Saturday, April 18, 2015

Please help me to help .....

My Unquenchable Thirst

Thank you in advance to everyone reading and contributing to this post.  This blog post is certainly something that deviates from the ordinary and is a call for help to all with a voice. 

Although I have been an Accounting professional with over 25 years of experience, my heartfelt burden is to serve in the fields of social work - education- ministry - counseling or the like. My desire is to transition into a role that would embrace my accounting skills while also allowing my passions to contribute to the well being of others. I have been a volunteer teacher and financial literacy case manager at homeless shelters for over 3 years; have served on both pro-Bono and contracted basis the role of Controller for many non-profit organizations; have developed and contributed to the development of many others and most importantly have always held a deep un-quenching thirst to serve in a capacity that touches the lives of all those in need!

My question : What would you (as my fellow LinkedIn friends - some with greater experiences in this matter than others - though welcoming all to comment) recommend and suggest that I do to pursue and reach this dream of mine ? What classes - Certificates or experiences should I strive toward ? ( understanding I do not wish to sit in college for 2 more years - not immediately at least )  less)

Thank you again and again !

Sunday, March 29, 2015

Sore Thumbs ...

Sore Thumbs.... Annoyances to an EQAA

One of the most annoying and distracting pains or discomforts in life are sore thumbs. Strange to conceive as a thumb in relation to the entire body is a very small member; however, the pain that can radiate from a thumb is often considered one of the greatest nuisances in life, hence the use of the phrase along many different lines of conversation.  I grew up on Skis and after hours on the slope, testing my carving and cutting, falling and fleeing down the hill, one of the most common side effects was sore thumbs.  Perhaps from falling, perhaps from holding onto the poles as I leaned into the mountain; regardless, and none the wiser, sore thumbs were there to keep me awake or certainly expedite my run to the medicine cabinet to open a bottle of Tylenol with my forefingers.  Well we certainly are not on an Accounting Blog to discuss sore thumbs, skiing or really anything physiological (unless you should consider our analytical capacity as physiological), so what am I getting at.  Sore thumbs exist all over the Accounting and Accounting picture design realm.  Sore thumbs are those items, accounts, transactions occurring or existing in the design of an Accounting picture, that are nuisances – erroneous omissions, inconsistencies, inaccuracies that stand out so much they take up all of our waking moments of thought - clearly sore thumbs.  At least to a high level, analytical accountant sore thumbs in the world of accounting are very real, and even though they can be small in relation to the overall financial picture of an entity (just like sore thumbs), they too can be very annoying and troublesome.   Unfortunately sore thumbs are not as obvious to everyone as they should be or at least to an experienced, qualified and analytical Accountant or EQAA. [ An Accountant needs experience – years of experience confronting and designing accounting pictures – Qualifications – A solid understanding of Accounting principles and Analytical – A capacity to see the forest while working amongst the trees.]

While skiing may develop sore thumbs- different misstatements, mistakes, omissions, errors (sins of accounting commissions) also create sore thumbs in Accounting.

What are examples ?

Abnormal Account Balances:   Each account or group of accounts in an entity’s Accounting Picture will have (or should have) a normal account balance.  That normal account balance is either negative or positive and as accountants, we further refer to each balance as having a normal Debit or normal Credit balance.  We are not discussing the reasonableness of a balance within this post, but rather the irresponsibleness of a balance when one is not “normal” and presented on a statement. 

What do I mean ?  I hear your questions even in advance of posting this blog.  

Let me break it down a little bit more.  A company’s accounting picture is designed by the financial transactions of the company as it passes through its ordinary revenue cycle.  Those financial transactions sum to a certain balance – which by accounting standards should be a normal balance of either a Debit or Credit balance.  For example, Assets – have a normal Debit balance.  An asset is something of value and as Debit entry increases an Asset – so should the ending balance of the asset or all assets be also a Debit balance.   The same holds true for other accounts.  Such as Liabilities are normally credit balances; Revenue is a Credit Balance and Expenses are Debit Balances.  You should have noticed that I left off Equity.  Equity SHOULD have a credit balance, yet many factors including years of losses, treasury stock repurchases or other contra-equity transactions could cause Equity to easily be reported as a Debit balance and not be abnormal.  I like to say that Equity errors are not sore thumbs – they are much worse – like the broken leg in skiing.   Although each account type has a normal balance, often these account or subaccount balances fall in error as abnormal – though it is up to us as Accountants to find them and resolve them.  Further, for example, Accounts Receivable – should be a debit balance as an asset.  Common sore thumbs are finding this balance to be a credit balance – ordinarily the result of missed invoice – a prepayment –deferral of revenue or the like.  An experienced, qualified and analytical accountant is needed to discover and find these sore thumbs. 

An accounting picture is great when the picture is not smudged with errors or omissions.   Sore thumb 1:  Abnormal Account Balances. 

Sore thumb 2:

Sins of Omission

Missed Accruals or Expenses:

Misclassified transactions: ( Perhaps requiring the most analytical capacity in recognizing this sore thumb – to an EQAA – the ache will radiate excruciation throughout the entire body – until resolved. 

See Sore Thumbs - Part 2... To be discussed…

What is an example of a missed Accrual and why would it cause an EQAA so much pain ?

Saturday, June 28, 2014

Appreciation for Depreciation

The concept and application of Depreciation in the design of an organization’s Accounting picture, is an essential element to understand and recognize, when responsible for the design or rendering of the company’s financial pictorial representation or when re-performing or further analyzing and interpreting the entity’s financial position.

Depreciation is a term used to cause for two main accounting principles.  These principles include: (1) Cost allocation:  When a company makes a major purchase, such as the purchase of a fixed asset, the company is anticipating utilizing that asset over a period of time, and in utilization of that asset, to generate revenues or reduce threats of potential liabilities.  For example, a pupil transportation company, will purchase school buses and particularly school buses of certain quality so as to ensure the efficient, safe and reliable transportation of its riders to and from school each day.  The company, we will call: Bunny Transportation (When walking my dog, I saw a mother bunny and its babies, so as such I came up with Bunny Transportation).  Bunny Transportation expects to utilize those school buses over a period of 10 years and as such will generate revenue from the use of those buses.    Depreciation allows and GAAP requires the company to allocate the cost of the purchase over the term in which the company anticipates it will generate revenue from that asset.  In our example above, Bunny Transportation will allocate the cost of the school bus purchase over 10 years.  Assuming Bunny purchased a bus for $100,000.00, Bunny would then allocate an expense of $10,000 toward that bus each year, for a period of 10 years.


As you can probably can tell right now, Depreciation ( as with many other accounting concepts and GAAP principles ) is based off of guesses.  Guesses in the world of accounting are called: Estimates.  As with guesses, estimates are merely calculated guesses and as such, the same could be wrong or unexpectedly changing.  This is not cause to PANIC !!!.  There are processes and procedures to adjust and correct these estimates as future events become recognized in the present, or in other words, “as stuff happens”.

The other main accounting principle Depreciation attempts to recognize, (2) is the decreasing value over time, of the asset that was purchased.  As Fixed Assets inherently decline in value over time, due to obsolescence, wear – tear, use, depletion, etc, Depreciation is used to record this decline in value, each period ( year, month, or any other measurable period, including non-calendar based periods, such as usage periods ).  Going back to Bunny Transportation:  Bunny’s purchase of a school bus for $100,000.00 will not be worth the same $100,000, not even the day the vehicle leaves the dealer’s lot and certainly less with each passing month, year and / or mile added to odometer.  Depreciation, therefore, not only recognizes the allocation of a respective asset’s cost over time, it also (and with the same stroke) attempts to reflect the decrease in the asset’s value.

How is Depreciation Calculated ?:

Depreciation can be calculated utilizing a variety of different methods, while accounting for even more influencing factors.  Depreciation can be calculated on a steady and consistent basis over time ( such as over the months or years of the asset’s life {economic life} or Depreciation can be calculated over the basis for which it will generate revenue (for example, the number of miles on the vehicle, number of hours of the machine, etc.) or Depreciation can be calculated utilizing an accelerated method of cost allocation and value depletion.  Accelerated methods are not only commonly used for financial reporting purposes, but are also standard procedures for corporate tax return preparations.    Furthermore, Depreciation can become influenced by many other factors, such as residual values, impairment, disposition of assets, asset groupings, etc.

I will give the first blogger to post the correct answer to this question, a free copy of my book, whenever, I decide to write one.

Why would the IRS encourage accelerated cost recovery (Depreciation methods) ?

In closing:  Due to Depreciation’s two fold purpose:  I appreciate a Fixed Asset as it Depreciates !

Tuesday, June 17, 2014

Sponge up your Costs !

In a manufacturing environment, Accountants and Financial Analysts are delegated and burdened with the responsibility of calculating the cost associated and accompanied with the manufacturing of the product for which their company produces.

               This is known as Cost- Accounting and is considered a specialized field or area of study for accountants.  Just as a Doctor could specialize in pediatrics, or pathology, or cardio vascular diseases, Accountants too can specialize in various areas of accounting, one being Cost-Accounting.  Cost Accounting can be viewed as the cardio-vascular system of a Manufacturer's financial position.  In other words, it is the heart and lungs; the life support of a manufacturer.  

What really goes into cost - accounting ?

               As with all accounting basis and specialties, cost-accounting can be conducted and proceeded in accordance with GAAP, NOT or in some type of hybrid method of being right and wrong.  [ GAAP stands for Generally Accepted Account Principles.  GAAP is the framework of standards for financial reporting.  Meaning that financial statements and the financial reporting of transactions and valuation calculations of those transactions should be recorded in accordance with this framework.  Unfortunately, just as the strike zone on a batter is quite broad, so is the framework at times, across different topics.  A financial statement, therefore, can claimed to be reported in accordance with GAAP and still defy consistency and be found with questionable reporting practices. ]

The GAAP recognized Cost-accounting method is known as Full Absorption Costing or Full Costing. 

               Cost-accounting involves identifying and recognizing the varying pieces and the cost (or value) of those pieces in the manufacturing of a product. 

               For example, a company makes Cheeseburgers {Why cheeseburgers ? - Because I'm hungry and I like cheeseburgers, plus I could have picked anything, like microwave ovens, copy machines, cars, interplanetary space modules, but you can't eat any of those - perhaps my discussion and visualization of a cheeseburger will cause me to be satisfied with a healthy leafy salad tonight for dinner - I will let you know}  Ok, a Cheeseburger, consists of a variety of different pieces, such as :

a.      Ground beef

b.      Hamburger Bun

c.      Cheese

d.      Lettuce, Tomato, Onion

e.      Salt, Pepper

f.       Ketchup (or Catsup) - Don't understand why we need two words saying the same exact thing - And people say Accounting can be confusing - Teach a foreigner how to spell the red sauce poured on fries or hamburgers.


               Each one of these pieces and the unique quantity of those pieces cost (or are valued) at a certain sum.  The company manufactures cheeseburgers and holds them as inventory until sold.  The company values those CB at the cost incurred for those 5 raw materials. 

Is this in accordance with GAAP ? Is this full absorption costing ?

NO !

               Although a product has pieces of raw materials used in the manufacturing of that product, the sum of those pieces independently do not make up the final product's ending valuation, at least in accordance with GAAP. 

Well WHY NOT ?

               Because …. What else did we forget to add when calculating the cost to make the cheeseburger ?  We forget to compute the cost of labor for the employees used to make the cheeseburger, we also did not calculate the cost of the energy used to cook the hamburger or the materials used to wrap up and seal the hamburger. 

So would that complete the costing in accordance with GAAP ?

NO !

               GAAP requires Full absorption costing in the valuation of a manufactured product being sold by a Company.  Full absorption costing requires that all costs associated with a product are calculated in the valuation of that product.  ALL Costs, mean ALL Costs.  All costs consist of the variable costs associated with the product such as the raw materials and the variable labor.  {Variable costs are those costs that vary or change depending on the quantity of the products that are manufactured.}.  All costs also consist of the fixed costs of the property and plant used and needed to manufacture the product.  {Fixed costs are those costs that do not change, they are FIXED, regardless as to the quantity or number of products that are manufactured.}  Fixed costs consist of those costs such as rent, overhead, fixed labor costs, etc.

               In conclusion:  GAAP Cost-Accounting requires Full Absorption Cost Valuation, in which Inventory is valued with Fixed and Variable costs in its computation.  Just as a sponge absorbs all liquid around it, so does the product that is being manufactured and for that reason, GAAP recognizes this method as the standard for a manufacturing environment.

So Manufacturers, manufacturer away, just make sure you have an Accounting professional that is knowledgeable of these standards and methods.  If Not, you may get Sponged !

Sunday, June 15, 2014

Starting a New Business ? - Good News !

Do you have a company that has not been able to get off the ground ? 

Do you have an entity that is still in its developmental stages ? 

If you said "Yes", then I have good news for you. 

FASB is going to make your life a little easier.

What does that mean ?  and Who is FASB ?

               FASB or the Financial Accounting Standards Board is the designated organization for establishing financial accounting and reporting standards in the private sector.  The standards that FASB sets are those in which accountants should follow, particularly for companies that do not offer investments to the public sector.  FASB continually reviews their standards during internal audit, or upon technical or general inquiries.  On June 10, 2014 * YES - 5 Days Ago * FASB announced that they have issued a new standard.  A standard that will revise and improve financial reporting for development stage entities.

               A Developmental Stage Entity (DSE) is defined by FASB as an entity that devotes substantially most of its time, and efforts to establishing a new business and for which its planned operations have not started or have not generated significant revenue.  Most companies or entities that are starting up, fall into this definition.  FASB recognizes that when issuing financial reports for an entity in this position, certain disclosures should be made to advise and almost forewarn the reader and end-user of the financial statements that the company is inherently at greater risk because of its stage of existence.  Most organizations; however, in this stage of existence, are not necessarily aware of this accounting standard, nor are most accountants, as financial statements are not typically issued.

So why care ?

               Care, because with this new standard, your start-up organization can issue a financial statement, seek funding, seek investors, submit bids, RFPs, grants, government contracts, etc. and not face the struggles once required for a developmental stage entity. 

Let's back up one second:  What is an entity ?  An entity, does not mean that your business has to be incorporated or officially formed with the Secretary of State.  An entity can be you !.  Yes, YOU with an idea to start a business.  An entity is an individual, or a company.  So remember that when considering your start up organization.

So what are the main provisions of this new standard ?  What do I need to do or to become aware ?

Prior to this amending standard: Developmental stage entities needed to, and were supposed to:

1) Present inception-to-date information in all statements, income, cash-flows and equity.

2) Label each financial statement as a "Development Stage Entity"

3) Describe the activities in which the entity was engaged during this time


4) Disclose, after it is no longer a development stage entity, that it is no longer a development stage entity that in prior years it has.


These disclosures and requirements have now been washed away;  and for that, you can be thankful.  Those financial reporting requirements would be quite burdensome to track, maintain and report upon and furthermore, expect an loan, investor or acceptance to your RFP. 


The new standards require the following:

1) Within the standard footnotes of an entity's financial statement, the entity shall disclose the nature of its operations by describing the major products or services it offers and the locations where it offers those products or services.  This disclosure is required for any leveled organization.


2) Verbatim "An entity that has not commenced principal operations shall provide disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activates are being directed toward"

FASB has provided examples on how an entity can clearly comply and disclose this information.  More information, sources and relevant information can be found on their website :

                So in closing, if you are starting a new business and would like to issue financial statements prior to fully commencing operations for purposes of funding, etc.,  understand these new rules, becoming effective 12/2014. 

               More questions, seek out a qualified and competent accounting professional !


Saturday, June 14, 2014

The Unification of Many

The unification of multiple statements in a financial statement presentation.

The varying financial statements in a financial binder, close or even managerial report, although very different in their presentation and intent, should all flow and sing as harmoniously as Angelic as Heaven itself.  A typical and ordinary financial statement close package for external provision (for a private, for-profit organization), regardless as to whom the end-user may be, consists of the following:

               Balance Sheet:      A Balance sheet is a financial statement with the purpose and intent of identifying all of a company's assets, liabilities and equity as of a date in time.  Although the Balance sheet depicts an entity's position as of a fixed date, a reasonable person can make assumptions as to the events that led up to that date and furthermore, assumptions extending beyond that date in time.  A Financial analyst, auditor, loan broker, CFO, fraud examiner, and many others will look at a balance sheet, make reasonable and logical assumptions and therein test such assumptions through requests, inquiries, etc.

               Income Statement:  Also known as a Profit & Loss Statement, Statement of Income & Expenses, an Income Statement, is a financial statement with the purpose and intent of identifying all of a company's revenue and costs associated in generating that revenue. (Discussion of Cash vs. Accrual based accounting will be held at a different time).  The Income statement is represented for a period of time.  While a Balance sheet presents a date in time, an Income statement is reporting a period of time - such as a Month, Quarter, Year, etc.  The income statement results in presenting a Net Profit. 

       Cash Flow Statement:     A Cash flow statement presents, categorizes and reconciles the generation and use of cash through the Income statement and the balance sheet.  The Cash flow statement, as with the Income Statement, presents the activity across a period of time.

               Footnotes:   Footnotes are written discussion of relevant and applicable areas of the financial statements that need specific attention for the end-user to fully comprehend the activity that has taken place within the statements identified above.  Footnotes, are like the choir director.  They are there, just in case the Statements starting singing off-key a little. 

               Consider this, an Accounting professional who prepares a Financial statement package that does not unify and omits footnotes, is deliberately and intently hoping that you are unable to hear the horror of an off-key choir. 

    Ok, so how do these multiple and different statements harmoniously sing as one choir…

All Financial Statements sing in unison and if they do not, they were not prepared in an ethical or at least, reliable and accurate manner.  As Accounting lives in the world of debits, credits, and dual entry, all transactions will flow through the statements in a balance, while effecting accounts across different statements.  Let's look at some examples:

               Depreciation: Depreciation is expensed each month or respective period and therefore influences the Income statement.  Depreciation is a Non-cash expense and therefore would affect the cash flow statement.  Further depreciation, accumulates and is recorded as a reduction in the value of a fixed asset, which therein effects the balance sheet.

               Cash:  The mighty KING.  Cash is KING and Cash as you can clearly tell will effect and influence every statement.  Cash is generated from revenue and reduced with the payment of expenses : Effects Income Statement.  Cash is also generated by collection and reduced by payment of payables: Effects Balance sheet.  Cash is the primary factor in a Cash flow statement.

               Notes:  As loan payments are made, cash is disbursed, which would clearly be identified on a cash flow statement and a balance sheet (for both the Note and the cash), but how about the income statement.  Notes are loans and loans charge interest.  Interest is an expense and expenses are categorized, where ?  Yes, the income statement.

               I can visualize,... now you are now beginning to see ….. A ha !..... So… what are some other ways in which these financial statements can sing in harmony.  There are many, many other ways.  One way, which is most obvious, I have left for you to comment.  You tell me, so I can stop typing and drink my root-beer. 

Untrained eyes may find some discrepancies in the ways financial statements are supposed to sing; however, it often requires the expertise or competency of an experienced Accounting professional.  Do not rely on the untrained, rely on the reliable.  Call me to audit, prepare, or advise you on your Accounting reliability.: WMORANMAFM@GMAIL.COM: 862-216-8196


Friday, June 13, 2014

Your intentions are meaningful....

One critical subject when presenting and discussing The Accounting Picture of a company is:


An entity's accounting picture is drawn by and through its transactions; however, Intent of a transaction plays a clear and crucial role in the drawing of an Accounting Picture.  Intent can be identified as the "real" plan, purpose or state-of-mind when a certain transaction or series of transactions occur and become recognized or recorded.  When the Intent of a transaction is not in-line with the recognition of the transaction, the Accounting Picture could (and most likely will) become skewed and misleading.  Certainly, as we have discussed previously, an entity's accounting picture should be objective in nature.  It should not be drawn by a designer, but rather drawn through actual transactional occurrences as recorded an independent, ethical and objective accounting professional; however, Intent is often an area where principals will attempt to manipulate for purposes of reflecting and representing a better picture. 

Intent does not and cannot materially affect every accounting transaction or every type of accounting transaction; however, the transactions for which Intent does apply, are typically the features in a company's accounting picture that are desired to be reflected in a different manner.  For example, the intent of a company to purchase merchandise for business purposes would not influence the recognition of the transaction; however, the intent of a Loan, whether the loan is received or lent, would indeed be an area, subject to the great Intent Debate.

The types of transactions that generally become materially affected by Intent are those transactions involving the disbursement or receipt of funds to and / or from company officers, employees or principals.  Funds disbursed or received by these members of an organization should be recorded in a manner based on their intent - their real plan or purpose - at the time of the transaction.  For example, amounts disbursed to a company officer without a prior arrangement of a clear repayment plan and interest accrual, without board of director approval, and / or without any intent (real intent) of being paid back, should NOT be recorded as a LOAN to the officer, as a Loan is not the intent of the transaction.  The Company does not expect to receive the amount to be paid back and the officer does not intend to repay the money.  Therefore, the transaction should not be recorded as a LOAN.

Intent, for clarification and redundancy purposes, is the real, honest, truthful, and ethical intent, plan, purpose and / or state-of mind at the time the transaction occurs.  For example, applicable intent occurs when the money was disbursed to the company officer - NOT when the IRS audits - NOT when preparing financial statements.  Intent of a transaction is NOT a belief that one day, the officer will repay the loan.   Would a bank loan money without a loan agreement or approval ?, neither should a  company, regardless as to the size, extent or capacity of the officer, the company or the transaction itself.

We are building real Accounting Pictures through this blog and therefore….

Intent is REAL & TIMELY

Intent applies to all transactions

Intent is material