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Outsourced CFO | How To Account For Assets On Financial Statements

How assets are accounted for on financial statements can significantly impact the accuracy of those financial statements says outsourced CFO. When an entrepreneur is reviewing their interim financial statements, the reports are supposed to be helping entrepreneurs give them the information they need to make important financial decisions in their business. However, if the asset purchases are booked incorrectly, the income statements and that being completely unusable. If an entrepreneur is not aware of this, they will use those income statements to make those purchases, and end up making poor financial decisions in their business that could potentially impact their business seriously.

One way that entrepreneurs can ensure the accuracy of those interim financial statements, is by learning how to properly book those asset purchases. Outsourced CFO says the very first step that entrepreneurs need in order to do that is no when an assets is. The definition that business owners should be using is anything that has a useful economic benefit over one year in their business. Examples of great fixed assets in businesses include computers, real estate, vehicles and major equipment such as x-ray machines or printing presses. Entrepreneurs should also understand that leaseholder improvements can count as asset purchases as well, because they are going to significantly benefit the business for longer than a year. For example, if an entrepreneur puts a new roof on their building, that is going to benefit their business for as long as they are in that building.

When entrepreneurs are learning how to calculate assets, and booking them into their financial statements, they should get into the habit of discounting assets that are under a thousand dollars in value. The reason for this, is because when entrepreneurs try to calculate all of the assets under thousand dollars as well as depreciate their value on an ongoing basis year to year, it can end up costing them a significant amount of time while accounted for all of those assets will not significantly impact the entrepreneurs bottom line. For the amount of time it takes a business owner to do this, they can be achieving the strategic priorities of their corporation or growing their business. It is just not a good use of time.

Another benefit however says outsourced CFO of accounting for assets that are over a thousand dollars, is if they see smaller changes to the asset account under thousand dollars they can first of all understand that it is a mistake, and the mistake is usually when an expense has been counted as an asset. For example, a business owner purchases an office printer for their business for under five hundred dollars, it might be counted as an asset, but it is under thousand dollars so should be claimed as an expense instead. If an entrepreneur sees that a small amount has been added into the asset account, they can take that out and claimant as an expense instead.

By learning these tips and tricks, entrepreneurs can be better prepared to review their interim financial statements and catch any mistakes that they see. In addition, will be also better prepared to enter in information correctly in the first place, so that they can end up with the most accurate interim financial statements possible to help them make informed business decisions.

Outsourced CFO | How To Account For Assets On Financial Statements

One of the significant challenges that many entrepreneurs have in their business, is that they are very good at what their business does says outsourced CFO, but they are not very good at running that business. Into it, who are the makers of the accounting software QuickBooks did a survey of small businesses to gauge how literate they were in basic business finances. Out of all of the respondents who did the quiz, eighty-two scored less than 70% on the test. This shows that many entrepreneurs are lacking a lot of financial literacy. By helping them become more financially literate in their business, can help them make more informed decisions in their business and keep their interim financial statements accurate.

One of the first things that entrepreneurs should understand is when they purchase an asset in their business, it is not going to show up as an expense on their income statement right away. The reason for this says outsourced CFO is because that asset purchase would end up making the finances of that business look extremely negative and also negatively impact the profit of the business. Instead, entrepreneurs should understand that there fixed asset expense will move directly onto their balance sheet. It will show up on the income statement at the end of the year however when entrepreneurs calculate the depreciation of all of their assets. All of the assets that have yet to make their way onto the income statement will be put their, for the amount that they have already depreciated. Entrepreneurs should understand this, so that they can know what they are looking at when they look at their interim financial statements especially at the end of the year.

What this will do for their business, is satisfy the accounting principle of revenue and expense matching principles. Outsourced CFO says that what this matching principle is, is that entrepreneurs need to ensure that the expenses of the business are matched to the income of the business. When looking at the income of certain period of time for the business, it should match the expenses of the same period of time.

By understanding exactly how these asset purchases are going to look not only on their interim financial statements, but on their income statements and balance sheets, entrepreneurs can verify the accuracy of the information, and understand why it appears the way it appears. By having the most accurate information by entering it correctly, but also having the knowledge to verify the accuracy of the information, can help entrepreneurs have the most accurate information at their disposal when they go to make financial decisions in their business. Whether it is purchasing more assets, paying their staff, or taking dividends that of their business, ensuring they have the best financial information at their disposal when they could make those decisions can help them significantly make the best decisions possible.