How to make more money - Part 2 -circa 1997

175 views

Published on

Chaim Yudkowsky, CPA, CITP, CGMA - Byte of Success

Part of a series in 1997 focusing on helping small and midsized business make more money / become more profitable

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
175
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

How to make more money - Part 2 -circa 1997

  1. 1. How to MakeHow to Make More MoneyMore Money Part 2Part 2 presented bypresented by Chaim Yudkowsky, CPAChaim Yudkowsky, CPA Grabush, Newman & Co., P.A.Grabush, Newman & Co., P.A. 410-296-6300 www.gnco.com www.byteofadvice.com
  2. 2. ““Show me the money!”Show me the money!”
  3. 3. Understanding FinancialUnderstanding Financial StatementsStatements What are financial statements? Principles in preparation of financials Cash vs. accrual accounting Role of the public accountant What do statements tell management? Using financial ratios What we will learn:What we will learn:
  4. 4. What Are FinancialWhat Are Financial Statements?Statements? A picture in time of the financial resultsA picture in time of the financial results of the operations of the business.of the operations of the business.
  5. 5. Underlying Principles in theUnderlying Principles in the Preparation of thePreparation of the Financial StatementsFinancial Statements G.A.A.P. (Generally Accepted Accounting Principles)
  6. 6. Examples of G.A.A.P.Examples of G.A.A.P. The matching process Conservative Assets are recorded at cost Stable dollar Consistency “Going concern”
  7. 7. Methods of AccountingMethods of Accounting CashCash vs.vs. AccrualAccrual
  8. 8. Accrual AccountingAccrual Accounting Recognize revenue when earned. Recognize an expense when incurred.
  9. 9. Cash AccountingCash Accounting Recognize revenue when received. Recognize an expense when paid.
  10. 10. 1.1. Billed $2,000, 000 for services.Billed $2,000, 000 for services. 2.2. Paid all operating expenses.Paid all operating expenses. 3.3. Did not collect money from the $2,000,000 in billings.Did not collect money from the $2,000,000 in billings. ACCRUAL CASH Fees $2,000,000 $0 Operating Expenses <1,250,000> <1,250,000> Profit/<Loss> $750,000 <$1,250,000> IllustrationIllustration
  11. 11. Although the accrual method is recommendedAlthough the accrual method is recommended for most businesses, the following typesfor most businesses, the following types of businesses may benefit from usingof businesses may benefit from using the cash method for taxation:the cash method for taxation: Law firms Accounting firms Dental practices Medical practices Architects Advertising agencies Other service providers
  12. 12. Role of the Accountant inRole of the Accountant in Preparing Financial StatementsPreparing Financial Statements COMPILATION – Lowest level of reporting – No opinion rendered
  13. 13. Compilation Report -Compilation Report - Accrual BasisAccrual Basis “. . . A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements [and supplementary schedules] and, accordingly, do not express an opinion or any other form of assurance on them. . . .”
  14. 14. REVIEW – Negative assurances rendered Role of the Accountant inRole of the Accountant in Preparing Financial StatementsPreparing Financial Statements
  15. 15. Review Report - Accrual BasisReview Report - Accrual Basis “. . . A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. . . .”
  16. 16. AUDIT – Highest level of reporting, though no assurance that fraud can be detected – Positive assurances rendered – Management letters provided Role of the Accountant inRole of the Accountant in Preparing Financial StatementsPreparing Financial Statements
  17. 17. Independent Auditors’ ReportIndependent Auditors’ Report “. . . We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Company as of Date and the results of their operations and their cash flows for the years ended in conformity with generally accepted accounting principles. . . .”
  18. 18. The Financial StatementsThe Financial Statements Disclose to Management…Disclose to Management… What assets have we accumulated? and What liabilities have we incurred?
  19. 19. Current AssetsCurrent Assets Current assets are those assets that will turn into cash within a 12 month period
  20. 20. Current LiabilitiesCurrent Liabilities Current liabilities are those liabilities that will be paid within 12 months
  21. 21. The Financial StatementsThe Financial Statements Disclose to Management…Disclose to Management… Did we make a profit?
  22. 22. The Financial StatementsThe Financial Statements Disclose to Management…Disclose to Management… Where did our cash come from and go?
  23. 23. A Poetic PerspectiveA Poetic Perspective Never ask of money spent Where the spender thinks it went. Nobody was ever meant To remember or invent What he did with every cent. --Robert Frost
  24. 24. Questions?Questions?

×