Cash Accounting Or Accrual Accounting

Cash Accounting Or Accrual Accounting
Bookkeeping based upon cash accounting principles is the
easiest accountancy practise but not necessarily the most
accurate or beneficial for tax purposes for the business.
This is because cash accounting adopts the date of
financial documents such as sales invoices and purchase
invoices as the automotive date for those primary financial
records to be entered into the accounts.

The date entered on the sales or purchase receipt is called
the tax point. The tax point does not determine the spread
of that transaction over the tax period which can be
different when accounts are prepared on an accruals basis
as opposed to a cash basis.

For the purposes of cash accounting the effective inclusion
of the transaction in the financial records is the date the
cash or bank receipt or payment was made. The tax point
date on the document is not the deciding factor to include
the item in the accounts. The determining factor is the
date the transaction amount was received or paid out be
that in cash or bank.

There are disadvantages to maintaining accounts on a cash
basis in that records must be kept of all payments received
and paid out and those records supported by the actual
primary accounting documents to which they relate. That
entails matching the financial documents to the payments
and receipts records, a feature many small businesses might
find onerous.

Virtually all professional accountants adopt an accruals
basis for clients accounting purposes as it is based upon
recording all financial information whether relevant to the
tax period or not and then adjusting the management
accounting profit indicated to produce the net taxable
profit or loss.

By operating an accruals basis all financial documents are
recorded according to the tax point date. If all financial
transactions during the year were paid for in that year
then the cash basis and accruals basis would produce
identical results.

The main adjustment a small business or the accountant
might make to accounts prepared on the accruals basis is to
first prepare the set of accounts according to the tax
point of the primary accounting records and then examine
those transactions and adjust them according to their
relevance to the financial period for which the accounts
are being prepared.

A typical example of the difference would be the rent
invoice for the business premises. Let us assume a
quarterly rent invoice was received dated 1 December for
the 3 months from December 1 to February 28 which was paid
by the small business owner by cheque on December 31 and a
year end date also of December 31

On a cash basis the rent would not technically be included
in the accounts as it would be shown as a rent payment from
the business bank account on January 2 or later if cashed
by the recipient at a later date. Therefore that quarters
rent would be included in the following year accounts not
the current year as issuing a cheque is not a payment but
actually a promise to pay.

If the rent was paid in cash prior to the 31 December then
the whole 3 months rent would be included in the current
accounting records. That treatment may have distorted the
accounts as more or less than 12 months rent might have
been included in the tax calculations.

On an accruals basis the rent invoice would have been
entered in the accounting records with an effective date of
December 1. Using accrual accounting the accountant or
small business owner preparing the accounts would then
deduct 2 months rent as a prepayment leaving one months
rent in the current year accounts.

That is more accurate as the other side of the accounting
would be for that same accountant or bookkeeper to further
include the 2 months rent not already claimed to be
included in the tax calculation for the next financial
year. That is how prepayments are treated when a business
uses the accruals accounting basis.

Further when using the cash accounting basis only those
transactions paid for or received are included. On an
accruals basis additional expenses can be added that may
not have even been invoiced yet on the basis that the costs
incurred were relevant to the accounting period for which
the books are being prepared.

Cash accounting might appear easier but has the
disadvantage of maintaining receipts and payments records
in addition to the primary documents which should also be
matched to the financial transactions to support the
accounts.

Accrual accounting is based upon recording all financial
transactions and then adjusting the end result to determine
the most accurate net taxable profit. The accruals basis is
favoured by accountants as it reaches an accurate tax
liability as opposed to more or less tax being payable on
the cash basis according to the credit control policies and
practises of the business its suppliers and clients.

----------------------------------------------------
Terry Cartwright, accountant and CEO at DIY Accounting,
designs accounting software http://www.diyaccounting.co.uk/
on excel spreadsheets providing complete single and double
entry bookkeeping systems
http://www.diyaccounting.co.uk/bookkeeping.htm

Thinking Outside the Bank - Business Loans and Working Capital

Thinking Outside the Bank - Business Loans and Working Capital
"Thinking Outside the Bank" means that non-traditional
(non-bank) commercial lenders should be considered for most
commercial mortgage loan and working capital financing
situations. Traditional lenders providing competitive
commercial financing for special purpose commercial
property loan and business cash advance needs are
relatively rare.

When commercial borrowers "Think Outside the Bank", it is
of critical importance that they are prepared to avoid a
wide variety of problematic traditional as well as
non-traditional commercial lenders in their search for
viable business financing, especially when it involves
business cash advance (credit card receivables and credit
card factoring) programs, credit card processing services
and commercial real estate financing.

In order to take advantage of "Thinking Outside the Bank",
commercial borrowers need to realize that they have more
commercial loan options than they think. These business
financing options are referred to here as "Thinking Outside
the Bank" because most commercial borrowers believe that a
bank is the best source for a commercial loan.

Here are two brief examples about how a commercial borrower
is likely to benefit by "Thinking Outside the Bank". In
many situations a traditional bank will provide a
commercial mortgage but will include non-competitive
covenants and terms. In other cases a traditional bank will
decline the business loan because they do not provide
commercial financing to the commercial borrower's
particular type of business.

Some borrowers are likely to feel that a traditional bank
is their best source for a commercial mortgage or
commercial loan. However, because most traditional banks
focus on a small number of established industries,
non-traditional (non-bank) and non-local commercial lenders
should be actively considered for most business financing
situations. Therefore the recommended business loan
strategy (as discussed in this article) is to "Think
Outside the Bank".

As described in a prior commercial loan report, in many
business financing scenarios it is typical for a
traditional bank to require more business loan covenants
than would normally be seen in a competitive commercial
mortgage situation. Traditional banks can unfortunately
take advantage of a shortage of commercial lenders in their
local market area.

An effective response by borrowers is to emphasize business
financing options other than the traditional ones. It is
not wise for business borrowers to depend only upon local
and regional banks for commercial loan possibilities. For
common commercial financing circumstances, a non-local
business lender can frequently provide the best business
loan terms because of competition with other business
lenders.

There are three business loan scenarios in which borrowers
will commonly discover that non-traditional lenders will
offer terms that are better for the business owner:
commercial real estate financing and SBA loan programs,
working capital business loan programs and business
management programs for credit card processing.

Two of the worst commercial real estate financing problems
for business owners can be eliminated by "Thinking Outside
the Bank". The first commercial mortgage business loan
problem is the typical bank practice to eliminate most
special purpose business properties such as golf courses
and funeral homes from their lending portfolio.

A second business loan possibility is the frequent practice
of many commercial banks to add recall and balloon
conditions to their commercial loans. The bank can then
require early payoff of the commercial real estate loan
under stipulated conditions. Both commercial financing
situations can easily be prevented by a non-traditional
lending source.

Many merchants that accept credit cards in their business
will qualify for a merchant cash advance with credit card
factoring. A traditional bank will usually be a poor source
of help if a business needs to use credit card financing.

Because even the most successful merchants usually need
more financial resources than they can get from a
conventional commercial business loan, it is essential for
a business to "Think Outside the Bank" and find
non-traditional lenders to coordinate this commercial
financing requirement.

A credit card processing service can be a key function in
improving the bottom line of merchants with high volume
credit card activity. The analysis of credit card
processing providers can be efficiently combined with
credit card receivables and credit card financing.

In coordinating a business cash advance and working capital
business loan program, it is usually possible to achieve
improvements in the business owner's credit card processing
services. Traditional banks are usually not competitive in
providing assistance with a business cash advance using
credit card receivables. So it is likely that a
non-traditional lender will be the major source of help
with these complex business needs.

----------------------------------------------------
Learn how to avoid mistakes with commercial loans and find
out about business cash management strategies at AEX
Commercial Financing Group. Steve Bush is a small business
loans expert =>
http://aexcfgllc.com

Dealing With The Tax Inspector In A Tax Investigation

Dealing With The Tax Inspector In A Tax Investigation
The essential first step to be taken by a small business in
regard to a tax inspection happens long before that small
business is advised a tax enquiry is about to take place.
That first step is to obtain and retain receipts and third
party evidence for every sale and purchase and maintain
accurate accounting records.

A solid system of bookkeeping accounts provides the basis
to defend any tax investigation. The fact that any
questions asked by the tax authority can be explained with
real financial paperwork has the effect of giving the tax
inspector confidence that the accounts and tax calculations
are accurate.

Despite the best intentions of a small business the tax
enquiry that small business faces is undoubtedly an
investigation between a businessman naïve in the thousands
of statutes and taxation regulations against a professional
tax inspector trained and experienced in where to find the
loopholes. The match is akin to a schoolboy football team
that has never played before taking on a professional side
of league status who train and play every day.

The difficulty most small business has to deal with is
apparently innocent questions from the tax inspector the
answers to which cost the tax payer money. The tax
inspector may ask numerous questions to which the tax payer
does not necessarily have to answer or agree to. The
solution is always to stick to the solid bookkeeping facts
as shown in the accounting records.

Under UK law there is no regulation stating that a tax
payer has to attend a meeting with the tax inspector.
Meetings with tax inspectors can result in many questions
being asked which increase the tax liability from lack of
knowledge of the tax rules and sheer frustration by the
small business to get the job done and over with. If called
to a meeting a professional tax advisor or experienced
accountant attending on behalf of the client or in place of
the client is undoubtedly a better option.

If the small business accepts a meeting with the tax
inspector it is important to prepare for the meeting
correctly. Such preparation would involve reviewing all
bookkeeping records prior to the meeting and arranging them
in a reasonable order, double checking the accounts do not
contain any obvious errors and also obtaining from the tax
inspector prior to the meeting a detailed note of all areas
to be discussed.

The tax inspector will often suggest a meeting at the
business premises or the tax payer home. The tax inspector
does not have a statutory right to enter the business
premises and can do so only by invitation or warrant. The
legislation regarding visits to business premises is to be
changed from 2009.

Tax inspectors are observant and on visiting the premises
will assimilate many areas to be investigated by simply
looking around or idle chat with members of staff. When a
tax inspector is invited to the home the general lifestyle
of the tax payer would be assessed in relation to the
profits declared.

There are many examples of how a tax inspection can
determine the validity of the accounting records. This list
is almost endless.

A visit to a public house might reveal catering sales which
had not been declared. A takeaway retail outlet may have a
large stock of cartons that subsequently could be checked
against purchases and sales. Notices on walls in a
reception area might indicate business success that would
produce an area to be looked into.

Of course the honest tax payer has nothing to hide but
nevertheless such visits can raise many awkward questions
that take up time and effort to explain. Many hours of work
can be spent producing evidence and discussions which could
lead to further difficulties even when there ii nothing to
hide.

When a tax inspector writes it is best not to ignore the
letters but to respond quickly and factually. Answer
questions directly and specifically without opening up
further areas for discussion. Ignoring correspondence or
avoiding questions leads to more problems than it is worth.

One feature of a tax investigation is to reach an area of
the inspection where there is disagreement between the tax
inspector and the business. In such circumstances the tax
inspector may propose a solution and that solution is often
not likely to be in the businesses best interests. When
such proposals are made the negotiation skills of the tax
payer or his advisor are paramount.

One area a tax inspector may make a suggestion is to adopt
a financial solution based upon a model set of financial
results. The business can agree to this proposal but does
not have to unless the tax inspector can show reasonable
deficiencies in the business financial records.

The tax inspector often ask questions when they have no
statutory right to the information unless volunteered by
the business. Questions may also be asked that are not
specific to the current investigation.

Information requests outside of the scope of the tax
investigation and personal records can be denied unless the
request is reasonable and relevant to the enquiry. Care
should be taken in casual conversations either before or
after meetings or phone calls as these are times when the
business or its staff may answer questions innocently but
remember that those innocent chats are with a professional
intent on examining every conceivable path to determine if
the maximum tax liability has been generated.

The conclusion to the best advice when the prospect of a
tax investigation is imminent is first of all to prepare
solid accounting records, always respond quickly and
specifically to the questions being raised. Keep the chats
and answers accurate, specific and short and sweet and to
the point.

If the business can afford it then engage a specialist firm
of tax advisors to negotiate on behalf of the business. The
best tax advisors are often either experienced tax
accountants or former revenue employees who know the rules
and can conduct the enquiry on behalf of the business in a
professional manner.

----------------------------------------------------
Terry Cartwright, accountant and CEO at DIY Accounting,
designs accounting software http://www.diyaccounting.co.uk/
on excel spreadsheets providing complete single and double
entry bookkeeping systems
http://www.diyaccounting.co.uk/bookkeeping.htm that
completes tax returns

Greek Island Crete Good For Property

Greek Island Crete Good For Property
The Mediterranean island of Crete is a favorite for
Europeans who are looking for a second home, vacation spot
or retirement haven. It has year round sunshine and
beautiful scenery, and is currently undergoing a
development boom. Crete has over 1,000 kilometers of
coastline, is the largest island in Greece and the fifth
largest in the Mediterranean, and is important historically
as the home of the Minoan Civilization and has many
archaeological remains for visitors to see and explore.

Crete, approximately 160 kilometers south of the Greece
mainland, has a population of nearly 650,000 residents, who
mostly reside on the north coast of the island. A long
mountain chain runs through the island, coming right to the
sea along much of the southern coast, where there a number
of smaller towns and beaches. The climate is temperate,
with summers long and hot and winters mild. During the
winter, snow falls in the mountains, and occasionally along
the northern side of the island but rarely on the south.

The largest city on the island is Heraklion, with nearly
150,000 residents, followed by Chania, with 54,000
residents and Rethymno. Chania and Rethymno are the most
popular destinations for tourists on the western part of
the island. On the eastern half, Heraklion is the business
and commerce capital of the island, with Agios Nikolaos and
Sitia being popular tourist destinations.

In between Heraklion and Rethymno is the small town of
Panormos, where a new home development is under
construction. Panorma Seafront homes all have sea views,
shared or private swimming pools and are located within 50
meters of the sea. Homes here begin at under €70,000
for a 1 bedroom property, while 3 bedroom houses can run
over €200,000. This development is a fine example of
the type of property available off-plan and nearly new on
this idyllic island.

The main airport for Crete is Heraklion International
Airport, also known as Nikos Kazantzakis International
Airport (HER), which serves many UK and European cities
with daily, nonstop flights. The other international
airport on Crete is Chania International Airport (CHQ),
serving the western part of the island. A number of
discount airlines fly to both airports, making it a
reasonably priced destination. There are also ferries that
travel to and from the Greek mainland, often taking an
overnight for the trip.

My top tip if buying land in Crete with an intention to
build is use to local builders. Attempting to build or
renovate a house without using a local architect is not a
good idea and may be a false economy. The climate of Crete
is very different from the climate of northern Europe and
may demand different types of building materials and
procedures. Dealing with builders without a local architect
to oversee the project may also be disastrous and could
lead to expensive errors owing to communication problems

----------------------------------------------------
Buying property overseas can be a daunting experience
Nicholas Marr makes it seem easier with his informative
articles based on his experience as CEO of overseas
property websites at

http://www.greekhomes4sale.com/ and
http://greece.homesgofast.com

Learning to Trade the Forex Market

Learning to Trade the Forex Market
The forex market has become one of the fastest growing
industries on the internet today. The secret's out and many
people are making money on forex currency trading as retail
traders and these are people like you and me. Average
people with computers, internet connections and a forex
trading account can start trading immediately. This opens
up a whole new opportunity for the average Joe investor and
the advent of the internet into all our homes has given us
a currency trading platform. For small investors, forex
currency trading has become a lucrative source of income
and everybody is trying to get in on the action.

Before you get started, you need to learn and understand
what foreign currency trading is and how it works. There's
plenty of information out there to help you learn, but
remember that a lot of this supposed information and free
forex trading strategy advise can be misleading. But don't
let this keep you from seeking real, quality forex
education, because this will be critical to your success as
a forex trader. The second piece of advice that you should
keep in mind is to start small. You can always start out by
trading a demo account from your broker that allows you to
use fake money with real charts and tools. That way you
risk none of your money while you're learning how to trade.
If you do well as a forex trader, you can move on to
trading a real money account. As you get better at trading,
increase your budget slowly, and make certain you don't
over leverage your account and blow your money. Money
management is very important in this business so make sure
you have a good balance between your risk/reward.

Also, seek good forex training courses and resources in
currency trading. There are plenty of these online or find
out where you can attend workshops locally. There are also
online workshops where you can trade along live with
professional traders to see how they analyze the market and
execute trades. You not only can make profit while trading
with professional traders, but you will be learning a life
long skill you can use to trade on your own one day without
having to rely on services like these. You can ask
questions, which will be answered by experts on live chat,
message boards and forums. There are courses on forex
currency trading that give you instant access to their
library where you can see historical trends and all types
of useful literature. Professional forex traders run these
forex training courses and offer videos with their own
forex trading systems explained in detail.

Many of these experts have also written a number of books
on the subject, so try to look for one that is authored by
a well-known trader, or someone with reliable credentials
instead of a self proclaimed guru with no background on the
subject. Anyone can claim to have made a fortune but trust
only someone who has traded professionally for a number of
years with a large financial company or someone newspapers
and magazines cite in their articles. The more you research
this business, you'll start to see the same names. Write
these down and research them further. You'll quickly come
up with a list of forex trading gurus and find the services
they run so you can trade along with them.

There are a number of forex brokers, both smaller firms and
large companies, who offer basic forex training when you
register with their service. If you're new to forex
currency trading, this can be quite useful. Most forex
broking firm have their own charting platform and tools
that will teach you to trade and allow you to trade
directly from their trading platform. As we mentioned
earlier, you can practice your forex currency trading
without using real money by demo trading. When you're
ready, you can use your real cash and start generating an
income from your trading. It's very advisable to combine
some of your own reading and forex training with some
amount of experience of forex trading platform.

Finally, if you are extremely risk averse and would rather
not trade yourself, many brokerages offer managed forex
accounts. You simply sign the appropriate paperwork and add
money to your trading account. The brokers professional
forex traders will manage your trades for you while you
watch your account balance grow. You will pay a fee for
this service and it can be as high as 25%, but if they're
making you money, it doesn't matter. They're in this
business to make money too, so it's a win-win for you and
the forex account manager.

----------------------------------------------------
Andrew Daigle is the creator and author of many successful
websites including ForexBoost at http://www.ForexBoost.com
and http://forex-trading-system.typepad.com , Free Forex
Training Resource for the Novice and Advanced Forex trader.

Financing your modular home

Financing your modular home
As with any new home purchase, the first task is to define
what you can afford. This saves a great deal of
inconvenience later if you realize what is within your
budget. In order to figure this out, meet with a mortgage
broker or lender. This defines the pre-approval process. If
you are serving as your own general contractor, be sure
that the lender also offers "sweat equity" loans so that
you can get the best deal. After evaluating your income,
your credit, and your debt to income ratio, your lender
will be able to give you an answer. Usually within 24 to 48
hours, you will know what your finances allow in terms of
affordability. Additional information such as required
escrow funds and down payment at closing is also provided
most of the time.

Once you have been pre-approved, you will then figure out
the exact costs of the project. For most people, it is
recommended that they take their pre-approval figure and
reduce it by 15 percent. This allows some built-in room for
extra expenses along the way. Once you have selected your
modular home style, design, and amenities, manufacturing
costs will be secure. It will be your task with your
builder to specify all the other costs that will be needed
to finalize your closing costs form with your lender. These
expenses will include excavation and landscaping costs,
finishing work after the set, land lot costs, permitting
expenses and several others. These are important to know at
the beginning so you can hold your builder accountable.

When ready for closing document preparation, your lender
will need engineered drawing plans for your modular home,
the home's order sheet with specifications, a complete list
of costs from your builder, a legal description of your
lot, two years of employment history, and two months of
recent bank statements. In addition, the lender will order
an appraisal and title search for the property to make sure
the appraisal covers the financing and that no liens are
attached to the property. These are all standard steps of
the financing process.

Depending on your situation, you likely will have a
construction loan during the construction period before the
actual mortgage loan is closed at completion. A
construction loan basically allows you to pay your builder,
your subcontractors, the manufacturer, etc. along the way
before the final home closing is performed. Did you know
the driver upon delivery of your modular home expects
payment for the delivered modules? It would be an issue if
there were no means to pay him. As work is completed, each
vendor will expect payment, and a construction loan makes
this easy while the building process proceeds.

Overall, because costs are more secure with modular homes,
there are usually less surprises at closing that might
otherwise occur with site-built home construction.
Likewise, since modular homes are a better investment
overall, the chance an appraisal will come in less than the
amount financed is also uncommon. Modular homes actually
give you the best ability to stay within your budget.

----------------------------------------------------
Michael Zenga, the Modular Building Specialist, founded ZN
Custom Building, in 2002 which specializes in building
modular homes in the Boston, MA area. Visit
http://www.zncustombuilding.com if you need a Modular Home
Builder near Boston, Massachusetts.