James Hutchinson's Blog
Posted by James Hutchinson
My Webster's New World Dictionary gives these definitions
- Pandemic - prevalent over a whole area
- Epidemic - prevalent and spreading rapidly among many individuals in a community at the same time
I guess that's pretty clear, the big difference is "spreading rapidly". H1N1, or the Swine Flu, isn't yet spreading rapidly.
Posted by James Hutchinson
A contributing factor for obese office workers in general and accountants in particular is the expectation that work cannot be completed in a forty hour work week.
If an accountant is required to work 10-12 hours per day, plus Saturdays and some Sundays in busy season, there is little time for much else, including exercise and healthy eating.
Accountants, especially those in public accounting, work in teams, and managers make sure staff put in the requisite hours. Slacking off doesn’t help in garnering promotions, and managers and partners tend to work even longer hours.
Since there are only so many hours in the day, many active workers rise early and hit the gym before 6 a.m. or late at night. Some fitness facilities are open 24/7 to accommodate these types. Others try to squeeze in a workout or walk during lunch, although is difficult for staff, which rarely even get a lunch in busy season.
What often happens is the belt gets a little tighter.
Posted by James Hutchinson
Not all accountants are overweight. Athletes become accountants and work hard to stay in shape. Accounting has attracted many women, who dedicate themselves to their work, but also maintain a healthy weight and attractiveness
Many accountants, and by an informal survey of my colleagues, most office workers, struggle to keep excess pounds off. Working in a office, long hours and poor eating habits contribute to an unhealthy lifestyle.
What’s to be done? This section of the blog will look at what causes businesspeople in general and accountants in particular, to lose the battle of the bulge.
Ending up slumped over a desk with a heart attack is definitely the wrong way to go.
Posted by James Hutchinson
Ratios are simply the result of comparing two or more different numbers. Accountants use them to value a business. Normal ratios used in accounting include the Current Ratio, Quick Ratio and Debt to Equity.
See these articles on Days in Accounts Receivable and Days Cash on Hand for specific examples on how they are used
Posted by James Hutchinson
Much of the attention in the accounting profession is focused on public accounting, which is responsible for auditing financial statements and producing audit reports.
However, I suspect that most of the accountants are engaged in financial or management accounting, who prepare the monthly financial statements presented management long before they audited by outsiders.
These accountants design the spreadsheets and book the journal entries so management can see what the profitability of the company is, and so that the auditors have something to audit.
Month End Again?
Most companies issue financial statements monthly, so that these accountants have a routine. The last few days of the month involve getting ready for close, and then the next five to ten days are a furious race to close the books accurately.
The next few weeks are spent working on other projects or preparing reconciliations, and then the process begins all over again.
I knew one accountant that counted the number of month ends to retirement. So, if you desire an unpredictable job, with varied responsibilities, never knowing what is going to face you each day, don’t go into accounting.
Posted by James Hutchinson
One term I really hate as an accountant is when people refer to the profession as bean counters. Most people don’t really mean it as insult, or at least a mild one.
The expression comes from the perception that accountants just add up numbers and keep track of other people’s money. Although there is plenty of math involved, accounting is more than that.
The primary responsibility of an accountant is to present the financial statements of a company in a fair and accurate manner. That requires a lot of analysis and judgment to make sure the estimates used are done correctly, but more importantly, appropriate for the item being measured.
Estimating the collection of receivables, or valuing a portfolio of complicated investments requires skill and training, a lot more than just the ability to count.
Posted by James Hutchinson
I found out the other day that employees have another method to save for retirement in the
Individual Retirement Accounts have been available for some time in two different forms:
- With a traditional IRA, monies funded can be deducted from Adjusted Gross Income, reducing tax liabilities in the year that it is funded.
- A Roth IRA, where funds are not deductible in the year funded, but any earnings from the fund are tax-free when withdrawn at retirement.
Traditional 401Ks have been available for many years. The advantages of 401Ks is that under employer sponsored plans, larger contributions and company match are allowed.
Recently Roth 401Ks have been created, so that the advantages of a Roth can be combined with the pluses of 401Ks. Consult your employer of financial professional for details as it applies to you.
Posted by James Hutchinson
Posted by James Hutchinson
Certified Public Accountants, as well as many other professions, need to maintain current on changing trends. In the
The number of hours needed varies, but many states require 40 hours of qualifying education a year. The renewal period may be two or three years, requiring the CPA to have 80 hours over a two year period, or 120 within three years.
Practitioners who do not meet the educational requirement cannot practice as a CPA. States offer a special designation for CPAs who want to maintain their title, but are not part of a public accounting practice.
This designation is called different things in different states, sometimes non-practicing, or in-active. Generally, the fees associated are lower. The downside is that the accountant cannot sign audited financial statements.
Posted by James Hutchinson
Golfers today display as many advertisements as race cars. Tiger Woods wears a Nike Swoosh, and other players were sporting good related images.
Phil Mickelson prominently displayed KPMG on his hat at the Masters. KPMG LLC is a major accounting firm, one of the so-called Big 4 firms.
They are:
- KPMG
- Deloitte & Touche
- Price Waterhouse Cooper
- Ernst & Young
There are thousands of other firms, but these are generally considered to the largest and most prominent. There was originally a Big 8, but with consolidation and the implosion of Arthur Andersen in the Enron scandal, the number has been reduced to four.
One thing I don’t understand is the value for KPMG to advertise on Phil’s hat. How many people watching have the ability to engage KPMG? Everyone can buy a pair of shoes or a golf, a Srixon golf ball (advertised on Jim Furyk’s hat.) But an accounting firm? It’s their money, but it seems a waste.
Posted by James Hutchinson
The IRS requires taxpayers to make estimated payments on income taxes if withholding is insufficient to meet the expected tax liability.
In most cases, if the taxpayer expects to owe at least $1,000 in unpaid taxes, they need to pay in quarterly installments. The due dates are:
- April 15
- July 15
- October 15
- January 15 of the following year
Posted by James Hutchinson
This time of year it is easy to make mistakes on taxes. Either you are focused on Federal and State returns, or you have filed and think everything is behind you.
If you haven’t now is the time to make sure you’ve completed all the miscellaneous returns before the deadline. City taxes are often a surprise.
In most municipalities, city taxes are a simple percent of earned income, without all the deductions and additional income. Taxpayers need to make sure that the amount deducted is correct and sufficient to cover the amount owed.
There are couple scenarios to watch for.
- If you recently moved, you may not receive a tax form notifying you of your liability. This doesn’t excuse you from penalties or interest. It is the taxpayers responsibility to pay what is owed. As they say, ignorance of the law is no excuse.
- If you work in one city but live in another, the tax deducted where you work may not satisfy your obligation in your home city.
Don’t get caught with unnecessary penalties. Make sure you check your city tax obligation before the deadline.
Posted by James Hutchinson
Equity is an accounting term for the value of the ownership of a business. When the liabilities are subtracted from the assets of a company, what’s left is what belongs to the owner. One hopes that is a positive number, but there can be negative equity, a situation that usually doesn’t last for long before bankruptcy.
Sweat Equity is not a real accounting term, but slang for the effort that the owner puts in himself to make the business work. Small businesses often depend on sweat equity since the owner doesn’t have the money to pay someone else to do all the tasks that need doing.
A small restaurant might have a cook and wait staff, but the owner may end up cleaning, doing minor maintenance and the bookkeeping. Instead of investing major amounts of money, he puts his time and talents to work for the business.
Many businesses fail due to owner burnout. So, you think you can run a business using sweat equity, make sure it is something that you really love doing. The better choice is to design a business that will build real equity, and the sweat equity is a bonus.
Posted by James Hutchinson
When filing your income taxes, the United States Internal Revenue Service and most states allow you to receive a refund either by check or direct deposit directly into a savings or checking account.
It almost always makes more sense to get direct deposit.
- There is no chance the check will get lost in the mail.
- Direct deposits are much faster, usually a week versus a month.
With direct deposit, there is a chance of error if the bank information is loaded or transferred incorrectly. In this electronic age, a computer error is less likely than a mix-up by a human somewhere between the IRS and your mailbox
Posted by James Hutchinson
I personally use TurboTax and it’s a great product. Probably the most annoying feature is if you buy the Basic version, many of the screens prompt you buy an upgraded version, either the Deluxe, Premier or Home and Business.
Do you Need to Upgrade TurboTax?
I use the basic version, and unless you have some really, really complicated return, you probably don’t need to upgrade. There is some more help with deductions and extra guidance, but Basic has most of what anybody would need. You can always add the state version separately, but most states have simpler returns and internet filing.
Posted by James Hutchinson
I think I am buying a new car this year. The
One of provisions of the American Recovery and Reinvestment Act (the 2009 Stimulus) is that for any auto or light truck purchase in 2009 (after 2/17/09), local and state sales taxes can be deducted from adjusted gross income, whether or not the taxpayer itemizes deductions.
So for example, with a 7% sales tax rate on a $25,000 car, the total sales tax paid is $1,750. In the 28% tax bracket, that is a tax savings of $490. The IRS website specifies that this will be phased out for AGIs over $125,000.
It is important to remember if you are trading in a car, in many states sales tax is reduced. Sales tax is charged on the net amount of the car, or the purchase price less trade-in. You won’t get the tax deduction, but you won’t be paying the sales tax either.
So head out for the nearest dealer and let Uncle Sam make that new car more affordable.
Posted by James Hutchinson
Cash is so important in Accounting that the Cash Flow Statement is a required schedule for Audited Statements. Nothing is a bigger factor in whether a company succeeds than if they have enough cash.
Companies with large cash balances are more likely takeover targets, because everyone wants that cash.
I like to read Robert Kiyosaki of Rich Dad, Poor Dad fame. He offers basic financial advice in easy to read terms. That said, he is not an accountant, and many of his ideas are pretty questionable. I don’t necessary subscribe to his investment advice, but he has pretty much built a career on one major idea.
That idea is to acquire assets that produce cash flow. He’s even developed a game by that name. He’s not so much interested in the accounting definition, but likes to see checks coming in every day. It’s a little hard to argue with that basic concept. It’s worked for him, at least by the revenue generated from his books.
Posted by James Hutchinson
“I can’t be overdrawn. I still have checks left.”
Sorry, that’s not the way it works. The best advice for money management I can give is to do bank reconciliations. Make sure you know how much money you have in your checking account. One mistake in a checking account can lead to expensive overdraft fees, or an embarrassing moment at the ATM.
I know people who don’t reconcile, they just close their bank accounts every few years so they can start fresh. That’s not really a good idea. It’s very easy to make a mistake now that that there are automatic withdrawals, internet transactions and fees hitting your account.
Bank reconciliations are easy if you follow the steps in this article.
Keeping track is smart and easy, especially if you have online access to your account. If not, making a date with your monthly statement is a great place to start.
Posted by James Hutchinson
Half the taxpayers have already filed their return in order to get their refund. Another group is dreading the eventual payment and is putting off doing their taxes until April 15th. The rest are either waiting for documents in order complete their return, or simply procrastinating.
If you have filed your return, this is a good time to look at the deductions from your paycheck. If you are getting big refund, consider changing your deductions so you don’t provide an interest free loan to the government next year.
If you haven’t filed yet, check out this article on getting ready, so everything you need will be at your fingertips when the time comes