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...
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...
Current Assets are items on a balance sheet that are either cash or are going to be cash in the near future. The current assets section of a balance sheet is an indication of cash flows and liquidity. The assets are usually listed in order of liquidity, or the amount of time that it will take for them to become cash. This section includes cash, accounts receivable, prepaid expenses, inventory, supplies, and temporary investments. (The order given here is not necessarily the order of liquidity found on a balance sheet.) Continue reading...
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...
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...
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...
You may not be able to make non-recurring withdrawals of various amounts from a Cash Balance plan. After you retire, you’ll typically have two options: a fixed monthly payment for the rest of your life, or a lump-sum payment. Cash balance plans generally do not allow random, non-recurring withdrawals because the individual account was always a hypothetical account. The administrative work of fetching various sums for everyone and keeping up with the total pool of plan assets is not the administrator’s prerogative with these plans. Continue reading...
Payout options in the realm of annuities tend to be guaranteed by the insurance company providing the annuity, and may come in many forms depending on the investor’s preference. Annuities can pay income to the annuitant in a few ways. One of the ways is to turn the entire balance of the annuity into a pension-like income stream for life, or jointly on two lives. The payout tends to be higher than the safe withdrawal rate than investors can use in an investment account, and it provide guarantees and surety where it wouldn’t exist otherwise. You can also elect to have these payments start off slightly lower, and then to increase at a guaranteed rate, to keep up with the cost of living. Continue reading...
Variable annuities generally provide investors with downside protection for a fee (the insurance guarantee), while also providing market exposure that may give the investor upside potential. A variable annuity is characterized by offering market exposure, and the risk and upside potential that comes with it, in the form of “separate accounts” which are institutional-level mirrors of retail mutual funds. Typically a variable annuity will not deplete the amount of your initial investment with sales charges, and may even credit your annuity with an initial bonus amount of several percent. Continue reading...
Cash Balance plans are Defined Benefit plans, but are not much like Pensions as you may know them, or other types of retirement plans, for that matter. On one side of the retirement isle you have defined contribution plans, such as 401(k)s and SEPs and so on, where the contributions are certain, or at least ascertainable, while the ending balance or benefit of each employee’s account is unknown, or at least does not have to be (and in most cases isn’t). Continue reading...
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...
Defined Benefit plans guarantee a certain amount of retirement income to an employee based on the employee’s current salary, years at the employer, and other factors. A Defined Benefit Plan involves a promise made to you by your employer to pay you a certain monthly “benefit” for the rest of your life, or for a certain number of years after retirement. The amount of the payment is pre-calculated using a formula which typically involves your age, your salary, the number of years you’ve worked for your employer, along with other factors. Continue reading...
Lump sum distributions are when the entire balance of an account is paid out at once. After you retire, you can elect to receive your money in a lump sum. Of course, you will end up paying income taxes on the entire distributed amount that year. There is also what’s called the mandatory 20% withholding, which requires custodians to withhold 20% from retirement plan distributions if they are not part of a trustee-to-trustee transfer (such as funding an IRA). Continue reading...
We encourage you to be responsible and keep the future in mind. The first thing to keep in mind is that it’s very easy to spend a lump sum right away without thinking about the consequences. While the monthly payment option protects your money from overspending, a lump sum should be handled with frugality and practicality in mind. A large portion of this amount should be invested safely and wisely, particularly if you are very near to your own retirement age, and you do not have time to ride out market fluctuations. When investing, you should consider a conservative estimate of you and your spouse’s life expectancies weighed against your annual income needs, adjusted for rising healthcare costs. Continue reading...
Internal control systems and procedures can ensure the accuracy and reliability of financial accounts at a business. Accounting controls are meant to ensure that the numbers being put onto the books are accurate. Internal controls are the practices that employees are trained to do, and may be audited on, which general involve some oversight or double-checking to filter out mistakes. This not only prevents mistakes, but also malfeasance, embezzlement and fraud. Accounting done wrong can result in criminal penalties, bankruptcy, and tax problems. Continue reading...
The Accounting Cycle includes all of the documentation that is collected and all of the controls and systems in place to ensure accurate accounting. The Accounting Cycle begins with the point of sale, with documentation for the transaction (invoice or receipt) and the internal expenses and inventory. There are conventions, controls and systems in place to account for and control the flow of information in a company at each stage of the process to ensure that accounts are as accurate as possible. The Accounting Cycle may refer to the length of time between trial balances, such as monthly, quarterly, or annually. Continue reading...
Accounting policies are the internal controls of a company which stipulate the methods by which the books will be kept. Accounting policies are the agreed-upon accounting methods, conventions, and practices of an accounting cycle. A business must establish guidelines and training to ensure that accounts are kept in ways that satisfy their needs for documentation, security, liquidity, management, and the observation of applicable laws. Continue reading...
Accounting records are the supporting documents that verify the history of transactions, audits, and reports. Accounting documents are sometimes required to be kept on file for a certain number of years. They may be paper or electronic records. Records may include point-of-sale documents such as receipts and invoices, as well as inventory delivery and audit records, and the results of internal and third-party audits from various periods. Continue reading...
An account number is a serialized identifier which is ascribed to a particular account holder or account at a financial institution, retailer, or other entity. Account numbers may include letters or numbers and may be of various length, but they usually exceed 5 characters. An account number is a way for a company or organization to uniquely identify the accounts associated with each individual customer. Continue reading...
Cash Accounting is the accounting method where only finalized transactions are documented. Larger, publicly traded companies are actually not allowed to use Cash Accounting because it can’t keep up with all the Payable, Receivables, and so forth that large companies have to keep on their books. Instead, larger companies are required by the SEC to use Accrual Accounting, which makes ledger entries for cash that has not yet be paid or received, among other things. Continue reading...