Online Bookkeeping

  Expense capitalization is a crucial concept for bookkeepers to understand. It involves recording certain expenses as assets on the balance sheet, rather than as expenses on the income statement. This accounting practice is used when an expense is expected to provide future benefits to the company beyond the current accounting period. By capitalizing certain expenses, companies can more accurately reflect the true value of their assets on the balance sheet.   Capitalizing an expense can have several benefits for companies. First, it enables companies to better align their reported assets with the actual value of those assets. For instance, if a company spends $10,000 on research and development for a new product, and believes that the new product will generate substantial future profits, they may choose to capitalize the expense and record it as an intangible asset on the balance sheet. They would then recognize a portion of the expense as an expense on the income statement each ye

Revenue recognition is a critical accounting principle that refers to the process of identifying and reporting revenue earned by a company over a given period. It is essential for businesses to accurately track their financial performance, comply with accounting standards, and make informed decisions. In this blog post, we will discuss the key principles of revenue recognition, how it affects businesses, and provide examples.   Key Principles of Revenue Recognition   The International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) provide guidelines on revenue recognition. The key principles of revenue recognition under both frameworks are as follows:   1. Identify the Contract:   The first step in revenue recognition is to identify the contract with the customer. A contract is an agreement between two or more parties that creates enforceable rights and obligations.   2. Identify Performance Obligations:   Once a contract is identified, the nex

Introduction:   Creative accounting practices refer to the use of accounting techniques that may be legal, but may also be used to manipulate financial statements to present a more favorable financial picture. While some argue that these practices are simply part of doing business, others contend that they are unethical. In this blog post, we'll explore the ethics of creative accounting practices and the impact they can have on businesses.   What are creative accounting practices? Creative accounting practices can take many forms, and they are often used to make a company's financial position appear stronger than it really is. These practices include:   Revenue recognition: Delaying the recognition of revenue until a later period, or recognizing revenue that has not yet been earned. For example, a company might record sales before they are actually completed, or record them before the payment is received.   Expense capitalization: Capitalizing expenses that should be recorde