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What is an Accounts Payable Subsidiary Ledger?

Accounts payable may have enough items within it to require its own department in the company, or just a subsidiary ledger to supplement the General Ledger of the company. A subsidiary ledger gives full details of a line-item in the general ledger, especially when it is too detailed to include in the general ledger. The Accounts Payable Subsidiary Ledger will contain all of the transaction details for each credit and debit in the Payables history from a specific period. Continue reading...

What is Accounts Receivable Subsidiary Ledger?

The Accounts Receivable Subsidiary Ledger will be a separate ledger from a company’s General Ledger, where all of the information pertaining to all Accounts Receivable will be reported. Receivables may have only a line-item on the General Ledger of a company, but may have an entire department dedicated to servicing the receivable accounts. Because there may be a large amount of information in just the Receivables sub-account, there is often a Subsidiary Ledger dedicated to the minutia of all the Accounts Receivable business. Continue reading...

What is an Account Balance?

An account balance is the amount either credited to or owed on a ledger assigned to a particular entity or line-item. The balance of an account is the net debit or credit assigned to it after all transactions have been documented for a current period. Transactions might be deposits, withdrawals, interest credited, fees, or other activity. The account in question could be a personal savings or checking account, or a ledger account at a business or institution, or another form of account, such as the macroeconomic concept of current national account. Accounts are said to be “in the red” when there is a net debit (negative) amount, and “in the black” when there is a net positive balance (net credit). Continue reading...

What is a Home Office Expense?

IRS Link to Form — Found Here The home office expense deduction allows people who work from home to take a tax deduction reflecting the loss of square footage in their home for the purpose of doing business there. The space must be used exclusively for doing business on a regular basis and it must be the principal place of business, not just a place to work outside of the actual office. Many people fail to file for the home office expense deduction because they believe it will be more trouble than its worth or that it may even trigger an IRS audit of their reporting. Continue reading...

What is Cash-Flow Financing?

Cash flow financing is an alternative method of securing a loan, in which cash flows are the collateral, not assets. In cash flow financing, also known as cash flow loans, a lending institution will base their decisions regarding the size of the loan and the loan repayment schedule on future expected cash flows of the company. The cash flows serve as collateral instead of assets, as in an asset-backed loan. Continue reading...

What is a Federal Credit Union?

Federal Credit Unions are essentially banks that are owned by their clients instead of publicly traded or what-have-you. Instead of being part of the FDIC, they have the National Credit Union Association (NCUA). They tend to be able to offer higher interest rates on savings and lower interest rates on loans than banks can, due to their mutual-ownership structure. Credit Unions operate as non-for-profit businesses, which can allow their management to use 457 retirement plans, but they are not associated with the Federal government. They do, however, charter under federal regulations, as opposed to state banks. Continue reading...

What is Account Reconcilement?

Account reconcilement is the act of comparing and affirming multiple records of the same financial information. To “reconcile the books” is to compare different records of the same accounts to ensure that they match up. One might reconcile all the different record-keeping for the same account, such as copies of checks and receipts, to be sure that they add up to the balance and ledger shown on a bank account statement. It could be that the recipient of a check has not yet cashed it, and it is important to keep all records “synced” with one another. Continue reading...

What is the Federal Unemployment Tax Act (FUTA)?

The Federal Unemployment Tax Act was passed in 1939, and it set up trust funds for the purpose of providing unemployment insurance. Businesses, not individuals, are taxed to provide funds for the program. There are 53 state funds (including D.C., Puerto Rico, and the Virgin Islands), 4 federal accounts, and 2 associated with railroad retirement. The Federal Unemployment Tax helps states fund their own unemployment programs. Continue reading...

How do Bitcoin Transactions Work?

Two words: blockchain technology. Transactions in bitcoin are encoded, packed into a block of other transactions, and all of these are sent out to thousands of computers running blockchain computations, known as hashes. All of these computers are running similar algorithms designed to force honest work and to take time for the computers to complete. The purpose of this step is merely forcing the blockchain to require time, energy, and effort, and to be randomized and decentralized when it is validating transactions. Whichever computer solves it first receives an incentive reward, and the entire blockchain, comprised of all computers running bitcoin client software, then updates the ledger to include the most recent validated transactions. Continue reading...

What is Minority Interest?

Minority interest is a portion of a company’s stock that is not owned by the parent company, and refers to a type of ownership that generally cannot exert influence over a company’s business decisions. If an outside investor or another company has a less than 50% stake in a company via shares, then they are said to have a minority interest. From an accounting standpoint, only the dividends of a minority interest are counted on a company’s books. If they exert influence over the decision-making, then a percentage of the income may also need to be included. Continue reading...

What is Account History?

Account history is a term especially useful for investment accounts, where transactions beyond a current month or year’s records are useful for reference. Most people are familiar with the transaction history that is available for the current month, quarter, or year on an individual’s savings, checking, and credit card accounts. These are often called “activity ledgers” or something similar. Account history that reaches further back might be more useful for investment accounts, where the current value of investments, and their cost basis, will depend heavily on account history from potentially years in the past. This sort of query can be made easily with online investment account viewing software from a broker or custodian company. Continue reading...

What is Accounts Receivable for Accounting?

Also simply called Receivables, the Accounts Receivable line on a General Ledger will contain the amounts owed to the company which are due to be received in the near future. If a company offers financing for the items it sells, or it has regular payments coming in for things such as rent, leases, monthly subscription or membership fees, and so on, they will have substantial numbers in their accounts receivable. Continue reading...

What is Terminal Value?

The "end" value at a specified date in the future of an investment or cash flow. Terminal value is a term used in value calculations looking forward toward the future value of an asset or cash flow, and also in calculations which start with the Terminal Value and depreciate the asset over the intervening years until one arrives at the Present Value. Can be used in calculations regarding a business, an index, a cash flow, or an asset. Horizon Value is a synonym, and is perhaps better suited to describe the way the calculation chooses a time horizon of a specific number of years, but otherwise uses the same numbers in an equation that will estimate the value if the business or index went on growing at the same rate into perpetuity. Continue reading...

How Does Blockchain Technology Work?

Blockchains are intended to maintain integrity in the system without anyone needing to monitor or control it. By instituting a system of checks and balances that functions on its own accord through rules programmed into the protocol, and which also makes decisions and keeps records based on consensus throughout a peer-to-peer network, a blockchain oversees its own activities without requiring any trust in a central authority or the other parties involved. Continue reading...

What is Acquisition Accounting?

Also known as Business Combination Accounting, there are specific guidelines and bits of information that must be documented on the books during an acquisition. Acquisition Accounting is a standardized way to account for the assets and liabilities of companies who are part of a merger or acquisition. International Financial Reporting Standards (IFRS) stipulate that even in a merger where a new company is formed, one company must play the role of acquirer and the other of acquiree, but that rule really only applies outside of the US. Continue reading...

What is a Form 2106: Employee Business Expense?

IRS Link to Form — Found Here Form 2106 is the long-form way to request deductions for unreimbursed business expenses incurred by an employee in the course of work. This can include professional affiliation dues, continuing education, insurances, vehicle mileage and depreciation, and other possible deductions. Often, employees are not reimbursed for every out-of-pocket expense they incur in the course of their work. This might include wear and tear on a vehicle, professional dues, travel expenses, business meals, and many more items. For any amount to go towards a tax deduction, the itemized unreimbursed expenses must be over 2% of adjusted gross income. Continue reading...

What is Account Settlement?

Settling an account is laying all outstanding business on an account to rest. Account settlement is an idea that can take a few forms. Settlement is when acceptable “consideration” (compensation or pay) has been provided and both parties agree that the matter is settled, resolved, and no further debts or obligations exist for that item of business. Many people have heard the term “settlement” with regards to legal matters, in which the defendant pays off the plaintiff before an actual trial and usually can avoid officially admitting guilt. Continue reading...

What is asset management?

Asset management is a term often reserved for the overseeing of assets on behalf of a business or for wealthy clients with significant and various assets. A financial planner, CPA, or estate attorney who is capable of assisting a client with various types of assets and their optimal arrangement for that client’s goals can be said to be in a business of asset management. Tax considerations and cash flows may be a larger consideration with asset management than with investment advising. Continue reading...

What is an Account Executive?

An account executive is an individual who has executive responsibility of the maintenance of client account. In certain businesses, some client accounts have a high degree of importance and priority with regards to sales and operations, perhaps because they generate significant revenue for the company. Examples of such businesses might be advertising, office products, and investment services. The title of account executive is especially fitting if there is a staff which supports the lead account executive in maintenance of the client relationship and account service, but a staff is not required to hold this title. In other businesses this position might be called an account manager. Continue reading...

What is Accounts Payable for Accounting?

Accounts Payable is part of the Current Liabilities section of a company’s books. Accounts Payable are the short-term expenses and debts that a company must pay out in the near future. These might include utility bills and regular expenses, debt service, and bills to regular suppliers and vendors. The amounts that appear in the Payables, as they are also called, have not been paid out yet, but are scheduled to be paid within the current quarter, generally. Continue reading...