What is the Income Statement? The Income Statement, which is sometimes referred to as the Profit and Loss Statement for small businesses, is a document that shows the financial performance of a company over a specific period of time. The Income Statement is used by investors, the company itself, and business analysts. What Is the […]
Operating Expenses Disguised as Inventory
Companies need to keep some amount of inventory. When I go to a home repair supplier, I expect them to have the copper pipe I need in stock. When I go to my local bakery, I expect them to have the macarons I crave in stock. When I go to my local grocer, I expect […]
A balance sheet consolidation is the process of combining the balance sheet of a parent company with all of its subsidiary companies into one single consolidated balance sheet. The consolidated balance sheet presents the financial position of this single economic entity. There are 8 steps in the balance sheet consolidation process. These are the same […]
Accounting for Business Consolidations
The economic entity principle implies that when a parent company acquires a subsidiary, their financial statements should be consolidated, because they are now a single economic entity. How does an accountant actually produce these consolidated financial statements? Read on. Acquisition by Cash, Equity or Both The purchase price is the total amount paid by the […]
Yes! There are some items that legitimately give rise to permanent differences between a company’s financial reporting income and its IRS income tax reporting income. These differences are not due to a company cheating on its taxes. Instead, these are due to policy decisions by the US federal government to incentivize certain behaviors by corporations. […]
