Measuring profits or net income is the most important thing accountants do. The second most important task is measuring costs. Costs are extremely important to running a business and managing them effectively can make a substantial difference in a company’s bottom line. Any business that sells products needs to know its product costs and depending… Continue reading Measuring Costs
In an accountant’s reporting systems, depreciation of a business’s fixed assets such as its buildings, equipment, computers, etc. is not recorded as a cash outlay. When an accountant measures profit on the accrual basis of accounting, he or she counts depreciation as an expense. Buildings, machinery, tools, vehicles and furniture all have a limited useful… Continue reading Depreciation reporting
Financial managers can do certain things to increase or decrease net income that’s recorded in the year. This is called profit smoothing, income smoothing or just plain old window dressing. This isn’t the same as fraud, or cooking the books. Most profit smoothing involves pushing some amount of revenue and/or expenses into other years than… Continue reading What is financial window dressing?