F income, Company A does not have the ability to assert the APB 23 exception on the portion of Subsidiary B 's unremitted earnings that relate to Investee C. In effect, the existence of the Subpart F provisions makes Company A 's indirect ownership in the Investee C (through Subsidiary B) analogous to Company A having direct ownership in Investee C. Accordingly, ownership of Investee C indirectly through Subsidiary B does not change the accounting, even if Investee C does not have a history of making distributions.
NOTE: The issue surrounding the ability to utilize the APB 23 exception with a CFC is not limited to a CFC 's equity method investments. To the extent that activities occurring at the CFC level or below will cause the recognition of Subpart F income by the CFC 's U.S. parent, the underlying facts and circumstances must be examined to determine if the recording of U.S. deferred taxes can be avoided for the item that may become subject to U.S. tax.
For example, an investment which is accounted for under FAS 115 may cause Subpart F income in the U.S. when sold. To the extent that a company is not able to avoid the triggering of Subpart F income on the reversal of the temporary difference associated with this investment, U.S. deferred taxes should be provided irrespective of whether an APB 23 assertion (that funds will not be remitted from the CFC to the U.S. parent) has been made.
Company A operates in the United States and owns 100% of UK Subsidiary B, a controlled foreign corporation (CFC). Subsidiary B owns 30% of the outstanding stock of Irish Investee C and does not have the ability to exercise control over Investee C. Accordingly, Subsidiary B carries Investee C on its books using the equity method of accounting.
Additional facts:
Dividends remitted by Investee C to Subsidiary B will be taxable to Company A under the U.S. Subpart F rules. In other words, even if the cash from the dividend payment were to remain with Subsidiary B, the income would be immediately taxable in the U.S.
Company A has asserted its intention to indefinitely reinvest all of the accumulated unremitted earnings of Subsidiary B.
The entire difference between Company A 's book and tax basis in Subsidiary B relates to unremitted earnings.
Investee C has not had a history of making distributions.
Question:
As Company A intends to indefinitely reinvest all of Subsidiary B 's s accumulated unremitted earnings, can Company A utilize the APB 23 exception to not record deferred taxes on the portion of Subsidiary B 's unremitted earnings that relate to Investee C?
Analysis/Conclusion:
Answer: No.
APB 23, paragraph 12 states:
Indefinite reversal criteria. The presumption that all undistributed earnings will be transferred to the parent company may be overcome, and no income taxes should be accrued by the parent company, if sufficient evidence shows that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation.
In order for Company A to invoke the APB 23 exception, Company A must not only have the intent, but also the ability to control the reversal of the portion of the outside basis difference for which deferred taxes are not recorded. To the extent that activities of a CFC constitute Subpart F income for tax purposes, the Subpart F includable amounts are treated as deemed distribution followed by a subsequent reinvestment of the proceeds back to the CFC. This reinvestment of proceeds results in an increase in the U.S. parent 's tax basis in the CFC and also results in causing part of the difference between the book and tax outside basis in the CFC to reverse with a tax consequence -- exactly what the APB 23 exception requires Company A to assert it is able to avoid from occurring.
In the fact pattern noted above, because Subsidiary B does not control Investee C, and because a dividend or certain other transactions involving Investee C will be taxable in the U.S. to Company A as Subpart F income, Company A does not have the ability to assert the APB 23 exception on the portion of Subsidiary B 's unremitted earnings that relate to Investee C. In effect, the existence of the Subpart F provisions makes Company A 's indirect ownership in the Investee C (through Subsidiary B) analogous to Company A having direct ownership in Investee C. Accordingly, ownership of Investee C indirectly through Subsidiary B does not change the accounting, even if Investee C does not have a history of making distributions.
NOTE: The issue surrounding the ability to utilize the APB 23 exception with a CFC is not limited to a CFC 's equity method investments. To the extent that activities occurring at the CFC level or below will cause the recognition of Subpart F income by the CFC 's U.S. parent, the underlying facts and circumstances must be examined to determine if the recording of U.S. deferred taxes can be avoided for the item that may become subject to U.S. tax.
For example, an investment which is accounted for under FAS 115 may cause Subpart F income in the U.S. when sold. To the extent that a company is not able to avoid the triggering of Subpart F income on the reversal of the temporary difference associated with this investment, U.S. deferred taxes should be provided irrespective of whether an APB 23 assertion (that funds will not be remitted from the CFC to the U.S. parent) has been made.
Basic accounting tips
Basic accounting tips
Accounting is not just about knowing about cash flow and expenditure. It involves knowledge of profits losses, incomes and expenditures. Without accounting it is not possible to know how much profit or loss a business is making.
About 500 years ago a man called Fra Luca Pacioli noted that three things are essential to run a business sufficient cash, being comfortable with the numbers side of business and system of organizing financial information is called accounting.
Accounting is a part of every day life. To understand accounting we need to know the and understand the different terms used in accounting. Next we need to see how accounting fits into our every day business life. This means that every transaction made has to be entered into the business books. This includes all details of checks, deposits, sales invoices cash receipts and purchase orders. Though individually they may not seem to be important, these numbers when systematically organized produce a picture of the health of the business.
One of the basic principles is to avoid double entry debits will always tally with credits. For every transaction, there will be two entries, one for credit and the other for debit.
The Accounting equation which states that Assets equal Liabilities plus Capital has to followed always. This is just another way of putting the first rule. As assets are debit balance accounts and both liabilities and capital are credit balance accounts.
The system of accounting is divided into categories and each category is further divided into accounts. Categories are of two types balance sheet and profit and loss.
Every debit entry would mean an addition to some accounts and a reduction to other accounts.
Accounting is necessary to assess the financial position of a company and accordingly engage in future planning for finances. As each organization has different needs accounting is customized and highly adaptable.
Financial accounting is about delivering accurate financial statements and hence is considered a precise science. Managerial accounting provides information to managers. In this type the manager is responsible for, Accounts Receivable, Billing, Payroll, Accounts Payable audits of operational procedures and process. It remains indispensable for anyone involved in any type of business.
Some tips to protect businesses from losses would be beneficial. Managers have to ensure their company is protected from check fraud. To this end they can set up financial limits for checks with their bank. An inventory of bank checks must be maintained and kept secure in safes.
Similarly a careful record off all bills paid must also be maintained. They will also serve as the basis for tax records.
All financial statements also need to reviewed regularly and entries made at least once in a week and balance expenditures with income. If not it could result in errors and overlooked payments.
The bank statements also need to reconciled as early as possible. The services of a good book keeper could also be used if you do not have the time. Their services would include paying salaries, coordinating and handling accounts receivable and payable, balancing ledgers and checkbooks, and organizing financial information required for business plans, loan proposals, cash-flow statements, etc.
Financial statements should be used to review the costs and expenses. They should be used to guide you to find better suppliers, cut down expenses and increase profits. Set up a cost control system. A systematic and streamlined accounting procedure will help in minimizing mistakes and missed accounts. Accounting helps considerably for any business to grow and increase profits.
Accounting is not just about knowing about cash flow and expenditure. It involves knowledge of profits losses, incomes and expenditures. Without accounting it is not possible to know how much profit or loss a business is making.
About 500 years ago a man called Fra Luca Pacioli noted that three things are essential to run a business sufficient cash, being comfortable with the numbers side of business and system of organizing financial information is called accounting.
Accounting is a part of every day life. To understand accounting we need to know the and understand the different terms used in accounting. Next we need to see how accounting fits into our every day business life. This means that every transaction made has to be entered into the business books. This includes all details of checks, deposits, sales invoices cash receipts and purchase orders. Though individually they may not seem to be important, these numbers when systematically organized produce a picture of the health of the business.
One of the basic principles is to avoid double entry debits will always tally with credits. For every transaction, there will be two entries, one for credit and the other for debit.
The Accounting equation which states that Assets equal Liabilities plus Capital has to followed always. This is just another way of putting the first rule. As assets are debit balance accounts and both liabilities and capital are credit balance accounts.
The system of accounting is divided into categories and each category is further divided into accounts. Categories are of two types balance sheet and profit and loss.
Every debit entry would mean an addition to some accounts and a reduction to other accounts.
Accounting is necessary to assess the financial position of a company and accordingly engage in future planning for finances. As each organization has different needs accounting is customized and highly adaptable.
Financial accounting is about delivering accurate financial statements and hence is considered a precise science. Managerial accounting provides information to managers. In this type the manager is responsible for, Accounts Receivable, Billing, Payroll, Accounts Payable audits of operational procedures and process. It remains indispensable for anyone involved in any type of business.
Some tips to protect businesses from losses would be beneficial. Managers have to ensure their company is protected from check fraud. To this end they can set up financial limits for checks with their bank. An inventory of bank checks must be maintained and kept secure in safes.
Similarly a careful record off all bills paid must also be maintained. They will also serve as the basis for tax records.
All financial statements also need to reviewed regularly and entries made at least once in a week and balance expenditures with income. If not it could result in errors and overlooked payments.
The bank statements also need to reconciled as early as possible. The services of a good book keeper could also be used if you do not have the time. Their services would include paying salaries, coordinating and handling accounts receivable and payable, balancing ledgers and checkbooks, and organizing financial information required for business plans, loan proposals, cash-flow statements, etc.
Financial statements should be used to review the costs and expenses. They should be used to guide you to find better suppliers, cut down expenses and increase profits. Set up a cost control system. A systematic and streamlined accounting procedure will help in minimizing mistakes and missed accounts. Accounting helps considerably for any business to grow and increase profits.
International Tax Free Reorganizations
In the world of international business, corporations that operate in different countries sometimes pursue reorganizations. They may do this to streamline operations to maintain a competitive advantage. They may also do it to change their corporate 'persona' with a new management and operating structure. When a multinational corporation reorganizes, it takes into consideration the tax implications.
What is an international tax-free reorganization?
It 's a transaction whereby one corporation acquires the stock or assets of another corporation. They may acquire part, or all, of the stock or assets of the target company. These two companies are 'commonly controlled companies'. This 'common control' occurs when two or more businesses have the same entity controlling them.
In reorganizations, one company is the target. The target liquidates into the common parent after the reorganization. If the parties to the reorganization meet U.S. Internal Revenue Code (IRC) stipulations then the transaction is not taxable.
When one corporation acquires the assets of another corporation it must give 'consideration'. In the tax-free reorganization, this involves transactions between commonly controlled corporations as previously stated. The acquiring company must give some of its stock as part of the 'consideration'. The targeted company must distribute this consideration to its shareholders when it liquidates completely.
The name for the above transaction is an Acquisitive or Non-Divisive D Reorganization. The target company is obligated to transfer all or 's ubstantially all' of its assets to the acquiring company. The distribution element of the transaction ('consideration' to the targeted company 's shareholders) must meet IRC 354 regulations.
In an international tax-free reorganization, the acquiring company receives the target 's operating assets. However, there are qualifying requirements to receive the designation as a Non-Divisive D Reorganization according to the IRC.
The basic qualifying requirements are:
1. The target company transfers most or all of its assets to the acquiring company. The acquiring company receives at least 90% of the Fair Market Value (FMV) of net assets of the target company. The 'net value' of assets is Total Assets minus Total Liabilities of the company. Another measurement is that the acquiring company receives 70% of the FMV of gross assets. These are assets without any of the company 's liabilities taken into consideration.
2. The company targeted in the reorganization, distributes the stock or securities received from the acquirer as consideration. With a 'plan of reorganization', the targeted company gives to its shareholders the stocks, securities and other properties received. It also distributes to its shareholders any of its remaining properties to complete the liquidation process.
There may be other property, other than that allowed by IRC stipulations that the target receives. The target company has to record a 'gain' according to the FMV of this property. This gain is taxable.
3. The target company shareholders must retain substantial continuing proprietary interest in the business that transferred to the acquiring company. At least 50% of the consideration paid to the target company shareholders must be the acquiring company 's stock.
4. The acquiring company must continue operating a major portion of the target company 's historic business. At the very least, it must use a significant portion of the target company 's historic assets in the operation of the business.
5. There must be a business purpose for the reorganization. It cannot be tax-motivated or conducted to avoid or evade taxation.
6. There must be a 'plan of reorganization', preferably written. The transfer of assets must occur according to this plan. The plan must consider the requirements necessary for the reorganization to qualify as a 'non-recognition of gain' or tax-free transaction. If 100% of the plan is not in writing, there must be evidence of the companies' discussions and negotiations.
Some of the general tax consequences of an international tax-free reorganization are:
* The acquiring company recognizes no gain or loss if it receives money or any other property from the target company. This is as long as it transfers stock, as consideration, to the targeted company.
* The target company shareholders who exchange their stock for acquiring company 's stock recognize no gain or loss. However, they may receive property or money that doesn't qualify under a Non-Divisive D transaction.
* The targeted company does not record a gain or loss when they are part of a tax-free reorganization. If they exchange property solely for stock or securities, they don't pay tax. Of course, they have to follow the 'plan of reorganization' with all its adherents to the IRC stipulations.
If the target receives something other than stock or securities, they still record no gain or loss. This is only if they distribute this 'other' to their shareholders according to the plan of reorganization.
Again, this other property must meet IRC definitions to qualify for a Non-Divisive D transaction. If it doesn't, there may be tax implications.
There are many elements for a multinational corporation to consider when reorganizing. In today 's regulated business environment, financial acumen, and wise planning will ensure a smooth reorganization process.
What is an international tax-free reorganization?
It 's a transaction whereby one corporation acquires the stock or assets of another corporation. They may acquire part, or all, of the stock or assets of the target company. These two companies are 'commonly controlled companies'. This 'common control' occurs when two or more businesses have the same entity controlling them.
In reorganizations, one company is the target. The target liquidates into the common parent after the reorganization. If the parties to the reorganization meet U.S. Internal Revenue Code (IRC) stipulations then the transaction is not taxable.
When one corporation acquires the assets of another corporation it must give 'consideration'. In the tax-free reorganization, this involves transactions between commonly controlled corporations as previously stated. The acquiring company must give some of its stock as part of the 'consideration'. The targeted company must distribute this consideration to its shareholders when it liquidates completely.
The name for the above transaction is an Acquisitive or Non-Divisive D Reorganization. The target company is obligated to transfer all or 's ubstantially all' of its assets to the acquiring company. The distribution element of the transaction ('consideration' to the targeted company 's shareholders) must meet IRC 354 regulations.
In an international tax-free reorganization, the acquiring company receives the target 's operating assets. However, there are qualifying requirements to receive the designation as a Non-Divisive D Reorganization according to the IRC.
The basic qualifying requirements are:
1. The target company transfers most or all of its assets to the acquiring company. The acquiring company receives at least 90% of the Fair Market Value (FMV) of net assets of the target company. The 'net value' of assets is Total Assets minus Total Liabilities of the company. Another measurement is that the acquiring company receives 70% of the FMV of gross assets. These are assets without any of the company 's liabilities taken into consideration.
2. The company targeted in the reorganization, distributes the stock or securities received from the acquirer as consideration. With a 'plan of reorganization', the targeted company gives to its shareholders the stocks, securities and other properties received. It also distributes to its shareholders any of its remaining properties to complete the liquidation process.
There may be other property, other than that allowed by IRC stipulations that the target receives. The target company has to record a 'gain' according to the FMV of this property. This gain is taxable.
3. The target company shareholders must retain substantial continuing proprietary interest in the business that transferred to the acquiring company. At least 50% of the consideration paid to the target company shareholders must be the acquiring company 's stock.
4. The acquiring company must continue operating a major portion of the target company 's historic business. At the very least, it must use a significant portion of the target company 's historic assets in the operation of the business.
5. There must be a business purpose for the reorganization. It cannot be tax-motivated or conducted to avoid or evade taxation.
6. There must be a 'plan of reorganization', preferably written. The transfer of assets must occur according to this plan. The plan must consider the requirements necessary for the reorganization to qualify as a 'non-recognition of gain' or tax-free transaction. If 100% of the plan is not in writing, there must be evidence of the companies' discussions and negotiations.
Some of the general tax consequences of an international tax-free reorganization are:
* The acquiring company recognizes no gain or loss if it receives money or any other property from the target company. This is as long as it transfers stock, as consideration, to the targeted company.
* The target company shareholders who exchange their stock for acquiring company 's stock recognize no gain or loss. However, they may receive property or money that doesn't qualify under a Non-Divisive D transaction.
* The targeted company does not record a gain or loss when they are part of a tax-free reorganization. If they exchange property solely for stock or securities, they don't pay tax. Of course, they have to follow the 'plan of reorganization' with all its adherents to the IRC stipulations.
If the target receives something other than stock or securities, they still record no gain or loss. This is only if they distribute this 'other' to their shareholders according to the plan of reorganization.
Again, this other property must meet IRC definitions to qualify for a Non-Divisive D transaction. If it doesn't, there may be tax implications.
There are many elements for a multinational corporation to consider when reorganizing. In today 's regulated business environment, financial acumen, and wise planning will ensure a smooth reorganization process.
Chartered Accountants Southampton
Chartered Accountants Southampton
Power Accountax is a firm of Chartered Accountants in Southampton. This highly recommended firm of accountants offers all aspects of accounting for an all inclusive fee. A variety of packages are offered including VAT, payroll, book keeping, self assessments, tax returns, final accounts, company accounts as well as comprehensive tax and business advice.
There mission is to provide you with outstanding accounting, tax minimising and income maximisation services. This firm of Chartered Accountants really do help you achieve your financial goals, by doing all the hard work for you and providing you the peace of mind in your already hectic business life. These Hampshire accountants really do try and help you maximise the fruits of your hard work and minimise your taxes, within the ambit of the law.
By focusing on relationship building with each of its clients this firm of accountants will endeavor to understand all your business and tax needs, providing you with the highest degree of personalised chartered accountancy services.
Power Accountax Chartered Accountants can offer you their expertise and assistance if you do not know what your profit is, or how much you should set aside for tax each month, as well as how to extract funds from your business tax efficiently.
This particular accountancy firm prizes itself in allowing you to concentrate on running and expanding your business bringing you peace of mind over your financial affairs by knowing that you are in expert hands. Power Accountax also provides help and support in managing your business and personal finances.
Power Accountax being Southampton Accountants was established in 2001 and hence a well experienced firm with respect to accounting and tax matters. This firm of Chartered Accountants is located on the High Street of Southampton, Hampshire, UK.
The Managing Principal qualified with PricewaterhouseCoopers and gained the highest overall exam results in the final examinations in southern England. Regulated under the Institute of Chartered Accountants in England & Wales (ICAEW).The office is staffed by eight people: Managing Principal, Accounts Manager, three Accounts Supervisors and three Accounts Assistants. All of them are either studying or qualified Accountants, under the Association of Taxation Technicians (ATT), or Associated Chartered Accountants (ACA).
The firms particular areas of expertise lie in new business; converting businesses from sole trader or partnerships to companies and self assessments. Hence attention is paid to solving your financial difficulties by finding customised solutions appropriate to your business. This well established firm of qualified accountants can be a trusted advisor, to increase the value of your business. These customised services really do enable you to attain a lifestyle and business model of your choice.
This accountancy company also undertakes all other functions such as bookkeeping, accounts preparation, production of company and personal tax returns, accounts review, management accounts on a quarterly basis, runs your payroll and advises on associated matters and a variety of other related services.
Other specialised services are also provided like the audit client accounts under RICS or The Law Society, as well as property certifications under The Landlord & Tenancy Acts 1988. The accountancy firm also reviews business accounts and produces business and share valuations.
Power Accountax is a motivated, highly technological, cohesive and dynamic firm with a modern and progressive work ethos. Each accountant values their client relationships and prefers to work with a small number of clients rather than big partner firms. This allows this chartered accountancy firm to know your business inside out so that problems can be easily remedied and opportunities recognised. With the best use of modern technology these Hampshire Accountants can serve as UK Accountants nationwide, running a very cost effective and highly personalised business.
With competitive fixed fee rates, you always know where you stand not worrying about paying high hourly charge out rates for valuable taxation advice. If you are looking for a firm of UK accountants whatever your requirements, this is a firm that you should definitely contact.
Power Accountax is a firm of Chartered Accountants in Southampton. This highly recommended firm of accountants offers all aspects of accounting for an all inclusive fee. A variety of packages are offered including VAT, payroll, book keeping, self assessments, tax returns, final accounts, company accounts as well as comprehensive tax and business advice.
There mission is to provide you with outstanding accounting, tax minimising and income maximisation services. This firm of Chartered Accountants really do help you achieve your financial goals, by doing all the hard work for you and providing you the peace of mind in your already hectic business life. These Hampshire accountants really do try and help you maximise the fruits of your hard work and minimise your taxes, within the ambit of the law.
By focusing on relationship building with each of its clients this firm of accountants will endeavor to understand all your business and tax needs, providing you with the highest degree of personalised chartered accountancy services.
Power Accountax Chartered Accountants can offer you their expertise and assistance if you do not know what your profit is, or how much you should set aside for tax each month, as well as how to extract funds from your business tax efficiently.
This particular accountancy firm prizes itself in allowing you to concentrate on running and expanding your business bringing you peace of mind over your financial affairs by knowing that you are in expert hands. Power Accountax also provides help and support in managing your business and personal finances.
Power Accountax being Southampton Accountants was established in 2001 and hence a well experienced firm with respect to accounting and tax matters. This firm of Chartered Accountants is located on the High Street of Southampton, Hampshire, UK.
The Managing Principal qualified with PricewaterhouseCoopers and gained the highest overall exam results in the final examinations in southern England. Regulated under the Institute of Chartered Accountants in England & Wales (ICAEW).The office is staffed by eight people: Managing Principal, Accounts Manager, three Accounts Supervisors and three Accounts Assistants. All of them are either studying or qualified Accountants, under the Association of Taxation Technicians (ATT), or Associated Chartered Accountants (ACA).
The firms particular areas of expertise lie in new business; converting businesses from sole trader or partnerships to companies and self assessments. Hence attention is paid to solving your financial difficulties by finding customised solutions appropriate to your business. This well established firm of qualified accountants can be a trusted advisor, to increase the value of your business. These customised services really do enable you to attain a lifestyle and business model of your choice.
This accountancy company also undertakes all other functions such as bookkeeping, accounts preparation, production of company and personal tax returns, accounts review, management accounts on a quarterly basis, runs your payroll and advises on associated matters and a variety of other related services.
Other specialised services are also provided like the audit client accounts under RICS or The Law Society, as well as property certifications under The Landlord & Tenancy Acts 1988. The accountancy firm also reviews business accounts and produces business and share valuations.
Power Accountax is a motivated, highly technological, cohesive and dynamic firm with a modern and progressive work ethos. Each accountant values their client relationships and prefers to work with a small number of clients rather than big partner firms. This allows this chartered accountancy firm to know your business inside out so that problems can be easily remedied and opportunities recognised. With the best use of modern technology these Hampshire Accountants can serve as UK Accountants nationwide, running a very cost effective and highly personalised business.
With competitive fixed fee rates, you always know where you stand not worrying about paying high hourly charge out rates for valuable taxation advice. If you are looking for a firm of UK accountants whatever your requirements, this is a firm that you should definitely contact.
Implications of New Interest Expense Rules for US Multinationals
Internal Revenue Code ("Code") section 864(e), implemented through Temp. Treas. Reg. Sec. 1.861-11T, requires all members of a "domestic affiliated group" to be treated as one corporation for purposes of allocating interest expense between domestic and foreign source income. Therefore, by applying this rule, the foreign-source income derived from a foreign entity that incurs its own interest expense can be reduced twice: once by the foreign entity 's own actual interest payments and second by the imputed interest paid by the domestic group that is apportioned to the asset that earned the foreign-source income.
The new rule under Code section 864(f)(1) creates a new comparison of the "worldwide affiliated group 's " third-party interest, which is apportioned to foreign-source income based on a ratio of foreign assets to total assets, less the third-party interest incurred by the foreign members that would be allocated to foreign sources under the new rule 's principles (an example to this rule is provided below). As such, there will be no apportionment of domestic group interest to the foreign-source income if the foreign members incur their pro rata portion of the worldwide affiliated group 's debt.
Note that intercompany debt will not be taken into account for purposes of this rule.
The composition of the worldwide affiliated group starts with the same affiliated group under Code section 1504(a), and adds to it foreign corporations that are: (1) CFCs and (2) are owned by the domestic group members in the aggregate at a level that meets the 80 percent vote and value test of Section 1504(a)(2), as modified by certain look-through rules.
Therefore, the new rule does not remove the exclusion of foreign corporations generally, but only adds the group of foreign corporations that are CFCs of which are 80 percent owned by the domestic group. Intercompany stock will not be taken into account under the new rules for purposes of determining assets.
For example, Assume a worldwide affiliated group consists of X, Y, and Z (the CFC). Each has $100 of third-party interest expense, and each is of equal size for purposes of the interest allocation regimes.
Under the current regime, Z would be allocated one third or $66.66 ($200 interest expense of the domestic affiliated group multiplied by 1/3) of the domestic interest, and thus its income would be burdened by $166.66 of interest expense for purposes of the Code section 904 computation (its $100 of third-party interest expense and its $66.66 allocated portion of the domestic interest expense).
The new regime would tentatively allocate to Z $100 of the worldwide interest ($300 of total interest expense of the worldwide affiliated group multiplied by the ratio of which the foreign assets of Z bear to all of the assets of the worldwide affiliated group), but since Z incurred $100 of the worldwide interest, in the end no additional interest will be allocated and Z 's income will be burdened only by its own $100 of interest expense for purposes of the Code section 904 computation.
The election to allocate interest on a worldwide basis is a one-time election and may be made only by the common parent of the domestic affiliated group that is part of the worldwide affiliated group, and may be made only for the first taxable year beginning after December 31, 2008 in which a worldwide affiliated group exists that includes the domestic affiliated group and a foreign subsidiary that could be in the worldwide affiliated group.
The election must be made by the due date (including extensions) for filing the federal tax return for the first year to which the election applies.
DISCLAIMER: This article does not, and is not intended to, constitute legal, tax, or accounting advice. You should consult an attorney, tax advisor, or accountant for individual advice regarding your own situation. Furthermore, this article is not intended or written to be used, and it cannot be used, for the purpose of avoiding tax-related penalties under the Internal Revenue Code.
The new rule under Code section 864(f)(1) creates a new comparison of the "worldwide affiliated group 's " third-party interest, which is apportioned to foreign-source income based on a ratio of foreign assets to total assets, less the third-party interest incurred by the foreign members that would be allocated to foreign sources under the new rule 's principles (an example to this rule is provided below). As such, there will be no apportionment of domestic group interest to the foreign-source income if the foreign members incur their pro rata portion of the worldwide affiliated group 's debt.
Note that intercompany debt will not be taken into account for purposes of this rule.
The composition of the worldwide affiliated group starts with the same affiliated group under Code section 1504(a), and adds to it foreign corporations that are: (1) CFCs and (2) are owned by the domestic group members in the aggregate at a level that meets the 80 percent vote and value test of Section 1504(a)(2), as modified by certain look-through rules.
Therefore, the new rule does not remove the exclusion of foreign corporations generally, but only adds the group of foreign corporations that are CFCs of which are 80 percent owned by the domestic group. Intercompany stock will not be taken into account under the new rules for purposes of determining assets.
For example, Assume a worldwide affiliated group consists of X, Y, and Z (the CFC). Each has $100 of third-party interest expense, and each is of equal size for purposes of the interest allocation regimes.
Under the current regime, Z would be allocated one third or $66.66 ($200 interest expense of the domestic affiliated group multiplied by 1/3) of the domestic interest, and thus its income would be burdened by $166.66 of interest expense for purposes of the Code section 904 computation (its $100 of third-party interest expense and its $66.66 allocated portion of the domestic interest expense).
The new regime would tentatively allocate to Z $100 of the worldwide interest ($300 of total interest expense of the worldwide affiliated group multiplied by the ratio of which the foreign assets of Z bear to all of the assets of the worldwide affiliated group), but since Z incurred $100 of the worldwide interest, in the end no additional interest will be allocated and Z 's income will be burdened only by its own $100 of interest expense for purposes of the Code section 904 computation.
The election to allocate interest on a worldwide basis is a one-time election and may be made only by the common parent of the domestic affiliated group that is part of the worldwide affiliated group, and may be made only for the first taxable year beginning after December 31, 2008 in which a worldwide affiliated group exists that includes the domestic affiliated group and a foreign subsidiary that could be in the worldwide affiliated group.
The election must be made by the due date (including extensions) for filing the federal tax return for the first year to which the election applies.
DISCLAIMER: This article does not, and is not intended to, constitute legal, tax, or accounting advice. You should consult an attorney, tax advisor, or accountant for individual advice regarding your own situation. Furthermore, this article is not intended or written to be used, and it cannot be used, for the purpose of avoiding tax-related penalties under the Internal Revenue Code.
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