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Inventory production – accounting for indirect costs

I often see that indirect costs that are incurred in the production of inventory are not capitalized, especially with smaller companies. Direct labor costs may be captured in the inventory valuation but not always indirect costs. So, what are indirect costs? Indirect costs (or “overhead”) include such items as: Building/factory rent Utilities Supervisory payroll Payroll …

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Agriculture accounting: inventory and asset classification

Agriculture is a big part of Arizona’s past, present and future. From crops to livestock, there are many farming and ranching companies within the state. One question that may come about when running a company involving agriculture, or farm, is what to do with your crops, animals and other products. Do you make these your …

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Applying Useful Lives to Fixed Assets

Selecting useful lives to depreciate fixed assets over can be a difficult task. It is hard to predict how long an asset will last or how long it will be before it becomes obsolete. The answer to this question first depends on the type of asset. A computer, for example, can become obsolete well before …

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The Basics of the Statement of Cash Flows

In our last blog posting, we covered certain non-recurring items that the Emerging Issues Task Force is looking at related to Statement of Cash Flows presentation. Let’s step it back a bit and go over the basics of the Statement of Cash Flows. Who – Financial statement preparers. What – The Statement of Cash Flows …

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How is Your Company Using Electronic Storage in Accounting?

Electronic storage is becoming commonplace in today’s work environment and that creates modern perils for managing financial data. Companies should continue to revisit how they use electronic storage to their benefit, as well as the controls over items stored, to ensure that the control environment remains strong. This blog will cover three components to electronic …

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Best practices with account reconciliations

As we put another calendar year in the books and start closing out year-end accounting records, now is a great time to revisit one of the key components of the financial close process: account reconciliations. By performing proper account reconciliations, businesses can prevent a lot of material errors that can occur on their financial statements. …

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When Do You Capitalize Interest?

Under the accrual basis of accounting, interest is capitalized in association with the financing of assets an organization constructs for internal use or for assets that are constructed with the intent to sell or lease upon completion. Interest is only capitalized during the period under which the asset is being prepared for its intended use. …

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Identifying and capturing accrued expenses

From our experience, we’ve noticed that some smaller companies tend to struggle with the concept of accrued expenses. They are unsure about what they should accrue for and when they should accrue for it. Accrued expenses To help clear this up, let’s first start by talking about what an accrued expense is. The definition of …

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Physical Inventory Planning

It’s that time of year when companies need to begin preparing for their year-end inventory counts. The difference between a clean inventory count and one with multiple mistakes is due to a few key steps, which include preparing for the count, determining the method of completing the count, evaluating the counts and correcting the inventory …

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Accounting for debt issuance costs

In 2015, the FASB changed the requirements for presentation of issuance costs associated with debt. These updates were made as part of FASB’s initiative to reduce complexity in accounting standards and went into effect in 2016. Debt issuance costs consist of brokerage, legal and other professional fees incurred in connection with issuance of long-term debt. …

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