Indirect costs are attributed to the running and managing of a business entity. Both direct and indirect costs have an effect on your net income, but for very different reasons. Indirect costs, often referred to as overhead costs, focus less on product production and more on day-to-day business expenses. While most direct costs are variable, … Read more
This means that the balance sheet should always balance, hence the name. If they don’t balance, there may be some problems, including incorrect or misplaced data, inventory or exchange rate errors, or miscalculations. For a sole proprietorship or partnership, equity is usually called “owners equity” on the balance sheet. Here we see that the sum … Read more
There’s surprisingly little to say about merger models and LBO models in the oil & gas industry. Simply subtract the expenses from the revenue each year and then multiply by (1 – Tax Rate) to calculate the after-tax cash flows. The good news is that most of the same valuation methodologies you’re used to oil … Read more
However, contrary to subtracting it, you actually incorporate it into your overall accounts receivable (AR). Because it gives you a more realistic picture of the money, you can expect to collect from your customers. An allowance for doubtful accounts (uncollectible accounts) represents a company’s proactive prediction of the percentage of outstanding accounts receivable that they … Read more
It becomes useful when an asset’s value is more closely related to the number of units it produces rather than the number of years it is in use. This method often results in greater deductions being taken for depreciation in years when the asset is heavily used, which can then offset periods when the equipment experiences less … Read more
The reconciliation statement allows the accountant to catch these errors each month. The company can now take steps to rectify the mistakes and balance its statements. Financial statements show the health of a company or entity for a specific period or point in time. The statements give companies clear pictures of their cash flows, which … Read more