Most 5 star CPA Google reviews in Canada
Helping Canadian businesses beat the odds!
Entrepreneurs should ensure that they are calculating the assets of their business, anything that is going to provide a useful benefit to their business for longer than a year, needs to be calculated into their asset accounts of the business and not their expense accounts. This is extremely important, so that a business owner can ensure that there assets are being calculated properly. When they purchase assets, outsourced CFO says the expense should not be showing up on the income statement right away. The reason for this, is because the asset should not negatively impact the profit of the business in the month that it was purchased and, because it is going to provide a lasting value to the business. It will show up on the income statement at the end of the year when the depreciating value is calculated. The amount that it depreciates will be entered into the income statement, and then amounts will increase each year.
Entrepreneurs can ensure that they are keeping great financial track of their assets by setting up subaccounts in their asset account. The reason for doing this, is not only to help entrepreneurs stay organized and keep the maximum amount of information on those assets should they decide to sell them later, so an entrepreneur can ensure that they have an accurate and complete record of all of their assets in case they sell their business as well. This is extremely vital for entrepreneurs that have a number of assets that are more likely going to be sold for a greater value later on in the business. An example of this would be vehicles. Entrepreneurs tend to sell vehicles in their business when the maintenance cost which is a certain threshold, but they are usually able to sell those vehicles at a fairly high price. The more information they have on those assets, the better chance they are going to have at selling those assets. Computers are an example of assets that are less likely to be sold later for a profit, because by the time an entrepreneur is selling them, computers are often obsolete.
By understanding how assets get accounted for in their financial statements, can help entrepreneurs keep accurate record, and ensure that they are depreciated properly. Outsourced CFO says this is extremely important if an entrepreneur ever is going to sell those assets, sell their business, want accurate interim financial statements in order to make great and informed financial decisions in their business.
When entrepreneurs are using interim financial statements in order to make business decisions that affect their finances says outsourced CFO, if those interim financial statements are not accurate, business owners put those decisions at risk by not being informed. By entering the assets and the expenses into their accounting records accurately, can help business owners end up with the most accurate financial statements possible, that can help them make the best financial decisions in their business possible. It can be very easy for entrepreneurs to learn how to do this, and it can benefit their business for years to come.
One of the first things that can help an entrepreneur learn this, is understanding what is considered an asset in their business. Entrepreneurs should consider anything that they purchase in their business that is going to have a lasting benefit in their business for longer than a year. Examples of assets are vehicles, leaseholder prints, computers, real estate and major in the business. All of these things are going to provide a lasting benefit to the business for several years. And expense on the other hand is something that an object purchases that ceases to benefit the business after its purchase. For example office supplies or advertising says outsourced CFO. They are important that business to have, once they are used, they do not continue providing a value to the business.
Another great tip for entrepreneurs to keep in mind as they are entering in the assets and expenses of their business properly, is that they should not worry about calculating fixed assets under a thousand dollars into their asset account. While technically, assets can be any monetary amount says outsourced CFO, it may not be a most efficient use of an entrepreneurís time. The reason is because the less expensive those assets may be, the more an entrepreneur might have them in their business, so it could be a significant amount of assets under thousand dollars which not only will take a lot of time to enter into the financial statements of the business, but also can be very time-consuming to try to depreciates those assets every year during their fiscal year end. This might not be the best use of an entrepreneurís time, because those small assets are not going to impact that entrepreneurs bottom line that much. By using the thousand dollars threshold, entrepreneurs can spend time on important things like growing their business or achieving the strategic priorities of their corporation.
Another benefit to ensuring that they are not entering in small assets into their asset account, can help fix mistakes on their financial statements. If they see something smaller than a thousand dollars being entered into their asset account, they will know immediately that it is a mistake and to fix it. This can help entrepreneurs ensure the accuracy of those interim financial statements by knowing what to look for.
By learning how their financial statements work, and how to enter in assets and expenses on their balance sheet and income statement, can help entrepreneurs have the best tools possible for making informed financial decisions in their business.
