Assets that can be depreciated

1. if you use the asset in your business or any kind of trade.


2. if the asset is part of an investment property and is being held in order to produce income


3. if the asset is only useable or useful for a certain measurable period of time.
   
   • this period of time has to be for longer than a year
   
   
   • this period of time also has to be able to be calculated, or estimated, reasonably accurately


4. If the asset gets worn out, if it can be used up, if it can break down, if it has to be replaced because it's out of date, or if because if just loses value naturally.
   Here are some examples of types of assets that need to be appreciated: cars, machinery, computers, buildings, and any major improvements and additions made on things (rather than simply repairs).

Accelerated depreciation methods are considered to be more conservative calculations of depreciation and also more accurate methods of depreciation calculation. Accelerated depreciation calculation methods assume and rest on the idea that an asset will lose value more quickly at the beginning of its useful life as opposed to losing value at a steady rate throughout its depreciable life. Another method of calculating depreciation that falls under accelerated depreciation is double-declining balance depreciation, or just plain declining balance depreciation.

1. 1. Take the expected life of the asset (make sure that it is in years). Count from the top number back to one. Then add all of the numbers together. So if you purchase a piece of machinery that is expected to last for 12 years, you would do the following:

   12 years useful life = 12 + 11 + 10 + 9 + 8 + 7 + 6 + 5 + 4 + 3 + 2 + 1 Sum of the years = 78

2. 2. To calculate the depreciation of an asset for each year of its useful life, you take the year of its useful life and set it as a percentage of the sum of the years.
   This means that in the first year of your machine's life, it would end up being depreciated 12/78 in value. This fraction comes out to 15.38%. So the asset loses 15.38% of its value in the first year. The second year, the machine will be depreciated 11/78, or 14.10% of its value. In the third year, your machine will depreciate 10/78 in value, or 12.82% of its value. And so on and so forth.
3. 3. Let's look at an example. Let's simply use the machine from up above. Let's say that this particular machine cost you $17,000. It has a salvage value of $900. Its useful life is 12 years. We have already calculated the sum of the years for the machine, and it comes out to 78.

We have already calculated that in the first year of use, the machine is going to depreciate by 15.38%. This means that in the first year of use, you will see depreciation expenses of $2467.18 (after subtracting the salvage value from the historical cost). In the second year, the machine has depreciation expenses of 14.10%. This means that you will see depreciation expenses of $2270.10. In the third year, the value will depreciate by 12.82%. Your depreciation expenses will end up being $2064.02.

That was the simple way of describing sum of years digits depreciation. Here's the more technical and complicated way of describing its formula.

Sum of years digits can also be described as a historical depreciation method. Its accelerated is in between straight line depreciation and declining balance depreciation. Here is the formula that is used to determine sum of years digits depreciation.
N = depreciable life of an asset
B = cost basis
S = salvage value
D(t) = depreciation charge for year t
Sum = (N(N + 1))/2
Then
D(t) = (N - t + 1) x ((B - S)/Sum)

Sum of the years digits depreciation is a way of calculating depreciation that will allocate the cost of whatever asset you have over its useful life. A simpler way of describing the formula than that above is to simply say that the numerator of the fraction is the number of years left to be depreciation out of the useful life of the asset. The denominator is the sum of the years digits, determined with the formula: ( N (N + 1) ) / 2 where N is the years of the depreciable life.

This valuation method determines the inventory value of an item by doing the following: first of all, you have to calculate the market value of the item as of that inventory date. Second, you have to compare the actual cost of the item with the market value that you have just calculated. The lower number is used as the inventory value of the item-the lower of cost or market [value].

Lower of cost or market can be used to describe inventory either on an individual item basis, or a group basis (you group items of a category together), or the total basis of the inventory.

Remember when using lower of cost or market that no matter what, the market value that you determine can't be greater than the ceiling placed on the item. Ceiling is the net realizable value of an item, a situation where it costs less to sell an item than to complete and dispose of that item. It's also important to keep in mind that the market value can't be less than the floor value of the item, the floor value being the net realizable value minus the normal profit margin of the item.

Unrealized gain is the opposite of lower of cost or market. Unrealized gain doesn't receive any recognition in the accounting of costs and value.

You can use lower of cost or market to determine the value of a number of different types of goods. Some examples are any goods that are purchased and on hand at the time. Lower of cost or market can also be used for the different parts of work in process, and parts of finished goods. Examples of these are the direct labor, direct materials, and some indirect costs.
When can't you use lower of cost or market? Lower of cost or market can't be applied to any LIFO evaluated and calculated inventory. Lower of cost or market also can't be used to determine the value of any goods that are being produced at an already determined price under a decided and fixed contract that is made for goods to be delivered at a certain date. For both of these examples, you are going to have to use the value at cost of the items.

Let's illustrate lower of cost or market by an example. Let's say that you own a used car lot. You want to determine the value of all of the Honda Accords that you have on hand right now. You go through your cars and see that you have three Honda Accords.

1. You determine the cost of each of the cars. Car 1 has a cost of $6,000. Car 2 has a cost of $4,500. Car 3 has a cost of $9,000. The total cost is 19,500.
2. The next step is to determine the market value of each car. Car 1 has a market value of $7,200. Car 2 has a market value of $3,000. Car 3 has a market value of $10,050. The total comes to $20,250.
3. The third step is to determine the lower of cost or market. Taking the lower of cost or market gets you the following results. Car 1: 6,000. Car 2: 3,000. Car 3: 9,000. The total comes to $18,000. This is your lower of cost or market.

Depreciation is an idea used in finance, economics, and accounting. Depreciation stems from the fact that all assets that have a measurable life-something like a car, machinery, and so on (as opposed to land)-will continue to lose value as time goes on.

In other words, depreciation is a way of allocating the historical cost of an asset across the life of the asset. Depreciation is not linked to the current market value of an asset-depreciation has nothing to do with what people are willing to pay for something at that time. For example, even though an asset has fully depreciated-it has gone through its historical cost-people will still be willing to buy it, in many cases.
Why does a company need to keep track of depreciation of its assets? For two main reasons:

1. A company has to be able to match both what it spends and what it earns from what it spends.


2. When drawing up a balance sheet, it's important for a company to be able to accurately state the value of its assets. Depreciation helps a company accurately calculate what its assets are really worth.
   Methods of depreciation are generally based on the way and the frequency with which an asset is used by the company. We will cover five different methods of calculating depreciation.
   
   1. Straight-line depreciation
   
   
   2. Sinking fund method depreciation
   
   
   3. Declining balance depreciation
   
   
   4. Activity depreciation
   
   
   5. Sum of years digits depreciation

1. Straight-line depreciation
   Straight line depreciation is the most commonly used way to calculate depreciation. The way it works is that the company estimates the salvage value of an asset. The salvage value is an estimated value of the asset whenever it will be sold. This could be zero. The depreciation expense is determined by the cost of the asset divided by the length of its useful life. This number is subtracted for each year of the life of the asset, and is considered its depreciation.


2. Sinking fund method
   The sinking fund technique of calculating depreciation sets the depreciation expense as a particular amount of an annuity. The depreciation is calculated so that at the end of the useful life of the annuity, the amount of the annuity equals the acquisition cost. The sinking fund method calculates more depreciation closer to the end of the useful life of the asset, and isn't used very often.


3. Declining-balance/reducing balance
   This way of calculating depreciation falls under the accelerated depreciation category. This means that it sets depreciation expenses as higher earlier on, more realistically reflecting the current resale value of an asset.
   The way that declining-balance depreciation is calculated is by taking the net book value from the previous year, and multiplying it by a factor (usually 2) which has been divided by the useful life of the asset.
   Depreciation expense = previous period NBV x factor / useful life


4. Activity depreciation
   This way of calculating depreciation bases the depreciation expense on the activity of an asset, like a machine. Multiply the per-whatever (mile, cycle, etc) rate by the actual activity level of the asset to determine the depreciation expense for the year.


5. Sum of years digits
   This way of calculating depreciation falls between accelerated and straight line depreciation.

Here's the formula:
N = depreciable life
B = cost basis
S = salvage value
D(t) = Depreciation charge for year t
Sum = N(N + 1) /2
D (t) = (N - t + 1) x ((B = S) / Sum)

A merchant account will allow your company to accept credit cards. In this current day and age, plastic is all the more popular. There colored cards, cards with picture, cards with art, cards with family, even see through cards. They are all plastic and almost all of us use them. With the pluses and minuses, it is faster, easier and subsequently safer.

Merchant accounts are not free. A charge is then applied each time you run a credit card. These fees are valid and vary based upon something called intercharge. The level of fee is processed by different kinds of circumstances for different cards. For example: a credit card that is swiped costs less that a card that is keyed in.

There is going to be a few different types are merchant account and tools you are going to need. Keep in mind these different merchant account options as you choose your merchant account provider.

You will need to choose a bank credit card processor and clearinghouse:

Processing credit card transactions usually, takes place though a clearinghouse. They verify the limit and availability on the card, in addition to validation for authorization.

Bank:

Banks and financial institutions assist in setting up cards like Discover, Master card, AMEX, and Visa.

Credit card merchant accounts:

These allow you to be able to accept credit cards on the Internet.
Credit card swipe machines:

The machine sits on about every counter of every business in the world. This allows you are your customer to be able to swipe away their money. This machine will display the pertinent information for the sale. This machine is often called a credit card terminal. It is pretty much a stand-alone piece of equipment. This credit card terminal is plugged into a power supply and a phone line. However, it is ran with batteries if necessary.

Desktop Software:

This is for e-business. This software makes it possible for sales to be possible in real time over the phone, mail, or email.

Automated response unit (ARU):

This process allows for keyed entry and subsequent authorization of a credit card over the phone.

Payment gateway:

The payment gateway is the code that will transmit a customer's order to and from an Internet merchant account provider.

Finally, yet importantly, remember to check the fees. You will want to keep an eye on the fees and make sure you are getting the best deal for you possible. Here are some fees to keep in mind.

Typically, an Internet merchant account will have three types of costs:

• Up Front Application Fees


• On Going Fixed Fee


• Discount Rate


• Fixed Transaction Fee


• Termination Fees


• Miscellaneous Fees

Most debts less than 3 months old recover about three-quarters of the amount owed. As the length of time increases the amount recovered decreases. At six months the average drops to close to half and by 1 year only about one third of the debt will be recovered. These numbers reflect the need to start your collection proceedings as soon as possible after the loan becomes delinquent.

The percentage of money recovered by a collection agency is also determined by how much money you pay the collection agency. This is usually a percentage of the debt collected and is between ten to fifty percent with the average being about twenty five to thirty five percent. So the amount collected is less the amount you pay the agency to get it for you.

Collection agencies also have a rate of recovery percentage that is an important factor. If you go with a company who charges less but has a lower rate of recovery you will receive a lower percentage of the debt. For example if Collection agency A has a twenty five percent commission but has a seventy percent recovery rate and you give them ten thousand dollars to collect for you, you will receive five thousand two hundred and fifty dollars or fifty two and a half percent. But Collection agency B has only a ten percent commission but also has only a forty percent recovery rate you would receive only three thousand six hundred back or thirty six percent recovered debt. So the amount you recover is not just affected by the commission charged but also the percent each agency collects.

In order to get this rate of return percentage you might have to ask the Collection agency for some referrals and ask them what their rate of collection has been historically with the company. Checking your collection agency out before hand could save you lots of money in the long run. Other questions to ask the referrals are if there were any problems or concerns and how they were resolved. You can ask to see the form letters that will be used to collect your debts and also what training any phone call employees receive to help them get results without offending your customers.

Agencies also must have licenses for different states to collect from debtors there so you will want to check that the agency you are working with can collect from the state most of your debtors are in.

Here are 5 Steps to avoid accumulating bad debt:

1. Be careful when offering credit. Carefully check credit references of each new account and don't extend more credit than the firm can handle.


2. Explain transaction terms thoroughly. Make sure your accounts know when you expect payment, and clearly detail any credits or penalties for early or late payment.


3. Follow up overdue accounts. Customers need you to promptly send statements and reminders of payment due dates.


4. Institute a series of overdue notices. You should schedule regular written and oral reminders before even considering a collection agency. This will not only help save money, but will also avoid the ill will that can be generated when using a third party to collect the funds.


5. Set an absolute due date and stick to it. As a final step, set an absolute due date before the account is turned over to a collection agency. Don't extend the deadline, but do give the debtor warning of this final payment date.

Once turned over to a collection agency you can expect 75% to 30% of a debt to be recovered. These numbers are directly related to the amount of time it takes to collect the debt. So don't delay notifying your debtors when they are delinquent.

Creating goals for your company to comply with in changing from the traditional types of standard types of accounting to the lean more efficient accounting plan is important. Here are some suggestions you can follow to implement changes.

Lean accounting helps you identify and reduce waste, giving you extra capacity and freeing up cash, which is so vital to a small business. You are not losing money, having made the right part(s) faster. You are actually saving money by not making the wrong products.

Lean accounting, is dropping waste, reduces dealings. That is a problem because, to measure overall operation, traditional accounting is based on using transactions to attach to indirect costs. Lean Accounting Performance Measures, however, analyze results and processes, information that traditional accounting was never designed to recognize. It is also accurately the information you need to improve efficiency and satisfy customers.

Lean accounting also puts a great deal of emphasis on long-term goals, rather than the short-term traditional accounting looks at. In order for you to understand lean accounting and make it work for you, knowing the difference and steps to implement it will be needed.

Our metrics in the past have been another aspect of accounting that is interfering with being business lean. We have tended to measure whatever metrics where easier. With the want of being more accurate and working with less cost or mistakes, we need to measure more of what we want to improve, for example, Inventory Turns, Customer Service, and Productivity.

In order to implement lean accounting, people will need to do their part. They will need to understand how lean accounting performance measures works. Decision makers will need to understand what information to gather and how to use it. Accountants will need to know how to do overall reporting and production managers will need to know how to get personnel to follow the steps recommended to implement it.

Lean accounting advocates point out that the columns of variances from standard costs, standard material usage, standard labor rates and the like that show up in traditional financial statements make them nearly impossible for most non-financial people to understand.

Value streams cut across functional departments, so that is why one stream can include sales and marketing, production, design and cash collection costs. Ideally, each employee is assigned to a single value stream, rather than being split among several, as is traditional with most employees.

In addition to making changes to their financial statements, you can adopt lean processes often include non-financial data in the statements. This information over all can improve productivity and customer satisfaction for your business.

• Verifying and entering information into journals, ledgers, and computers


• Compiling reports and financial statements


• Receiving, recording, and paying out cash


• Balancing checkbooks with monthly bank statements


• Posting accounts receivable and payable


• Preparing and making bank deposits


• Recording payrolls


• Maintaining inventory records


• Purchasing supplies


• Preparing purchase orders


• Sorting documents and filing bills

Bookkeepers have less education than a CPA or a Public Accountant; some are high school graduates with on the job training. Bookkeepers generally have some trade or tech school training for less than 1 year and then on the job training. As they have less education than a CPA they are less expensive, one average is about 35% less than a CPA. If you need someone to do your record keeping on a frequent basis but don't have the money to hire a CPA than a bookkeeper might be the right answer for you. It is a great place to start hiring out the record keeping work you are doing.

Bookkeeping skills such as record keeping of profit and loss, expenses, payroll, and many other accounting activities are required by law and most small business owners would like to have time to build their business rather than spend it record keeping. Most business owners would be wiser to use their time in this manner as well because that is more effective use of their time. Hiring a bookkeeper is good business because it frees you up to do what you do best and builds your business faster.

The American Institute of Professional bookkeepers and is the national association for professional bookkeepers. It has over 30,000 members, 97% with recommended certification. It is a great place to start looking for a bookkeeper for your business. There is also the Association of Government Accountants.

Most bookkeepers specialize in certain areas of expertise so they are a valuable asset in their specialty. Some examples of specialties are health care, insurance, manufacturing, or real estate. In larger companies bookkeepers could specialize in certain tasks such as accounts payable, receivable, or payroll.

Bookkeepers are in high demand from Jan 1-April 15th so if you are thinking about hiring one do not wait until tax time. You could be waiting a long time.

What are the differences between common and preferred stock?
First let's take a look at who usually gets what.

Just who the stock is issued to shows some of the underlying differences, now let's take a closer look:

When it comes down to it, one of the biggest differences is the liquidity and weight of the stocks. By liquidity, it means how easily they can be turned into cash, and by weight, how much board representation you get for ownership of said stocks.

Common stock is less liquid, and has less pull. It is often thought of as a vehicle for issuance in exchange for effort, or sweat equity. So, in other words, if you work hard we will give you a little stock for doing so, or a piece of the company, but this piece can be difficult to get at, and does not hold much weight.

Preferred stock is more liquid, and has a say. Preferred stock is called just that because it has preferential rights in matters such as liquidation and board representation. This stock is for people who invest cash, not time, into the business.

Ok, so now that you know the differences, let's take a look at why they even exist. You might be asking yourself the question, "Why would a startup company want to worry about something so complex?"

The answer is simple. Having common and preferred stock is the easiest way to give investors (those putting cash, not time or sweat, into your company) the protections they'll insist on. People do not just throw money around, at least not in general, and they are not going to invest in your company unless they have some sort of reassurance or protection. Preferred stock is your way of giving them that reassurance or protection.

Along with what was already discussed about preferred stock, sometimes you also have to give investors the right to co-invest in additional rounds of financing and the right to a co-sale if a shareholder sells their ownership in the business.

In addition, some investors may also ask for antidilution protection. What is that? It is a fancy way of saying that because they invested early in your company, before everyone else was, they want their share of ownership protected from the possibility of being reduced or diluted if (or when) other investors invest in the company, but do so at a lower price.

Basically, you may have to cater to your investors some, but the upside is that all these provisions can be incorporated into the rights of the preferred stock. And then you do not have to deal with other contracts, complexities, and agreements. Hence the advantage of offering preferred stock.

Why else would you want to have both common and preferred stock?
Well, one thing that can be a big incentive for small business is that there are tax advantages in having two kinds of stock.

Basically to take advantage of these tax breaks, you will want to attribute the lowest price per share to the common stock. This in turn means that those who work to earn the stock have the least tax consequences, as technically stock options are considered income, and you have to pay taxes on them even if you do not have any cash flow come from them.

You in turn want the highest price per share associated with the stock you issue to cash investors.

So, the big difference between common and preferred stock is what the intrinsic values are. Or what is attached, whether that is the tax liability, or the privileges. It's not uncommon for the value of preferred-stock shares to be 10 times that of common-stock shares. However, in the end both types of stock are converted into common shares at the time of the public offering. So, once the company has gone public, there is no difference, it is before that matters.

Before that question is answered let's take a look at some of the basics of Paypal:

What Does it Cost?
With Paypal growing in popularity, and because you see it everywhere online, it is important to know what it is going to cost you to use. In general, for the one doing the purchasing it is free, and for the one doing the selling there is a small fee. The fee structure for the U.S. is as follows:

Sending Payments (excluding Mass Payments): Free

Sending Payments through Mass Payments: 2% up to a maximum of $1.00 USD per recipient.

Receiving Balance/Bank Funded Payments into a Personal Account: Free

Receiving Card Funded Payments into a Personal Account (limited to 5 per 12 month period): 4.9% + $0.30 USD for domestic payments, 5.9% + $0.30 USD for cross border payments

Receiving Payments into a Business or Premier Account (applies to all payments)
Standard rates:
2.9% + $0.30 USD for domestic payments.
3.9% + $0.30 USD for cross border payments.
Merchant rates (based on monthly transaction volume and a one-time application):
1.9% - 2.5% + $0.30 USD for domestic payments.
2.9% - 3.5% + $0.30 USD for cross border payments.

Withdrawing your Balance: Free to transfer to a bank, $1.50 USD for a physical check, $1.00 USD for a PayPal ATM/Debit Card cash withdraw from an ATM, $3.00 USD for a PayPal ATM/Debit Card cash withdraw from a bank that requires a signature.
( Above fees include the Exchange Rate & Fee if you are converting your Balance to a different currency.)

Chargeback Fee: $10.00 USD per Chargeback filed unless you are protected by the Seller Protection Policy.

Exchange Rate & Fee: The exchange rate is the retail foreign exchange rate as determined by PayPal at the time a transaction is completed. The exchange rate is adjusted regularly, based on market conditions, and includes a 2.5% Fee above the rate at which PayPal obtains foreign currency. The 2.5% Fee is retained by PayPal.

Expanded Use Fee: $1.95 USD
This amount will be refunded when you successfully complete your expanded use enrollment and send your next payment.

Records Request Fee: $10.00 USD (per item)
You will not be charged you for records requested in connection with your good faith assertion of an error in your Account.

Knowing the costs associated with using Paypal will help you determine whether or not it is going to be a good program for your online storefront, or online business. Many have found that it is a better way of tracking purchases, faster way of receiving payments, and much more convenient for them and their customers, as well as a less expensive method of payment, with more flexibility.

What criteria do credit companies use to rate credit worthiness?
The answer to this question is simply that there are a number items, or in other words, financial information, that is used to rate credit worthiness. And it will vary from credit company to credit company, however, there are a few that each company uses. The following are a few of the most widely used types of information used to rate credit worthiness:

In general, with all of the above criteria, credit companies look at three factors: severity, timing, and frequency. Each of these factors is going to determine how high or low your rating of credit worthiness is. For example, a report of a 30-day late payment is not as serious as a 90-day late payment. Just as one late payment is much less severe than ten. And, a late payment from four or five years ago does not effect your score as one from a month or two ago. So, now you know. Knowledge is power, so use this knowledge of how credit companies rate your credit worthiness to improve your credit score. Pay on time, keep credit lines open to establish history, keep your debt in check, and use credit for bigger purchases.

It is important to note that the generally accepted accounting principles for the US as a whole are often different than those of local or state governments. Generally accepted accounting principles for local and state governments are usually under a different set of assumptions, principles, and constraints, which are determined by the Governmental Accounting Standards Board (GASB).

So are the generally accepted accounting principles for the US the same as international financial reporting standards?
Unfortunately the answer to this question is no! The provisions of the US GAAP do have some differences from those of international standards, however, the FASB and SEC are in the process of trying to reconcile these differences in a way that reports created under international standards will be acceptable to the SEC for companies listed on US markets. However, until this does happen, you will have to use different standards for international financial reports than you do for those in the US. Every country has their own version of GAAP, so be aware that just because your company meets US GAAP requirements, does not mean it will meet them elsewhere.

The idea behind GAAP is that accounting information should be assembled and reported without bias. So, standards were set to make sure this process was done objectively. Thus, the objectives of GAAP were laid out to ensure that financial statements were useful to those looking to learn about the company, helpful in nature, and concise, meaning only about economics, nothing more.

How Specific is GAAP?
GAAP is not just broad guidelines for financial reporting, the truth is that while there are generalities, there are also detailed rules and procedures that must be followed, especially if you are a publicly traded company.

GAAP has four basic assumptions, four basic principles, and four basic constraints that were put in place to help achieve objectivity. Let's take a look at these:

A. Assumptions: 1. Economic Entity Assumption; 2. Going Concern Assumption; 3. Monetary Unit Assumption; 4. Periodic Reporting Assumption

B. Principles: 1. Historical cost principle; 2. Matching Principle; 3. Full Disclosure Principle; 4. Revenue Recognition Principle.

C. Constraints: 2. Cost-benefit Relationship; 2. Materiality; 3. Industry practices; 4. Conservatism

Now what do these mean?

Economic Entity Assumption

This assumption simply means that the business is separate from its owners or other businesses. So, business and personal expenses are assumed to be kept separate.

Going Concern Assumption
This assumption means that the business will be in operation for a long time.

Monetary Unit Assumption
This assumption means that the business is using a stable currency. And that this currency is going to be the unit of record

Periodic Reporting Assumption
This assumption means the business operations can be recorded and separated into different periods, to show differences between past and present.

The Historical Cost Principle
This means that companies have to say what they acquired something for, not the current fair market value.

The Revenue Recognition Principle
This requires that companies record when revenue is realized and earned, not received.

The Matching Principle
This is the principle idea of expenses matching revenues, so basically the product or service should contribute to the revenue.

The Full Disclosure Principle
Basically, it is impossible to report it all, but you can't hide stuff, the information reported needs to be enough to allow people to make accurate judgments.

Cost-benefit relationship
This constraint is basically in place to show that the information provides should be beneficial enough to justify the cost to provide it.

Materiality
This is in place to make sure crap isn't reported. It evaluates the significance of an item when it is reported.

Industry Practices
Pretty much this is there to ensure that the accounting procedures follow industry practices.

Conservatism
When choosing between two possible solutions, the one that will be least likely to overstate assets and income should be chosen.

Assets, liabilities and owners' equity are the three components that make up a company's balance sheet, and it is this balance sheet that gives you the little snap shot of how secure, or insecure the company is financially.

Every transaction of a company whether it is money coming in or going out should be recorded, and it is these recordings that make up what your assets, liabilities and owners' equity are. Generally on a balance sheet assets get recorded on the top or the left side; liabilities and owners' equity are recorded on the bottom or the right side of the balance sheet.
While your specific assets, liabilities and owners' equity will be unique to your company, we can take a look at what is generally included in these three areas:

1. 1. Assets: by definition assets are anything of value that your company owns. These generally include the following:
   
   • Current assets. These are assets with dollar amounts that change regularly, so that would mean cash, accounts receivable, inventory or raw materials.
   
   
   • Investments. These are sometimes lumped under the same category as current assets, as they are similar to having cash. These include securities such as stocks and bonds, or even property.
   
   
   • Capital assets. Think of capital assets, as permanent things your company owns. So, land, buildings, equipment like computers, machinery etc. Even furniture and appliances are considered capital assets.
   
   
   • Intangible assets. These are assets that are not physical, but still hold weight, such as patents, copyrights and other nonmaterial assets that have value. These can be really big, brand names carry a lot of weight.


2. Liabilities are defined as anything a company owes. So, whether this is owed to people that work for you, such as salary, or wages, or whether it is debts, this is liability. There are really only two types of liabilities:
   
   • Current liabilities. This pretty much means things that are owed that must be paid within the year. Which pretty much means bills, money you owe to your vendors and suppliers, employee payroll, and short-term loans.
   
   
   • Long-term liabilities. This is pretty self explanatory, but long term liability is any debt that extends beyond one year, such as a mortgage.


3. Owners' Equity by definition is any debt owed to the business owners. So, this means that if you are the owner, and you invested $40,000 of your savings to start a business, that amount is recorded on the balance sheet as owners' equity. Another part of owners' equity is that of stock if you are dealing with publicly traded companies. Outstanding preferred and common stock represents owners' equity but is generally called shareholders' equity.

Knowing what your assets, liabilities, and owners' equity are will help you keep your business in the black.

One way to find an accountant for your business is to use an accountant on-call. These types of employees are typically hired from staffing or placement agencies and can be hired on a temp or temp to perm basis.

• Saved time and effort. With an accountant on call from a placement agency, you don't need to go through the time, effort, and money required with posting a job ad, sorting through resumes, and interviewing potential candidates - all of this takes you away from running your business.


• Save money. New hires cost, on average, $2,000 a piece just to start and train. This does not count the amount of money lost by taking the interviewer away from his or her own duties.


• Easier payroll. With a temp or accountant on-call, you don't have to worry about benefits or tax preparation; the employer simply pays the agency for the use of "their" accountant, and they in turn take care of all payroll and tax information for that employee.


• Little commitment. Hiring an employee on a temporary basis leaves you with little commitment to that employee. You have not invested a great deal of time and money in training and other expenses. In addition, if you are not pleased with his or her performance, or would rather go to someone else, you simply call the agency and tell him or her not to send the accountant back.

However, the main drawback of accountants on call is that they are transient - these employees are usually looking for something permanent, and if a more permanent offer comes their way, they will most likely take it. However, if you decide to hire the accountant on a permanent basis, you face steep fines from the agency for taking "their" employee. This is usually a flat rate or a one-time fee that is a percentage of the starting employee's salary.

Should I Use an Accountant On-Call?
Whether or not you use an accountant on call depends on your status as a business as well as your needs. A business just starting out would be wise to get their accountant from a staffing firm, as it will not take valuable time away from running the business to conduct interviews, review resumes, and other such duties that go along with hiring. The staffing firm has already taken care of that; they simply send you the employee.

If you don't have use for a full-time accountant just yet, an accountant on call is certainly the way to go, as you only pay for the accountant when you need him or her, whether it's tax time or once a week to prepare payroll.

Ultimately, the decision to hire an accountant on call will depend on the state of your business and your needs at the time. If you don't have the workload or resources for a full-time accountant, or if you are unsure of the hiring practice, then an accountant on call is a good choice.