AccountingHelpDesk

Accounting Basics: Current Assets - Accounts Receivable

2009-05-18T11:52:00.003-04:00

Almost as common a term as cash nowadays, accounts receivable is an accounting term meaning amounts owed to a business by other business or customers (individuals or otherwise). An accounts receivable arises anytime when goods are sold but cash is not received immediately; thus when you purchase something for cash at Walmart you are not creating an accounts receivable. If you commit to purchase something (say a lawnmower) and you are offered the option to pay next month, now you have created an accounts receivable on the retailers books.

Unlike a note receivable (to be discussed next), there is generally no signed agreement beyond an invoice for an accounts receivable. They are generally short term in nature (less than a year, if not only a couple months). Because of their short term nature, they are generally listed as a current asset on the balance sheet next after cash.

Accounting Basics: Current Assets - Cash

2009-05-14T07:57:00.002-04:00

Cash is normally the first item listed under Current Assets on the Balance Sheet. What does cash include? Cash includes any deposits available in the bank as well as anything on-hand which might include bills and checks or money orders to be deposited.

Accounting Basics: Current Assets

2009-05-11T08:01:00.002-04:00

We've previously discussed what Assets are. In an unclassified balance sheet where you only have 3 major classifiations (assets, liabilities and owners equity) that would be in the story. A much more useful report is the Classified Balance Sheet. Here, the three major categories are subdivided to provide readers of the financial statements with much more detailed information. The first such subdivision under assets is Current Assets.

Current Assets are defined as those assets which will either be converted into cash or otherwise 'used up' by the business in a relatively short period of time (generally one year or less). On the balance sheet, they are generally presented in order of liquidity; thus cash is generally listed first.

Other examples of current assets include accounts receivable, notes receivable (which often have a current and a non-current portion) and prepaid expenses. These will be examined in future entries.

Accounting Basics: Assets

2009-05-10T09:59:00.003-04:00

As hinted in my previous entry, the balance sheet is comprised of three basic sections: assets, liabilities and owners equity. Assets are resources or items of value owned by the business. They are items of value which can be used or exchanged in the production or delivery of services of the business.

Typically, the most common asset people think of is cash. Cash can be exchanged to purchase office supplies, raw materials used in production, pay employees, etc.; thus it is an asset of the business. Machinery is another asset; it is used in the production of the goods or services delivered by the business.

Substantial effort is made by accountants in valuing assets; some of which may not have a clear current value. For example, a piece of equipment purchased five years ago for $100,000 and used daily in the operation of the business is not worth $100,000 today (in the same way that a five year old car is not worth the price paid for it when it was new). In this instance, accountants use depreciation to adjust the value of a 'fixed asset' such as this (to be discussed later).

Next Topic: Current Assets.

Stop the Credit Card Offers Coming in the Mail - Opt Out Line

2007-11-01T17:17:00.000-04:00

Annoyed by the never ending deluge of credit card offers?
Call the Opt Out Line to get off the list.
The number is 1-888-5-OPT-OUT (1-888-567-8688)
There is also a website:
OptOutPrescreen

Accounting Basics: The Balance Sheet

2007-10-19T19:48:00.000-04:00

One of the fundamental components (for want of a better word) of accounting is the Balance Sheet. The balance sheet is often referred to as a statement of financial position. It can be described as a snapshot that shows the company's financial position at any given moment. Listed in the balance sheet are the company's assets, liabilities and owners equity.

If you view the balance sheet as a two column worksheet, the assets would be in the left column while the liabilities and owners equity would be in the right column. The two columns must be equal.

You won't be able to determine the company's profitability from the balance sheet. What the balance sheet will show is the solvency of the company. Analysts will look at various ratios (i.e. current ratio: current assets / current liabilities) to determine the company's financial well being.

Future entries in my Accounting Basics series will describe each of the components of the balance sheet.

Product Pricing Issues and Strategies

2007-10-03T13:40:00.000-04:00

Another good article on BNET (can you tell I like this website). A lot of it is common sense. The helpful thing about the BNET website is how they present the article. It has a very good layout which highlights the main points. This particular article talks about issues and strategies regarding product pricing.

Understanding Pricing Issues on BNET

Another Free Office Suite of Products

2007-09-21T09:57:00.000-04:00

I haven't looked at this new free office suite called IBM Lotus Symphony; but it looks like it could be pretty good. It appears to be an open suite of products (very universal) and they claim:

"With Lotus Symphony, you can import, edit and save a variety of file formats including Microsoft Office files. You can even export your documents to Adobe® Portable Document Format (PDF). The tools work with computers running both Microsoft Windows and Linux- environments, with support for Apple Macintosh planned for the future."

The suite consists of three products:

Lotus Symphony Documents (replacement for Word)
Lotus Symphony Presentations (replacement for PowerPoint)
Lotus Symphony Spreadsheets (replacement for Excel)

As a former Lotus 1-2-3 user, I'm very interested in these and will have to check them out the first opportunity I get. If anyone has tried them, please comment!

Here's the link to the page:

IBM Lotus Symphony

Resume Writing Tip

2007-09-06T08:25:00.000-04:00

Just happened to come across this article on MSN. Some interesting tips on resume writing. Includes a list of 'buzz words' you should avoid on your resume as well as a few what they call 'empty phrases' which should be avoided.

MSN Careers - What's Wrecking Your Resume

Another Information Security Breach

2007-08-30T20:49:00.000-04:00

This time on a government database. See the CNN Article:

Personal Information Stolen From 146,000 People - CNN

Anyone holding such information on the internet should be required to have their systems independently tested on an annual basis. Many company's have audits of their financial records and internal controls. Why not audit the security controls of their network?

Accounting Basics: Management Accounting vs. Financial Accounting

2007-08-24T13:28:00.000-04:00

This 3rd installment in my "Accounting Basics" series will discuss the differences between Management Accounting and Financial Accounting.

The private accounting field can be further divided into two sub-categories depending on how the information generated by the accountant is used.

As its name implies, Management (or Managerial) Accounting provides that information which is used by managers within the company. The information provided can be as broad as long range financial projections or as detailed as analyzing cost variances (ie budget overages). Wikipedia defines management accounting as being " concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions."

While management accounting concerns the internal use of information, Financial Accounting concerns the external use of accounting information. Of course financial accounting concepts are used in management accounting. Financial accounting involves providing information which is useful to external users such as prospective buyers and investors, creditors, government agencies, etc. Financial Statements are the most provided piece of information. These include the Balance Sheet and Income Statement (to be explained in a future post). Wikipedia defines financial accounting as "the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, government agencies, owners, and other stakeholders. Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company."

HIPAA: just something to read more about

2007-08-23T10:00:00.001-04:00

Haven't really delved into this at all. Came across this article at the link below. Other than the form which I kind of gloss over at any new doctors office. I really don't know much about HIPAA. The author at the link below has a link to some more documentation on HIPAA. Just posting this as one of those things I'd like to read more on when I get a chance (Sarbanes-Oxley is another one).

Today's Debate: HIPAA, end it or mend it? on ZDNet

Save Money: Buy Refurbished PC's

2007-08-23T09:42:00.000-04:00

BNet had a good article (which you can read my comments on) regarding purchasing refurbished PC's...something I have no problem with. Read the article at the link below and read my comment at their site also:

Should You Buy a Refurbished PC? on BNet

Operating Lease vs. Capital Lease

2007-08-15T15:11:00.000-04:00

Good article on Bnet identifying the differences between an operating lease and a capital lease. Includes accounting for each type of lease.

This link should get you to their article:

BNET Identifying Capital and Operating Leases

Accounting Basics: Public Accounting vs. Private Accounting

2007-08-06T09:35:00.000-04:00

Next in my Accounting Basics Series: Public Accounting vs Private (Industrial) Accounting.

The old accounting text book defines public accounting as: offering accounting and related services for a fee to companies, other organizations and the general public. The other services can include auditing, tax services and consulting. The certification offered for this type of accountancy is a Certified Public Accountant. The exam is prepared and administered by the American Institute of Certified Public Accountants (AICPA).
Private (or industrial accounting) is the opposite. Instead of providing services to many clients, a private accountant provides services to a single business. In a business consisting of many accountants, the 'head accountant is typically called the controller. Private accountants may or may not be CPA's. The National Association of Accountants does offer a certificate for private accountants called a Certificate in Management Accounting (CMA). Private accountants are often much more specialized and have to adapt to the needs of their company (controlling costs, budgeting, accounting systems, etc.)

Target Follows Blockbuster and Goes Blu Ray

2007-07-26T20:57:00.000-04:00

Follow up to my June 20, 2007 post. Looks like Target is following Blockbusters lead and supporting Blu Ray...

Target to Sell Only Blu-ray DVD Players

Sony says Target will exclusively carry Blu-ray players "at least through the holiday season" and will also expand its inventory of Blu-ray discs.

NEW YORK (Reuters) - Target plans to carry only Blu-ray high definition DVD players through the holiday shopping season, a move that boosts the Sony-backed technology and may deal a blow to rival HD-DVD.

In a statement on Thursday, Sony Corp. said that Target will exclusively carry Blu-ray players "at least through the holiday season" and will also expand its inventory of Blu-ray discs.

The move begins in October with Target's sale and promotion of Sony's BDP-S300 unit, which sells for about $500.

It was the second major retailer in as many months to throw its weight behind Blu-ray in the industry wide standards war reminiscent of VHS and Betamax. Blockbuster, the largest U.S. provider of home movie entertainment, in June set plans to line its shelves with Blu-ray DVDs, saying that Blu-ray rentals are "significantly outpacing HD DVD rentals."

HD DVD is developed by Toshiba Corp. and backed by Microsoft Corp. and film studios including Warner Bros.. It competes with Sony's Blu-ray which is built into its PlayStation 3 game console, and supported by companies such as Samsung Electronics Co., Apple and Dell.

Earlier this month, the HD DVD camp said its stand-alone video players have outsold rival Blu-ray players by a three-to-one margin in Europe's main markets so far this year.

Mass market acceptance of high-definition video is still some way off, due in part to the high price of the devices, and the fact that some movies and programs are available on one platform and not the other.

(Reporting by Franklin Paul)

Interviewing Tips Continued...Questions to Ask

2007-07-20T09:05:00.000-04:00

While were on the topic, I found this article (also on BNet) with a well organized list of questions to help you stage the interview...

The 7 Interview Questions You Must Ask

by Brian Libby

There are no magic bullets when it comes to job interview questions, but the way you structure your queries is important: It's the interviewer's job to create a framework for the discussion and prevent it from running off the rails. Every company's needs are different, but a good basic strategy is to ground the interview in questions about past job performance. Then throw in some situational questions to evaluate practical decision making, and learn a little bit about how the job fits in with a candidate's biography.

Question #1: "How about those Yankees?"

Purpose: Develop the rapport needed to get the interview off the ground.

Every interview should begin with an icebreaker. It helps nervous applicants calm down and builds a sense of trust. If you have a 45-minute interview, you should spend at least the first five minutes trying to connect on a neutral topic. Make the person feel at ease and you'll solicit better information—and much more honest responses.

Alternate Version 1: "Did you go to the industry conference last week?"

Alternate Version 2: "Were you affected by the heat wave/cold snap?"

Alternate Version 3: "Did you have a good holiday?"

Question #2: "Talk about a time when you had to overcome major obstacles."

Purpose: Get a clear picture of the candidate's past performance.

Variations on this question should actually comprise your next several questions. Don't hesitate to guide the candidate through the variety of tasks (both tangible and theoretical) necessary to perform the job, and listen carefully to how he or she has handled such challenges. Pay attention to intangibles: some people are better at performing in interviews than on the job. If your candidate continually plays the role of hero or victim, that's a red flag that you're probably not getting the whole story.

Alternate Version 1: "Tell me about a time when you wrote a report that was well received. Why do you think it was successful?"

Alternate Version 2: "Describe a time when you hired (or fired) the wrong person."

Alternate Version 3: "If you had to do that activity again, how would you do it differently?"

Question #3: "What interests you about this position?"

Purpose: Find out how the candidate feels about the job and the company.

People apply for jobs for plenty reasons besides the obvious ones. Asking a candidate why he or she wants the position gives insight into their motivation. The answer may be personal (such as a narrative about what spurred them to seek a new job), or it may connect the candidate to the company: her experience with the brand, the mission statement, or the organization's role in the community. Any of these answers (or some combination) are acceptable—a personal answer can communicate trust, and a connection to the business indicates loyalty and a sense of ownership.

Alternate Version 1: "Where does this job fit into your career path?"

Alternate Version 2: "If you had to convince a friend or colleague to apply for this job, what might you tell them?"

Alternate Version 3: "What motivated you to apply for this job?"

Question #4: "Is there intelligent life in outer space?"

Purpose: Find out what kind of thinker the candidate is and how he deals with surprises.

This is your curveball, designed to make the candidate ad-lib instead of just reciting well-rehearsed answers. How much will he or she play along? As long as it's not too short or too long, virtually any response is a good one. But pay attention to attitude, the way the candidate approaches the problem, and the ease or difficulty they have in coming up with a response.

Alternate Version 1: "How many phone books are there in New York City?"

Alternate Version 2: "How do they get the cream filling inside a Twinkie?"

Alternate Version 3: "Why do people climb mountains?"

Question #5: "Imagine we've just hired you. What's the most important thing on your to-do list on the first day of work?"

Purpose: Learn about the candidate's judgment and decision-making skills.

This is an example of a situational question, which is like a behavioral question in that it's designed to assess judgment, but it's also like a curveball question because it illuminates the candidate's thought process. You want to see whether he demonstrates the competencies and priorities that are important to the job.

Alternate Version 1: "Say a coworker tells you that he submitted phony expense account receipts. Do you tell your boss?"

Alternate Version 2: "How would you handle an employee whose performance is fine but who you know has the potential to do better?"

Alternate Version 3: "What would you do if you got behind schedule with your part of a project?"

Question #6: "Why did you get into this line of work?"

Purpose: Measure the fit between the candidate's values and the culture of your company.

It risks a long, drawn-out answer, but this type of question will help you select candidates that fit your company's culture. It's not about finding people like you, or people with similar backgrounds that led them to your company, but about getting a sense of their values and motivations. Concepts like values and culture can be subjective and difficult to define, but you should be looking for someone whose work ethic, motivations, and methods match the company's. This isn't a quantitative measurement so much as a qualitative one. Coke and Pepsi may seem the same to people outside the soft-drink industry, but each houses people with different approaches to making cola and running a business.

Alternate Version 1: "What do you like best about your current job?"

Alternate Version 2: "When did you realize this would be your career?"

Alternate Version 3: "What keeps you coming to work besides the paycheck?"

Question #7: "But enough about you. What about us?"

Purpose: Find out if the candidate has done his or her homework.

It's a cliché to end an interview with the standard, 'So, any questions?' But the fact remains that you really do want to let the candidate ask a few things of you. Reversing roles communicates that the company seeks an open a dialogue, and it helps you ascertain just how curious and knowledgeable a candidate is about your company. If he doesn't ask any questions about the job or the business, it's a safe bet his heart isn't in it. Listen for insightful questions that demonstrate a sophisticated understanding of the circumstances of the job, the company, the competitive landscape, or the industry.

Alternate Version 1: "Where do you think the company should be in ten years?"

Alternate Version 2: "What's your opinion of our new product?"

Alternate Version 3: "Have you seen the company's new ad campaign?"

Interviewing Tips (From Managements Side)

2007-07-20T08:58:00.000-04:00

I haven't had to do it very often, but I have told people that interviewing someone for a job is almost as nerve racking as being interviewed. This article I came across on BNet has some very useful tips...

10 Mistakes Managers Make During Job Interviews

by BNET Staff

Hiring is one of the hardest parts of managing a team. A lot is riding on the initial meeting, and if you're nervous or ill-prepared—or both—it can make you do strange things. The following mistakes are all too common, but they're easy to avoid with some advance preparation.

1. You Talk Too Much

When giving company background, watch out for the tendency to prattle on about your own job, personal feelings about the company, or life story. At the end of the conversation, you'll be aflutter with self-satisfaction, and you'll see the candidate in a rosy light—but you still won't know anything about her ability to do the job.

2. You Gossip or Swap War Stories

Curb your desire to ask for dirt on the candidate's current employer or trash talk other people in the industry. Not only does it cast a bad light on you and your company, but it's a waste of time.

3. You're Afraid to Ask Tough Questions

Interviews are awkward for everyone, and it's easy to over-empathize with a nervous candidate. It's also common to throw softball questions at someone whom you like or who makes you feel comfortable. You're better off asking everyone the same set of challenging questions—you might be surprised what they reveal. Often a Nervous Nellie will spring to life when given the chance to solve a problem or elaborate on a past success.

4. You Fall Prey to the Halo Effect (or the Horns Effect)

If a candidate arrives dressed to kill, gives a firm handshake, and answers the first question perfectly, you might be tempted to check the imaginary "Hired!" box in your mind. But make sure you pay attention to all his answers, and don't be swayed by a first impression. Ditto for the reverse: the mumbler with the tattoos might have super powers that go undetected at first glance.

5. You Ask Leading Questions

Watch out for questions that telegraph to the applicant the answer you're looking for. You won't get honest responses from questions like, "You are familiar with Excel macros, aren't you?"

6. You Invade Their Privacy

First of all, it's illegal to delve too deeply into personal or lifestyle details. Secondly, it doesn't help you find the best person for the job. Nix all questions about home life ("Do you have children?" "Do you think you'd quit if you got married?"), gender bias or sexual preference ("Do you get along well with other men?"), ethnic background ("That's an unusual name, what nationality are you?"), age ("What year did you graduate from high school?"), and financials ("Do you own your home?")

7. You Stress the Candidate Out

Some interviewers use high-pressure techniques designed to trap or fluster the applicant. While you do want to know how a candidate performs in a pinch, it's almost impossible to recreate the same type of stressors that an employee will encounter in the workplace. Moreover, if you do hire the person, they may not trust you because you launched the relationship on a rocky foundation.

8. You Cut It Short

A series of interviews can eat up your whole day, so it's tempting to keep them brief. But a quick meeting just doesn't give you enough time to gauge a candidate's responses and behavior. Judging candidates is nuanced work, and it relies on tracking lots of subtle inputs. An interview that runs 45 minutes to an hour increases your chances of getting a meaningful sample.

9. You Gravitate Toward the Center

If everyone you talk to feels like a "maybe," that probably means you aren't getting enough useful information—or you're not assessing candidates honestly enough. Most "maybes" are really "no, thank yous." (Face it: He or she didn't knock your socks off.) Likewise, if you think the person might be good for some role at some point in the future, then they're really a "no."

10. You Rate Candidates Against Each Other

A mediocre candidate looks like a superstar when he follows a dud, but that doesn't mean he's the best person for the job. The person who comes in tomorrow may smoke both of them, but you won't be able to tell if you rated Mr. Mediocre too highly in your notes. Evaluate each applicant on your established criteria—don't grade on a curve.

Accounting Basics: Accounting and The Accounting Cycle

2007-07-18T14:35:00.000-04:00

What is accounting? My old accounting text book defines it as: "the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by the users of the information." The text distinguishes between accounting and bookkeeping. Whereas bookkeeping involves the mechanical process of recording economic activities, accounting expands on that to include analysis and interpretation of financial information as well as preparing financial statements, conducting audits, designing accounting systems, etc.

Since this is a web based forum, lets look at Wikipedia's definition: the measurement, disclosure or provision of assurance about financial information primarily used by managers, investors, tax authorities and other decision makers to make resource allocation decisions within companies, organizations, and public agencies. The terms derive from the use of financial accounts. Accounting is the art of measuring, communicating and interpreting financial activity. Accounting is also widely referred to as the "language of business".

Any way you look at it, accounting is a process. It is a process of identifying economic events related to a business activity, recording these events, and subsequently reporting on this business activity with some means of financial representation (financial statements or other reports).

Accounting can be represented as a cycle:

Observe events.
Identify those events which are economic events.
Measure the economic events.
Record measurements.
Classify measurements.
Summarize measurements.
Report business activity in financial statements or other reports.
Interpret the contents of financial statements and other reports.

What really adds value to an accountants services is the ability to supply items #7 and #8.

Small Business Advice - Vacation Policies

2007-07-06T15:44:00.000-04:00

Good article with tips on establishing a vacation policy to keep your small business running smoothly:

Vacation Policies Needed for Small Biz

AP Online via NewsEdge Corporation :

NEW YORK_Holiday weeks and peak vacation periods can be a trying time for small business owners, especially if they haven't formulated a policy about employee time off.

This scenario will probably sound painfully familiar to many company owners: Several staffers all want the same day or week off, and when the boss says yes to some and no to others, there are hard feelings, complaints of favoritism, maybe even someone calling out sick in protest.

Human resources consultants say there are ways to resolve this kind of crisis _ although as in many other situations small business owners must contend with, it's best to plan in advance and prevent such a predicament in the first place.

Rob Wilson, president of Employco, a Chicago-based human resources firm, said that if too many people want the same time off, an owner might consider negotiating with one or more, asking workers if they'd be willing to forgo the day or week in return for something else.

"Maybe you can throw in something extra ... let them come in late or take a half a day off, something that everyone in the office doesn't have to know about _ a thanks for helping me out," he said.

Leigh Branham, owner of Keeping The People Inc., an Overland Park, Kan., human resources consulting firm, suggests drawing employees into the problem-solving process.

"Have a meeting with them, and ask how is the work going to get done?" Branham said. "Create a sense of ownership among the employees. Each person has a responsibility."

He also suggested, where possible, hiring temporary workers to fill in. Or, if it's not entirely necessary for an employee to be physically present in the office, if one or more of the vacationing staffers will agree to be available by cell phone for help or consultations.

This kind of approach to the problem can help employees feel more valued, Branham said. "It's a chance to be more a part of the team."

But the bigger question is how to make sure vacation conflicts are kept to a minimum. HR consultants uniformly advocate creating a written vacation policy, one that ideally is part of a broader employee handbook. Policies and handbooks serve an important purpose _ the more that staffers understand what's expected of them, and what they can expect to do, the better off the workplace will be.

A vacation policy needs to spell out not only how many days an employee is entitled to take and at what point in the staffer's tenure they can be taken _ for example, how many days a new employee can expect to have in the first six months or year, and at what point is he or she entitled to a full week, two weeks, three weeks, etc.

It also needs to specify how far in advance time off needs to be scheduled and how conflicts will be resolved, whether by seniority or on a first-come, first-served basis, or a mixture of both. An owner also needs to consider whether time off includes sick days as well as vacation time and personal days.

Owners who need help in putting a policy together might talk to other business owners in the same industry or the same geographic area, to see what the norm is. Branham also suggested, "Get a good benefits person to give you some guidelines."

As they formulate a policy, owners need to remember that vacation and time off policies can help make companies more competitive in a tight labor market. Businesses that can't afford benefits like health insurance might want to consider more flexible time-off policies _ keeping in mind that increasingly, workers are looking for a better work-life balance. A good candidate for a job might be turned off by a vacation policy that's too stingy or too rigid.

Still, there are some businesses that have to hold the line on vacations _ for example, restaurants in popular beach or resort areas. In such cases, employees need to know even before they're hired that time off is likely to be limited at certain points in the year.

Wilson noted that his company found as it grew that the last week of the year was one of the busiest because of tax law changes that were taking effect Jan. 1. So Employco's vacation policy had to be adjusted to let workers know that no one could take time off that week.

Summary of Health Spending Accounts

2007-07-06T15:34:00.001-04:00

I found this article which gives a good little summary of available options for health care spending accounts (at the very least, it defines the acronyms):

What's an FSA?

Biotech Week via NewsEdge Corporation :

2007 JUL 11 - (NewsRx.com) -- Health insurance is confusing enough. And then we're expected to understand all of those acronyms. What's an FSA? An HRA? An HSA?

David Ewers, Boise district manager for PacificSource Health Plans, thinks it's important to talk to people in plain English. "How can you make good choices if you don't understand your options?" he asks.

Today, many employers are encouraging their employees to take a more active role in managing their own health care -- and their own health care costs. That trend has led to a whole new array of health care plan options, along with a new set of acronyms.

Such consumer-directed plans help employers control healthcare costs while giving employees more control over how their healthcare dollars are spent. Plans vary but all consumer-directed plans include a low cost, high deductible Preferred Provider Organization (PPO) plan plus a healthcare spending account.

Among these spending account options are Flexible Spending Accounts (FSAs). FSAs let employees make pre-tax contributions to pay for dependent health insurance premiums and such foreseeable out-of-pocket healthcare expenses as unreimbursed medical expenses, dental and vision care and prescriptions. These plans offer tax savings for both employees and for employers.

Health Reimbursement Arrangements (HRAs) are similar to FSAs but employer contributions to employee accounts are not taxable and funds may be rolled over from year to year.

Health Savings Accounts (HSAs) may be funded by either or both employers and employees and, again, there are tax advantages for both.

Ewers says it's worth wading through the sea of acronyms to get the most out of your health insurance. Don't be afraid to ask questions and you'll enjoy all the benefits your insurance plan has to offer.

Information / Data Security

2007-07-06T08:55:00.000-04:00

I hope that a person that commits a theft such as this is punished as severely as a criminal would be for bank theft or robbing a convenience store at gun point. I'd like to gather some of these articles and track what the outcomes are (don't know if time will permit). This is a big issue today whether you work in accounting, medical, retail... All company's really need to do is apply some basic accounting controls to their data (separation of duties, access to assets vs. access to records, etc.), follow through with some physical controls, then let the technology experts advise on data security techniques. Probably more complicated then I'm making it out to be, but if a company can keep its valuable trade secrets then they can protect their valuable customer data.

DATA SECURITY: 2.3M consumer records stolen, sold

Miami Herald via NewsEdge Corporation :

Fidelity National Information Services, the electronic-payment processor that agreed to buy EFunds for about $1.8 billion last month, said an employee stole 2.3 million consumer records and sold them to a data broker.

Certegy Check Services, a Fidelity unit which helps businesses clear checks, sued William Sullivan in a Florida state court to retrieve the information and end its use. The personal, bank account and credit-card data were resold to direct marketers, the Jacksonville company said.

"We don't anticipate losing any business as a result of this situation," Renz Nichols, president of Certegy, said on a conference call. "We have seen no evidence that any credit card or bank account information was used for anything other than marketing."

Banks, financial firms and retailers are focusing on data security after system breaches led to consumer lawsuits and losses. Retailer TJX Cos. said in March that hackers stole at least 45.7 million card numbers, the biggest theft of such data. MasterCard and Visa reported in June 2005 a security breakdown that exposed 40 million cards to fraud.

Certegy also sued Sullivan, formerly a senior database administrator, for misappropriation of trade secrets, breach of fiduciary duty and breach of confidentiality agreements. The complaint didn't specify the amount of damages sought by the company.

Certegy fired Sullivan after it discovered that the information was sold, Michelle Kersch, a spokeswoman for the subsidiary, said. Sullivan was one of five workers with access to the records, Nichols said.

Lawyers for the firm said they didn't have an address or telephone number for Sullivan, who couldn't be reached by Bloomberg News for comment through directory assistance or computer searches.

The stolen data included names, addresses, telephone numbers, birth dates, as well as bank account and credit card information, the company said. After receiving the information, the data broker sold names and addresses, but not customers' entire bank account numbers, to the marketing firms, Nichols said.

The Secret Service, a branch of the U.S. Treasury Department that investigates fraud, is "actively investigating this case," said John Joyce, special agent in charge of the agency's Tampa field office. It's a felony to transfer, possess or use private customer information for unauthorized purposes, he said.

Shares of Fidelity National fell 8 cents to $54.70 in New York Stock Exchange composite trading. The stock has gained 36 percent this year.

"It's the responsibility of institutions like Fidelity to strictly limit access to data, to make sure the people handling the data are people we can trust," said Adam Levine, chairman of Identity Theft 911, a financial services firm in Scottsdale, Arizona.

Certegy, which employs about 1,000 people, is notifying consumers about the data theft, and has alerted credit reporting agencies as well as the Visa and MasterCard networks to be on the look out for fraudulent transactions, Nichols said. As far as the company knows, "no one was financially harmed," he said.

Disappointing state of affairs for the U.S.

2007-07-05T16:42:00.000-04:00

I hate to say it right after the 4th of July festivities, but this disappoints me to no end. Have we priced ourselves right out of the US car market. It is hard to find a decent American made new car for under $25,000. If China is able to cost effectively build a quality auto and sell it here for $10,000-$20,000 this could be the beginning of the end for US auto manufacturing (actually may have passed the beginning already). Quality issues including numerous recalls plague US auto manufacturing. Sadly, one of my last two auto purchases happened to be my first foreign auto purchase. I was looking for a low cost, quality, gas miser car. The model I was looking at from Ford was riddled with recalls, Chevy's option was poor all around, I ended up with Hyundai and it has given me 135,000 almost trouble free miles. Chrysler, Ford, GM lets step it up a bit...I want to buy American but with limited money, I have to get the most bang for my buck.

Anyways, read this article and comment...

Chrysler, China's Chery sign deal to export Chinese cars to United States

Associated Press WorldStream via NewsEdge Corporation :

BEIJING_The next Made-in-China export bound for the United States: cars.

Chrysler Group signed a deal Wednesday with China's biggest automaker, Chery, to launch a low-cost production venture that could export the first Chinese-made cars to the United States.

The first cars will reach Latin America or Eastern Europe within a year and models should be exported to North America and Western Europe in 2 1/2 years, said Chrysler CEO Tom LaSorda.

"As part of the Chrysler Group's global transformation, we are finding new ways to bring vehicles to market faster, more efficiently and with less cost," LaSorda said at a signing ceremony.

The alliance offers 10-year-old Chery Automobile Co., based in the eastern Chinese city of Wuhu, an opportunity to realize its longtime ambition of entering the U.S. market.

Chinese automakers already export, mostly low-priced trucks and buses shipped to Africa and other developing markets. But analysts say they lack the technology to meet U.S. and European safety and pollution standards on their own.

Chery CEO and Chairman Yin Tongyao said the deal will help Chery improve its skills as it tries to expand foreign sales of its own models.

"Chery is still young, so we should learn from Chrysler and improve our own competitive edge in the near future," he said, calling LaSorda "my teacher in the automotive business."

The first Chrysler-Chery export will be based on Chery's A1 compact and sold under the Dodge brand, LaSorda said.

A 1.3-liter version of the A1 retails in China for 53,800-59,800 yuan (US$7,100-US$7,900; €5,200-5,800). Export prices have not been announced.

The companies will jointly develop future models, probably with Chrysler styling on a Chery platform, LaSorda and

LaSorda said he had "no concerns at all" about convincing U.S. consumers that Chinese-made cars are safe at a time of warnings about seafood, tires and other goods imported from China. Chrysler will work closely with Chery to ensure the cars meet U.S. and European safety and emissions standards, he said.

The agreement follows DaimlerChrysler AG's agreement in May to sell 80.1 percent of money-losing Chrysler to U.S. private equity group Cerberus Capital Management, freeing the parent company to focus on its truck and Mercedes luxury car lines.

Major automakers have been aggressively expanding production in China, which overtook Japan last year to become the world's No. 2 vehicle market after the United States. But until now, most has focused on meeting red-hot local demand, which has made China a bright spot for U.S. automakers amid lackluster sales at home.

Others also have announced plans to export Chinese-made cars to the United States but none has yet made it to market.

A Chinese automaker, Changfeng Motor Co., said in January it hoped to sell sport-utility vehicles in the United States within two years but has given no details. Chery had a deal with American entrepreneur Malcolm Bricklin to sell cars in the U.S. market but that fell through.

Japan's Honda Motor Co. has exported Chinese-built Jazz subcompacts to Europe since 2005.

Last year, Chery reported sales of about 310,000 cars, with 40,000 of those exported. Its target this year is 390,000 cars, including 70,000 units sold abroad.

The company assembles vehicles with partners in Iran, Malaysia, Russia, Ukraine, Brazil and Egypt. It announced plans in March to open a factory in Uruguay _ its first in Latin America _ with an Argentine partner.

Total Chinese passenger car sales rose 37 percent last year to 3.8 million, while total vehicle sales rose 25.1 percent to 7.2 million, according to the China Association of Automobile Manufacturers. LaSorda said Chrysler picked Chery after looking at potential partners in Europe and Asia.

"We researched the world and found they were the best," he said.

Asked whether Chrysler was worried that the alliance might help Chery develop into a competitor that might threaten its U.S. partner, LaSorda told The Associated Press, "No, we're not. With us or without us, they're going to grow. So the question is, 'Are you going to go with a winner?'"

The venture's production could reach several hundred thousand units a year, LaSorda said.

"This is the start of a very long relationship between Chrysler and Chery," he said.

___

On the 'Net:

Chery Automobile Co. (in Chinese): http://www.chery.com.cn

Chrysler Group: http://www.chrysler.com

Microsoft Coffee Table PC

2007-06-22T15:14:00.001-04:00

Is there really a market for this thing; I can't imagine having such an intrusive thing in my living room...

Microsoft to unveil 30-inch touch screen computer - May. 30, 2007

Microsoft unveils coffee table 'surface computer'
Software maker will introduce a coffee-table-shaped computer that has a 30-inch display, allowing people to touch and move objects on the screen.
May 30 2007: 2:42 PM EDT

SEATTLE (Reuters) -- Microsoft Corp. will unveil a coffee-table-shaped "surface computer" Wednesday in a major step towards co-founder Bill Gates's view of a future where the mouse and keyboard are replaced by more natural interaction using voice, pen and touch.

Microsoft Surface, which has a 30-inch display under a hard-plastic tabletop, allows people to touch and move objects on screen for everything from digital finger painting and jigsaw puzzles to ordering off a virtual menu in a restaurant.
surface.03.jpg
Microsoft's coffee-table-shaped "surface computer" hopes to one day replace the mouse and keyboard with voice recognition, pen and touch.

It also recognizes and interacts with devices placed on its surface, so cell phone users can easily buy ringtones or change payment plans by placing their handsets on in-store displays, or a group of people gathered round the table can check out the photos on a digital camera placed on top.

Microsoft (Charts, Fortune 500), the world's largest software maker, said it will manufacture the machine itself and sell it initially to corporate customers, deploying the first units in November in Sheraton hotels, Harrah's casinos, T-Mobile stores, and restaurants.
Microsoft's 150-lb computer: What's the point?

Mistakes that Kill Small Business

2007-06-21T16:39:00.001-04:00

Another interesting list I found on bottomlinesecrets.com.  As an accountant, I'll try not to be offended by Mistake #3...just kidding...accounting controls are the key.

Bottom Line's Business Secrets

Dumb Mistakes that Kill Small Businesses And what you can do instead Ruth King BusinessTVChannel.com Published: July 1, 2007 Y ou have a strong work ethic, a solid business plan and a great reputation in your field. Your small business ought to be a success. Yet a single seemingly minor mistake might be all it takes to make a thriving young company go belly up. Fatal small business mistakes often can be avoided, but only by business owners who recognize the danger in time. Common errors that can doom small companies...

Mistake 1: Relying too much on one customer. New businesses sometimes start out with just one or two clients. When these clients provide all the work the business can handle, the customer list doesn’t expand. After all, why search for new clients when the dance card is already full? However, short client lists increase the odds of disaster. Small companies often collapse when a customer that accounts for 50% to 100% of their income decides to use another supplier... eliminate a product line... or handle a previously outsourced function in-house. What to do: Continue to search for additional customers even if one or two big clients already give you all the work your business can handle. If necessary, add an employee. Avoid letting any customer make up more than 25% of your revenue.

Mistake 2: Losing key employees to competitors. A small business might have only a few employees. It can be a crippling blow if one or two of the best quit to join a rival. Not only are the company’s most productive people now working for the other team, but the owner often must do the work that these former employees would have done. On top of that, he/she has to hire and train replacements, all of which can distract him from leading the company. The departed employees even might take some of the company’s best customers with them. Example: Several top-producing employees of a small Nevada mortgage brokerage company were hired away by a new rival that was attempting to enter the sector. The mortgage brokerage owner could not find adequate replacements and was forced to scale back his operations despite surging demand. What to do: To keep your employees loyal, do everything in your power to keep them happy. Remember to praise employees and thank them for their efforts. Keep the attitude of the office upbeat. An enjoyable working environment is at least as important for employee retention as hefty salaries.

Mistake 3: Trusting a bookkeeper too much. Even an honest-seeming bookkeeper could be an embezzler. Example: A Georgia contracting company hired a grandmotherly bookkeeper whom everyone loved -- until they learned that she had cooked the books and forged $100,000 in checks. What to do: Maintain personal control over your company’s money whenever possible. Do not give a bookkeeper check-signing privileges. Have bank statements sent to your home so you see them before your employees do. Each quarter, print out lists of receivables and payables and scan them for unusual entries. Divide any financial tasks that you can’t handle yourself among several employees so no one employee can steal without another noticing a problem.

Mistake 4: Turning a hobby into a business without understanding what’s involved. Coin collectors often dream of owning coin shops... skilled amateur photographers hope to open their own studios. Unfortunately, many people turn their hobbies into small businesses without first considering the time and money required, the risks and their lack of practical business skills. Example: A woman interested in Native American jewelry opened two jewelry stores -- one in Colorado, the other in Arizona. She had a great eye for jewelry, but she had no knowledge of the local markets... didn’t know how to write a business plan... and had never worked in retail. Both shops failed. What to do: Before launching your business, work for someone who has a comparable business so you can learn about the field. (This business either should be a few towns removed from where you intend to start your business or have a slightly different focus so that you won’t later be in direct competition.) Try to master mundane back-office tasks that are unfamiliar to you, such as balancing the books and negotiating with distributors and suppliers. To reduce your risk, try to launch your business part-time before leaving your current job. This means working very hard for a while, but it’s better than taking the leap without a safety net.

Mistake 5: Having a relationship with just one bank. Most small businesses depend on loans and lines of credit to get them off the ground and avoid cash-flow shortfalls. When a business builds a relationship with only one bank, that credit can dry up if the bank’s policies or management change. What to do: Try to do business with at least two local banks so they get to know you and believe in your company.

Mistake 6: Thinking you’ll never get sick. A long-term health problem, even if it is not life-threatening, could mean the demise of your business, particularly if it is a sole proprietorship. Example: A Georgia hairdresser broke his arm in a motorcycle accident and could not cut hair for more than a month. He contracted with another hairdresser to cut his clients’ hair for the time his arm was in a cast. Had his customers gone elsewhere, his business might not have recovered. What to do: Do not work yourself so hard that your health deteriorates. Quit any risky hobbies. Consider signing an agreement with a friendly, respected competitor to look after each other’s businesses in the event of extended health problems. Make sure this agreement includes a promise not to poach customers. If you can afford it, buy disability insurance.

Mistake 7: Failing to share the workload with employees or partners. Some small business owners find it psychologically difficult to give anyone but themselves important assignments. Their unwillingness to accept assistance limits their companies’ growth, and eventually they burn out. What to do: If your current employees can’t handle the work, hire or train employees who can.

Mistake 8: Working with unstable suppliers or distributors. When a small business’s supplier or distributor has problems, the small business itself has problems. Example: A California writer lost her stream of income and her entire inventory of books when her book distributor went bankrupt. What to do: Work with multiple suppliers and distributors whenever possible. Watch for signs of financial problems in these companies, such as bounced checks or slow-to-arrive payments. Ask your lawyer to look over your contracts with distributors to make sure that you will still own your products if the distributor goes bankrupt. For more information about protecting your small business: www.smallbusinessadvocate.com... www.sbresources.com... www.startupnation.com.

Good News for Coffee Drinkers

2007-06-21T16:31:00.001-04:00

I have read in Mens Fitness that no more than 3 cups of coffee can't do you any harm and will actually help.  I found this article on the bottomlinesecrets website which expands on the issue.  As with most things in life...moderation is the key.

Bottom Line/Health Secrets

Health Secrets... the best in non-biased health information,
from Bottom Line/Health.
The Amazing Healing Power of Coffee
Fight heart disease, diabetes, memory loss and more... with coffee

Joe Vinson, PhD
University of Scranton

Published: June 1, 2007

W hen most people think of a healthful diet, fresh fruits and vegetables typically top the list.

Surprising: An eight-ounce cup of caffeinated or decaffeinated coffee contains more disease-fighting antioxidants than a typical serving of fresh blueberries or oranges.

Although coffee does not contain some of the other nutrients found in healthful foods, it is the main source of antioxidants in the American diet (followed by tea and chocolate, respectively). Of course, the stimulating effects of coffee’s caffeine are not always desirable -- some people experience nervousness, insomnia or even spikes in blood pressure.

But most people who drink moderate amounts of coffee (typically defined as one to three cups daily) seem to have a lower risk for a number of chronic conditions, including heart disease, diabetes and age-related cognitive declines.

WHAT’S IN A CUP?

The amount of caffeine that is found in coffee varies, depending on how the coffee is prepared.

Examples: One ounce of espresso contains about 50 mg... an eight-ounce cup of instant coffee has 95 mg... and eight ounces of plain, brewed coffee has 150 mg.

A serving of espresso, instant or brewed coffee each contains roughly the same amount of antioxidants. In fact, coffee contains hundreds of antioxidants, particularly polyphenols -- plant compounds that can inhibit cell damage or inflammation, two of the main causes of many chronic diseases. The addition of milk and/or sugar does not appear to affect the antioxidant levels.

Important: Most of the research linking coffee to reduced disease rates is based on epidemiological studies, in which scientists have analyzed the past dietary habits of large groups of people.

This type of research helps to develop hypotheses that deserve further study, but definitive answers won’t be possible until scientists conduct more large-scale clinical studies, in which factors such as coffee consumption are tightly controlled (rather than merely self-reported by test subjects).

What the newest research on coffee consumption tells us...

GOOD FOR THE ARTERIES

New finding: In a study published in the American Journal of Clinical Nutrition in May 2006, Norwegian researchers found that postmenopausal women who drink one to three cups of coffee daily are 24% less likely to develop cardiovascular disease than non-coffee drinkers.

Theory: The antioxidants in coffee -- like those in fruits and vegetables -- are thought to inhibit the damaging effects of free radicals on cells lining the arteries.

Result: A decrease in inflammation, now thought to be the underlying cause of heart disease.

Caution: Because of the stimulating effects of caffeine, blood pressure rises temporarily (for about one hour) when regular coffee is consumed. People who drink several cups in a row may keep their blood pressure elevated, thus increasing the risk for heart disease or a heart attack.

Helpful: Space out coffee consumption. For example, have one cup in the morning and another at lunch or in the afternoon. Or switch to decaf, which doesn’t cause the blood-pressure spikes of regular coffee -- but offers the same health benefits, except for those that improve cognitive function.

BLOOD PRESSURE STABILIZER

New finding: An analysis published in the American Journal of Clinical Nutrition in February 2007 found that older adults (age 65 and over) who have four or more daily servings of caffeine -- in the form of coffee, soft drinks, etc. -- have less than half the risk of dying of heart disease than those who consume smaller amounts.

Theory: Older adults are prone to occasional hypotension (low blood pressure). They are especially vulnerable to drops in blood pressure after meals, which can increase the risk for heart attack. Caffeine, by quickly raising blood pressure, appears to reduce the risk for such coronary events.

Caution: The oils found in steeped coffee, such as that made in a French press (a glass beaker to which hot water and ground coffee are added... then a plunger is depressed, filtering out all the grounds and sediment), can significantly raise cholesterol and increase the risk for elevated blood pressure.

Better for health: Coffee that is drip brewed (water is poured over ground coffee and seeps through a filter into a pot). The filter traps most of the oils.

LESS DIABETES

New finding: Research published in the June 26, 2006, Archives of Internal Medicine found that among 28,812 postmenopausal women studied, those who drank four to five cups of coffee (especially decaffeinated) per day were 16% less likely to develop type 2 diabetes than women who didn’t drink any coffee.

Theory: The antioxidants in coffee may protect the pancreas’s insulin-producing beta cells from oxidative damage.

BETTER BRAIN HEALTH

New finding: Coffee appears to slow the rate of cognitive decline in elderly adults. In a study published in the European Journal of Clinical Nutrition in August 2006, researchers gave memory tests to 676 healthy men in Finland, Italy and the Netherlands, then repeated the tests 10 years later. Non-coffee drinkers had four times more cognitive decline than men who drank three cups of coffee a day.

Theory: The antioxidants in coffee reduce age-related damage to brain cells (neurons) and/or cause beneficial changes in the hormones/neurotransmitters that are involved in cognitive function.

Scientific studies also suggest that moderate consumption of coffee reduces the risk for Parkinson’s disease as well as Alzheimer’s disease. Researchers have yet to explain why coffee reduces risk for these two diseases, but the mechanism is thought to be similar to that associated with reduced cognitive decline.

A HEALTHIER LIVER

New finding: According to research published in the June 12, 2006, Archives of Internal Medicine, coffee may reduce the risk for cirrhosis (irreversible liver scarring that, in severe cases, can be life-threatening without a transplant), especially in alcoholics. This link may be due to the anti-inflammatory effects of the antioxidants in coffee.

In addition, coffee may help protect against gallstones. Specifically, data from the ongoing Harvard Nurses’ Health Study found that women who drank four or more cups of coffee daily required fewer operations for gallstones than women who didn’t drink coffee.

Theory: Caffeine stimulates gallbladder contractions, which cause the gallbladder to empty more often and may reduce the risk for gallstone formation.

Caution: Caffeine interacts with certain medications, causing some to become more potent or increasing the amount of time caffeine remains in the body. These drugs include certain selective serotonin reuptake inhibitors (SSRIs), such as fluvoxamine (Luvox)... anti-arrhythmics, such as mexiletine (Mexitil)... and bronchodilators, such as theophylline (Theovert). Caffeine also may interact with the herbal dietary supplement ephedra. In addition, consumption of more than five cups of coffee daily has been linked to higher risk for bone fractures in postmenopausal women.

Special from Bottom Line/Health

Out of State Sales Into California - Applying for Temporary Resale

2007-06-21T16:10:00.001-04:00

Thought I'd jot down my findings real quick since the issue came up...

The company I work for has a potential sale coming up with a customer in California (we're in New York).  We'd like the vendor we are purchasing the equipment from to drop-ship into CA for us (to avoid having the equipment cross the country twice).  The vendor has nexus in CA and wants a resale certificate or must charge CA sales tax. 

I found on the CA sales tax website form BOE-400-SPA which is the Application for Sellers Permit.  This form allows you to apply for a permit as a temporary seller.  The way the form is worded, though, it is generally for vendors selling at a trade show or event.  Another concern about the form is that the instructions say that you may be required to put up a security deposit.

I decided to call the CA Out-of-State District office (916-227-6602) to ask a couple questions.  By the way, I found their number in Publication 77:  Out of State Sellers (worthwhile to read through).  After explaining the situation to her that this is a one time sale to an individual customer she said that I should fax in form BOE-400-SPA as a temporary vendor (fax #916-227-6641) and in the section titled 'Temporary Permit Event Information' simply enter the address of your customer (so that the county can get its share of tax collected).

On that note, you will be responsible for filing a CA sales tax return and you will have to collect CA sales tax from your customer unless they provide you with an exemption certificate. 

I was told that after you fax in the application, it will take 2-3 days for you to get the identification number to provide to your vendor on a resale certificate (also available on the CA website).  A bit of work for just one sale, so it would have to be worthwhile.

On my website I have links to all the states tax or department of revenue websites.  Find them here:  AccountingHelpDesk Sales Tax Sites. 

Possible FASB Changes Upcoming for Net Income

2007-06-21T11:36:00.001-04:00

From an article in the Wall Street Journal on-line...

Profit as We Know It Could Be Lost With New Accounting Statements - WSJ.com

In coming months, accounting-rule makers are planning to unveil a draft plan to rework financial statements, the bedrock data that millions of investors use every day when deciding whether to buy or sell stocks, bonds and other financial instruments. One possible result: the elimination of what today is known as net income or net profit, the bottom-line figure showing what is left after expenses have been met and taxes paid.

It is the item many investors look to as a key gauge of corporate performance and one measure used to determine executive compensation. In its place, investors might find a number of profit figures that correspond to different corporate activities such as business operations, financing and investing.

Another possible radical change in the works: assets and liabilities may no longer be separate categories on the balance sheet, or fall to the left and right side in the classic format taught in introductory accounting classes.

What's this mean for accountants...

Well that falls in the wait and see category. What they are talking about could mean substantial changes in the way financial statements are presented. If the expected changes do go through, there is going to have to be a lot of re-education needed...

textbooks re-written
accounting systems modified
bookkeepers and accountants re-trained to compile data needed
executives and investors will need to learn to use the new data
The article states that this move is in part due to a change in who uses financial statements...originally created for bankers and lenders but now looking for better measures for investors. Will replacing net income with several different numbers reflecting profit from various activities be helpful or will this just create more confusion? I don't think we'll see quite the widespread changes noted in this article, but we will probably see additional financial indicators on the face of the financial statements sometime soon.

Did Blockbuster settle the Blu Ray / HD DVD Debate?

2007-06-20T20:35:00.000-04:00

Those of us who have been waiting for a standard to be established in the HD marketplace may have finally gotten the answer. Blockbuster announced a couple days ago that they are giving their endorsement to the Blu-ray standard. Up to this point, they had been carrying both versions of the HD movies (Blu-ray and HD-DVD) on a test basis in select stores; now, they have put their backing behind Blu-ray. With the impact that Blockbuster has on home movies, this could be a huge blow to the HD-DVD format. I guess its too bad that there wasn't a middle ground to settle on, but when there are two incompatible formats, consumers can't support both of them (how many sections can we deal with in the video store...vhs, dvd, blu-ray, hd-dvd, beta...what?). Well I expect we'll see a large push on the Blu-ray players from the electronics retailers. Unless HD-DVD can win over Hollywood Video...

Here's an article on CNN: Blockbuster Back Blu-ray

Roth IRA vs Traditional IRA

2007-06-15T12:54:00.000-04:00

This is another article from the BottomLineSecrets newsletter. I haven't researched the facts to double check their accuracy, but I think they are on-track. This article was titled and written by:

Roth IRA or Traditional IRA?

Ed Slott, CPA

Ed Slott's IRA Advisor

If you have money to save in an IRA, should you do so using a Roth IRA or a traditional IRA? Here are factors to consider to arrive at the best decision. You'll see that a Roth IRA is likely to be the best deal for a great many -- but not in every case...

they start out equal

A traditional IRA provides a deduction on contributions, but distributions from it are taxable as ordinary income.

A Roth IRA provides no deduction on contributions, but distributions after retirement age can be totally tax free.

In a hypothetical world, when "all other things are equal," these two arrangements are exactly equivalent, giving the same after-tax value to retirement savings in the end.

Example: A person in the 25% tax bracket today earns $100 that he uses to fund an IRA contribution. It earns a 7% return for 20 years, and then it and the compound earnings on it are distributed while the individual is still in the 25% tax bracket. With a...

Traditional IRA, the full $100 is contributed to the IRA (unreduced because of its deductibility), then grows over 20 years to $387 -- which, after 25% tax on distribution, leaves $290.

Roth IRA, the initial $100 is reduced by 25% tax, leaving $75 to put in the IRA, which grows over 20 years to $290 tax free.

So with all other things equal, the traditional and Roth IRA give the same result. But in reality, it's very unlikely that all other things will be equal.

difference makers

Expected changes in your future tax bracket can make either kind of IRA more attractive than the other. With a...

Traditional IRA, if one is in a higher tax bracket when deductible contributions are made than when taxable withdrawals are taken, one saves tax-wise. But if one is in a higher bracket when withdrawals are taken, one loses tax-wise.

Roth IRA, it's the reverse -- the advantage accrues to one who is in a lower tax bracket when contributions are made than when withdrawals are taken.

Thus, Roth IRAs are generally advantageous for children and persons in their low-tax-bracket, early earnings years, who expect to be in a higher tax bracket later in life.

Example: A young person in a 15% tax bracket who funds a Roth IRA can withdraw funds later in life (after age 59½) tax free, even when he/she may be in a much higher tax bracket.

Traditional IRA planning: Most people in their high earnings years may expect to be in a lower tax bracket after retirement -- an argument for the traditional IRA. But...

Not everyone expects to be in a lower bracket after retirement, even under current law.

Today's tax brackets are at historic lows, especially for higher earners. With massive budget deficits projected in the future due to Medicare and Social Security costs, tax bracket rates may well go up in the future, to the detriment of holders of traditional IRAs.

Roth advantages

Other differences that favor Roth IRAs...

Contribution rules. These are more liberal for Roth IRAs.

A person who is a participant in an employer's qualified retirement plan can make a deductible maximum contribution to a traditional IRA only if modified adjusted gross income (MAGI) is less than $50,000 on a single return or $75,000 on a joint return for 2006 (with the deduction completely phased out as MAGI rises to $60,000 and $85,000, respectively). But the "covered by an employer plan" limitation doesn't apply to Roth IRAs, and anyone with MAGI as large as $150,000 (there is a phaseout at $160,000) can make a maximum Roth contribution.

For persons not covered by an employer plan, there are no income limits for traditional IRAs, but the Roth limits continue to apply.

Minimum annual distributions. With a traditional IRA, after reaching age 70½, annual distributions become mandatory, with the amounts based on life expectancy. If you don't really need the money to live on, this forces taxation on unwanted distributions at top rates.

No minimum distribution requirement applies to Roth IRAs. Thus, you can leave funds in them as long as you desire to receive additional tax-free compound investment returns.

Bequest possibilities. Because of the lack of any lifetime minimum required distributions, one can plan to leave a Roth IRA to children or grandchildren who then may receive totally tax-free income from it at any age over their entire lives. Even a small amount left in such a Roth to compound over such a long time -- perhaps several decades -- may provide huge total returns to the children.

In contrast, predeath mandatory annual required distributions from traditional IRAs reduce amounts that can be left to children through them -- and if a traditional IRA is left to heirs, it will pay distributions that are taxable to them at top ordinary rates.

Long-term capital gains and dividends. In a taxable account, long-term capital gains and qualified stock dividends are taxed at a top rate of 15%.

In contrast, if you hold stocks for long-term gains and dividends in a...

Traditional IRA, it will increase the tax rate paid on capital gains and dividends to top ordinary rates.

Roth IRA, it will reduce the tax rate due on them to 0%.

Early withdrawals. Distributions taken out of a traditional IRA funded with deductible contributions are subject not only to income tax, but also to a 10% penalty if withdrawn before age 59½.

But contributions made to a Roth IRA can be withdrawn at any time tax free and without penalty -- only earnings on contributions are subject to penalty if withdrawn prematurely.

Moreover, withdrawals from Roth IRAs are deemed to be made up of contributions first, until all are withdrawn.

Result: A Roth IRA can serve as a tax-free source of funds at any time before retirement if necessary.

Note: When a traditional IRA is converted to a Roth IRA, the converted amount can be withdrawn without penalty after five years.

Travel Tips - Packing Light

2007-06-15T12:39:00.000-04:00

We all need to travel at some point (whether personal or business). Not sure if I'm disciplined enough to follow some of these tips (especially the outfit coordination), but some ideas to keep in mind. This came from the BottomLineSecrets website and was titled and written by:

Pack for a 10-Day Trip in One Carry-On Bag

Joanne Lichten, PhD

You can pack everything needed for a 10-day vacation into a single 22"-x-9"-x-14" bag that complies with today’s strict airline carry-on rules. Of course, you won’t be able to wear a different outfit every day or get really dressed up for dinner, but frequent travelers find the convenience worth it. What to pack...

TWO-OUTFIT STRATEGY

In addition to the clothes you wear, you need pack only a core wardrobe of two outfits if you do the following...

Pick one color scheme. Select a neutral color -- black, navy, brown or olive -- and pack only clothing in this color or that goes well with this color. This makes it easy to create new outfits by mixing and matching pants, skirts, shirts, etc. Avoid lighter neutrals, such as tan and white, which are more likely to show dirt.

Buy wrinkle-resistant clothes. Garments made from high-tech fabrics that resist wrinkles can be worn several times during a trip without looking messy. A wrinkle-resistant T-shirt is particularly versatile for men and women -- it looks great with jeans or under a sport coat.

You may want to bring a microfiber T-shirt and a pair of shorts as workout clothes. Microfiber is breathable and fast-drying. You can wash it and wear it again the next day. A large microfiber T-shirt works as a nightshirt and a bathing suit topper. You also may want to bring microfiber socks and underwear (enough for each day of the trip).

Good sources of travel clothing include Magellan’s (800-962-4943, www.magellans.com)... TravelSmith (800-950-1600, www.travelsmith.com)... and L.L. Bean (800-441-5713, www.llbean.com).

Wear a pair of sneakers or walking shoes, and pack one pair of dressier, but still comfortable, shoes in your carry-on bag.

Examples: SoftWalk shoes for women (888-218-7275, www.softwalkshoes.com)... Johnston & Murphy “Signature Comfort System” dress shoes for men (800-424-2854, www.johnstonmurphy.com).

If you must bring a coat, make it a compact, wrinkle-resistant, all-weather raincoat. With a sweater underneath, it’s good even in 20-degree weather if you’re not outside too long. Examples: TravelSmith’s Men’s Packable Classic Raincoat ($169 to $179) or Women’s Packable Microfiber Classic Raincoat ($149) provides lightweight wrinkle-resistant warmth.

If you need a suit or sport coat, check for wrinkle resistance. Roll or knot the suit sleeve. If it still looks good when it’s straightened out, it should work well during your trip.

OTHER ITEMS

Buy travel-size bottles for toiletries, if you’re not staying in a hotel that supplies them. The Container Store sells plastic bottles perfect for small supplies of shampoo, conditioner, body lotion and aftershave. Cost: 79 cents and up, depending on size (888-266-8246, www.containerstore.
com). Small bottles comply with new US air travel rules, which ban bottles that hold more than three ounces of fluid from carry-on luggage.

Helpful: Magellan’s sells compact brushes, curling irons, toothbrushes, etc., that save additional room.

Bring paperbacks or magazines -- reading material that you can throw away when you’re done.

Wear a watch with an alarm if you don’t want to rely on a hotel alarm clock. Or use a cell-phone alarm.

Company Loans to Business Owners

2007-06-15T12:34:00.000-04:00

Here's another article relevant to this blog from BottomLineSecrets. It discusses options that business owners have to get their hands on cash with tips on how to structure it for tax purposes. This article was titled and written by:

Make the Most of a Loan from Your Company

Albert Ellentuck, Esq., CPA
King & Nordlinger, LLP

Business owners may find themselves short of cash while the company has ample liquid reserves. If that’s the case, it might be tempting to borrow money from the business.

Such tactics may make sense, especially if the alternatives are taking a bank loan or running a credit card balance. But proceed cautiously to avoid tax traps and other dangers...

DEFEND AGAINST DIVIDENDS

Avoid simply transferring funds from the company’s bank account to your own, making a mental note that this is a loan.

Trap: If the IRS examines your personal or business records, the transfer might be considered a dividend.

Result: The entire amount could be taxable income to you. A $50,000 “loan,” for example, could add $50,000 to your income for the year.

Moreover, dividends are not deductible for the company. If you run your business as a regular C corporation, the amount of the transfer could be subject to both personal and corporate income tax.

Strategy: Any loan between a company and an employee (especially if the employee is a shareholder) should be formalized.

The loan document should state an interest rate, repayment terms, and procedures to be followed in case of default. If you’re the borrower, adhere to the terms of the loan.

Added protection: To defend against a possible future charge that the transfer was a dividend, record the loan in your corporate minutes. Make a note to the effect that a loan is being made to a corporate executive to relieve personal financial pressures and thus facilitate performance of business-related responsibilities.

A loan will look more realistic if some interest is charged, even at a below-market rate, and if that interest is paid on schedule.

LACK OF INTEREST

As mentioned, a company-to-shareholder loan will be on safest ground if interest is charged and paid. For the best tax outcomes, such interest will be at a market rate -- it will be treated as a loan rather than a taxable gift or dividend.

However, you might prefer to pay a below-market rate of interest, or no interest at all.

Tax treatment: With few exceptions, interest in such cases will be imputed by the IRS on loans between employers and employees.

Example: Walt Smith is the 100% owner of ABC, Inc. He borrows $50,000 from the company, interest free. At the time of the transaction, the applicable federal rate (AFR) published by the IRS is 4%.

Result: Imputed interest of $2,000 (4% of $50,000) will be included in Walt’s income each year.

Walt might be able to take an offsetting $2,000 deduction... but he might not. If he uses the loan proceeds for personal purposes, other than acquisition of a residence, no interest deduction will be allowed. If he uses the money for investing, interest deductions will be allowed only if Walt has taxable investment income to offset.

Below-market loans: Instead of an interest-free loan, Walt might have agreed to pay, say, 2% interest to his company. In that case, the loan is two percentage points below the AFR and the annual imputed interest would be $1,000 (2% of the $50,000 loan amount).

LOW-COST DEBT

Suppose that Walt uses the proceeds for personal expenses. He will owe tax on $2,000 worth of “income” from imputed interest and get no tax deduction. Even so, such a transaction might be advisable.

Reason: Assuming an effective 40% tax rate (federal, state, local), Walt would owe $800 per year in tax on the $2,000 of imputed income.

If Walt borrowed the same $50,000 from a bank, in today’s interest rate environment, he might have had to pay 8% interest, or $4,000 per year.

Even worse: Putting $50,000 worth of debt on credit cards would probably have cost much more interest.

Bottom line: Using a no-interest or low-interest loan from your company might be the best way to get your hands on needed cash.

Try to start repaying the loan as soon as possible. If no repayment has been made after several years, the transaction may start to look like a dividend, with the undesirable tax treatment described above applied retroactively.

EMPLOYING THE EXCEPTIONS

In some situations, no-interest or below-market loans between employers and employees are exempt from the imputed interest tax rules.

Exception 1: Loans that total no more than $10,000 won’t trigger imputed interest.

Exception 2: Relocation loans also may be exempt from these rules.

Example: XYZ Corp. moves its headquarters from Wyoming to Arizona. Beth Jones, the sole shareholder of XYZ, also moves to a new home in Arizona.

XYZ makes Beth an interest-free loan to help her buy her new home. No interest will be imputed.

Required: To avoid imputed interest, the loan must be secured by Beth’s new residence. The note will say that the house will be sold in order to pay off the loan, if necessary.

The relocation must involve a move of at least 50 miles. The loan must not be transferable (the company can’t sell the note to another party) and must oblige the borrower to perform future services (the borrower promises to work for the company).

In addition, the rules state that the borrower must certify to the employer that he/she expects to itemize deductions each year the loan is outstanding (see Reg. Sec. 1.7872-5T[c]).

Exception 3: In some cases, the imputed interest rules can be avoided on bridge loans that are used to buy a new home while an existing residence is on the market.

Required: All the above conditions for relocation loans must be met. In addition, the loan agreement must state that the loan will be repaid in full within 15 days after the sale of the old home.

The amount of the loan can’t be more than the borrower’s reasonable estimate of the equity in the old home. Moreover, the old home must be sold rather than converted to business or rental property.

Strategy: For a relocation or bridge loan, the borrower should open a separate bank account for handling the borrowed funds. Then the loan proceeds can be traced to the purchase of a new residence, strengthening the case for exemption from the imputed interest rules.

Sources to Borrow From in a Pinch

2007-06-15T12:27:00.000-04:00

This is another article from the BottomLineSecrets newsletter I receive. Those of us that have gone through certain life challenges (divorce, illness, etc.) should find these useful. Problem is, when the crisis strikes, have to think clearly enough to get through without committing financial suicide. This article was titled and written by:

How to Get Cash in a Flash

Madeline Noveck, CFP

Novos Planning Associates, Inc.

Suppose life throws you a curve ball and you need money fast. Where can you get the cash? Options -- and traps to watch out for...

LOW OR NO COST

1. Ask your employer for an advance. The terms may be informal or written as a promissory note. This option works best when the need for immediate cash is very small and the boss is approachable.

2. Borrow from your relatives. This quick fix comes with emotional potholes. If you don’t repay the money, there may be resentment from the lender, as well as from other relatives who may feel slighted or jealous.

What to do: Use a formal promissory note stating the interest rate and repayment terms.

Trap: Without such a written note, the IRS may bar the lender from writing off a bad loan on grounds that it was a gift.

Caution: Such a loan doesn’t have to bear interest. But if it does, the lender must report that interest as income. If the loan exceeds $10,000, and the interest is below the applicable federal rate (AFR) -- currently just under 5% -- the lender must report not only the actual interest, if any, but also the “imputed interest,” which is the difference between the actual interest and the AFR.

More information: At the IRS Web site, www.irs.gov, type “applicable federal rate” into the search box.

RETIREMENT ACCOUNTS

3. Borrow from your 401(k). If your plan allows it, under federal law, you can borrow up to 50% of your vested account balance or $50,000, whichever is less. You usually have up to five years to repay the loan.

Advantages: You can’t be rejected for the loan -- you may only need to make a phone call to the plan administrator or complete a short loan form... the interest rate, set by the plan, will be relatively low -- usually a couple of points above the prime rate, currently 8.25% (this is low compared with credit card rates, which can be up to 25%). The interest you pay goes back into the account.

Disadvantages: The money borrowed diminishes what could be saved for retirement... if you leave the company before repaying the loan, you must pay it back -- any outstanding balance will otherwise be treated as a taxable distribution (and subject to a 10% penalty if you’re under age 59½).

4. Tap your IRA. Pledging an IRA as collateral for a loan or “borrowing” from it is treated as a taxable distribution (subject to a 10% penalty if you’re under age 59½). But you can use money from your IRA for 60 days, tax and penalty free.

Big danger: You must replace (redeposit) the money in any of your IRA accounts within 60 days, or pay tax on it. Whatever isn’t put back becomes taxable as ordinary income.

Caution: You can make only one such withdrawal/redeposit, called a rollover, within a one-year period.

COMMERCIAL ALTERNATIVES

5. Borrow against your life insurance policy. If you have a cash-value life insurance policy (whole or universal life), you can borrow against the amount accumulated in your account. Just call your insurance agent or insurance company to receive a check within 48 hours to two weeks.

Borrowing limit: The cash value in the policy.

In today’s market, the annual interest rate on such a loan is about 7%, but many companies will reduce the dividends they credit to your account for as long as you have the loan -- in effect, upping the interest rate. Usually, you can repay funds when and to the extent you choose, but if payments don’t at least cover interest, the cash value of your policy continues to be further depleted because the interest not paid is subtracted from the cash value.

6. Use a margin account. Margin borrowing allows you to leverage securities you hold at a brokerage firm to access a convenient line of credit -- using checks issued by the firm to access your line or by receiving a broker’s check (often the same day you ask for it). You can even have the funds wired to your bank account. All you need to do for this kind of borrowing is sign a margin account agreement.

Limit: 50% of the current market value of a stock... 90% for Treasury and agency bonds... 70% for corporate bonds... and 60% for municipal bonds. Some securities (e.g., equities trading below $3 a share) are excluded.

Interest rates, which are based on the broker call rate (the broker’s cost of money), vary and the more you borrow, the lower the interest rate.

Example: Fidelity’s rate for borrowing less than $10,000 is currently 11.075%, but borrowing $500,000 or more has a 6% rate.

Note: Interest on margin accounts may be tax deductible as investment interest by those who itemize deductions. You must use the money to buy or carry investments, and you must have investment income at least equal to the investment interest. You must also not be borrowing against tax-exempt securities.

Caution: If the value of the securities falls below a certain level while your loan is outstanding, you’ll get a margin call -- a demand from a broker to provide money or securities to bring the value of the account back to the required level. You’ll have to sell some of your holdings to cover the shortfall if you don’t find other money to pay down the margin debt.

7. Get a home-equity line of credit (HELOC). Your bank will approve you for a specific amount of credit. Many lenders set the limit on a HELOC by taking a percentage of a home’s appraised value and subtracting the balance on the existing mortgage, if any. The process can take a week or more to arrange, but once the line is in place, you can write checks against it.

HELOCs typically use variable interest rates based on the prime rate (current HELOC rates are around 7.5%). Look for a lender that will waive all costs of establishing the loan, such as an application fee, an appraisal fee and closing costs.

HIGH-COST OPTIONS

8. Take a cash advance from a credit card. Drawbacks: Very high interest rates -- rates for advances typically range from 20% to 25%, in contrast to the average rate on credit card purchases of around 16% to 17%. In addition, cash advances usually carry an up-front fee of 2% to 4% of the amount advanced.

9. Borrow from a pawnshop. Pawnshops are in the business of making short-term, small-money loans, with personal items used as collateral. A pawnbroker will appraise your jewelry, small appliances, musical instruments or other items and typically lend 50% of the retail value. Interest rates and fees for these loans are state regulated, but the term of the loan is usually 30 days to several months and the fees are generally high.

Example: New York pawnbrokers have a collateral loan period of four months, and the interest rate is 4% a month, which means an annual percentage rate (APR) of 48%. There may also be a service charge -- the maximum charge for loans between $50 and $100 is $3 (loans above $100 are $5). If you don’t pay back on time, your collateral can be sold.

10. Take a “payday” loan. If your employer won’t give you a wage advance, consider a payday or “fast cash” loan.

These loans (offered at payday loan stores and at such sites as www.wegivecash.com, www.ordercashnow.com and www.credit.com) are popular because they’re easy and quick to arrange -- you can get funds in as little as one hour.

These loans don’t require a credit check -- they’re based on just a few criteria, such as the applicant’s monthly wages (usually a minimum of $1,000). The maximum loan amount is between $500 and $1,500, and the loans are for short periods, usually one to four weeks.

These loans are pricey -- finance costs (fees) run from $25 to $45, regardless of the size of the loan. Sounds reasonable? It’s not. Charging $45 for a two-week loan is the equivalent of $1,170 for a year. If you borrowed $300, that’s an APR of 390%!

Household money saving secrets

2007-06-15T12:18:00.000-04:00

I receive this email newsletter from bottomlinesecrets.com. Had a nice summary on cost cutting and cost controlling moves for any household (including mine). This articles title and authors are:

Money-Saving Secrets from America's Cheapest Family

Steve & Annette Economides

The HomeEconomiser Newsletter

Many people think it is stressful to keep an eye on spending, but being frugal reduces the stress in our house. Unexpected financial setbacks, which rarely occur, can be remedied without major lifestyle changes. Our family members have learned to work together toward common goals. Our favorite strategies...

Plan and save in advance for all expenses. We divide our checking account into 20 subaccounts on paper -- though it could be done using a computer -- to save for all regularly occurring household expenses, such as mortgage and auto insurance payments, as well as such categories as recreation, gifts, home repair, savings and even pets.

Every other week, we spend two hours recording our expenses and dividing our total paycheck into the subaccounts. For instance, we anticipate the cost for gas and maintenance on two cars is about $2,700 a year, so we set aside $103 per paycheck for those needs. Money in a subaccount that is not completely spent accumulates with each paycheck. This way, it's never a financial strain when the car needs new brakes -- we have the money saved to cover it.

This system takes discipline, but it gives us peace of mind. We know exactly how much money we have to spend in each category. No more robbing Peter to pay Paul.

Plan how to spend large sums. People often squander large payouts, such as work bonuses and tax refunds. Instead, determine the most effective use for the money before it comes in. For instance, when we were paying off our first house (within nine years), we decided that extra money would be divided as follows -- 30% to extra payments of our mortgage principal, 30% to retirement and other savings accounts, 20% for house projects, 10% for charitable giving and 10% for recreation. We always allow some money for fun while working toward a goal. It makes it easier to stick with the plan.

Budget and pay bills together as a couple. Many financial experts suggest that spouses keep their money separate. We don't. Working together has built incredible unity in our marriage, as we have worked toward and accomplished our financial goals. We both know exactly where we stand financially. There are fewer arguments and more determination to persevere.

Avoid the ATM. This cash usually evaporates as quickly as ice on a hot griddle. Instead, to take control of the most common areas of overspending -- food, recreation and clothing -- we withdraw predetermined amounts in cash from each paycheck. Putting a set amount of cash into three separate envelopes minimizes overspending. When the cash is gone, the spending stops. It is amazing to see how easy it is to get control of your money this way.

Plan dinner menus for the coming week. This habit will encourage you to eat dinner at home more often, rather than at restaurants. With practice, a weekly menu can be created in as little as 15 minutes. You will make fewer trips to the grocery store and will save time and money. We have a list of more than 90 different dinner meals that we rotate from month to month. A favorite resource is The Good Housekeeping Illustrated Cookbook, which includes pictures of many of the dishes.

Give up your "sacred cows" for a month to reach your goals. Sacred cows are the little extravagances that you refuse to forgo even when you're under financial pressure. If you're comfortable enough without your sacred cows for 30 days, consider giving them up for good. For many people, these include premium cable channels, bottled water and Sunday brunches at restaurants.

We had a friend in financial trouble who insisted on continuing his newspaper subscription for $30 a month. He couldn't imagine living without it. We challenged him to give it up for 30 days, just to see what happened. When you let go of something, you often find a creative way to meet that need. In this case, our friend discovered that someone at his office brought in the paper each day and left it in the break room.

Make a game of being thrifty. Find a creative solution that costs less than the obvious one.

Example: We saved $400 for a dishwasher. After consulting Consumer Reports, we called several appliance stores in our area looking for a particular brand and model. We discovered that most large distributors have "scratch and dent" and discontinued units, so we called more stores looking for these deals. We struck pay dirt at Maytag and walked out of its downtown warehouse with a brand-new, $800 stainless steel dishwasher (in an open box) for $400. We stayed within our budget and got a much better quality dishwasher than we expected.

Keep your eyes open -- deals are everywhere. Most Sam's Club warehouses have discount/closeout areas in the back of the store. We always check there for deals. One day, we found a twin pack of Xerox Toner cartridges for our copier. They retail for $130 each. We have bought them on eBay for as little as $60, but Sam's Club had discontinued this particular item and marked it down to $10. Of course, we scooped them up. The deal got even sweeter when we remembered that inside each box was a certificate for a $5 rebate when we mailed in our empty toner cartridge (postage paid).

Decide on your "time versus money" threshold. If one phone call will resolve a small error on our bank statement, we go for it, but we're always careful to balance our drive to save money with our time for family and friends.

Our rule: If the resolution of an issue can't yield us at least $10 to $15 per hour of our time, then it probably isn't worth pursuing.

Cash Flow

2007-06-14T21:29:00.000-04:00

Steps to monitor and control cash flow:

Do at least a summarized cash flow out to 12 months. I do a highly detailed cashflow for 2 months.
Offer customers incentives for early payments (sometimes the cash discount lost is worth the quicker pay...especially if vendors are pressing you).
Lease equipment instead of buying. Allows cash outflow to be spread out.
Monitor your inventory. Only keep on hand that which is needed for the short term.
Monitor spending...goes without saying.
Postpone hiring until absolutely necessary.
Avoid waste; recycle wherever possible.
Cap owners salaries to that which is reasonable for work done.

No one likes to do it; but whether it is a lean year or a good year, take a look and plug leaks before it is too late.

Home Business - Is it a Hobby or a Business?

2007-06-14T21:14:00.000-04:00

Everyone likes the word write-off, but especially in the case of home based business', care should be taken. The IRS is kind enough to allow deductions for expenses which are ordinary, necessary and reasonable. In Treasury Reg. 1.183-2 are listed 9 factors that the IRS uses to determine whether an activity is a hobby or a business. Nicely summarized on the tax almanac website, the 9 factors are as follows:
1) Manner in which the taxpayer carries on the activity. The fact that the taxpayer carries on the activity in a businesslike manner and maintains complete and accurate books and records may indicate that the activity is engaged in for profit. Similarly, where an activity is carried on in a manner substantially similar to other activities of the same nature which are profitable, a profit motive may be indicated. A change of operating methods, adoption of new techniques or abandonment of unprofitable methods in a manner consistent with an intent to improve profitability may also indicate a profit motive.

(2) The expertise of the taxpayer or his advisors. Preparation for the activity by extensive study of its accepted business, economic, and scientific practices, or consultation with those who are expert therein, may indicate that the taxpayer has a profit motive where the taxpayer carries on the activity in accordance with such practices. Where a taxpayer has such preparation or procures such expert advice, but does not carry on the activity in accordance with such practices, a lack of intent to derive profit may be indicated unless it appears that the taxpayer is attempting to develop new or superior techniques which may result in profits from the activity.

(3) The time and effort expended by the taxpayer in carrying on the activity. The fact that the taxpayer devotes much of his personal time and effort to carrying on an activity, particularly if the activity does not have substantial personal or recreational aspects, may indicate an intention to derive a profit. A taxpayer's withdrawal from another occupation to devote most of his energies to the activity may also be evidence that the activity is engaged in for profit. The fact that the taxpayer devotes a limited amount of time to an activity does not necessarily indicate a lack of profit motive where the taxpayer employs competent and qualified persons to carry on such activity.

(4) Expectation that assets used in activity may appreciate in value. The term profit encompasses appreciation in the value of assets, such as land, used in the activity. Thus, the taxpayer may intend to derive a profit from the operation of the activity, and may also intend that, even if no profit from current operations is derived, an overall profit will result when appreciation in the value of land used in the activity is realized since income from the activity together with the appreciation of land will exceed expenses of operation. See, however, paragraph (d) of §1.183–1 for definition of an activity in this connection.

(5) The success of the taxpayer in carrying on other similar or dissimilar activities. The fact that the taxpayer has engaged in similar activities in the past and converted them from unprofitable to profitable enterprises may indicate that he is engaged in the present activity for profit, even though the activity is presently unprofitable.

(6) The taxpayer's history of income or losses with respect to the activity. A series of losses during the initial or start-up stage of an activity may not necessarily be an indication that the activity is not engaged in for profit. However, where losses continue to be sustained beyond the period which customarily is necessary to bring the operation to profitable status such continued losses, if not explainable, as due to customary business risks or reverses, may be indicative that the activity is not being engaged in for profit. If losses are sustained because of unforeseen or fortuitous circumstances which are beyond the control of the taxpayer, such as drought, disease, fire, theft, weather damages, other involuntary conversions, or depressed market conditions, such losses would not be an indication that the activity is not engaged in for profit. A series of years in which net income was realized would of course be strong evidence that the activity is engaged in for profit.

(7) The amount of occasional profits, if any, which are earned. The amount of profits in relation to the amount of losses incurred, and in relation to the amount of the taxpayer's investment and the value of the assets used in the activity, may provide useful criteria in determining the taxpayer's intent. An occasional small profit from an activity generating large losses, or from an activity in which the taxpayer has made a large investment, would not generally be determinative that the activity is engaged in for profit. However, substantial profit, though only occasional, would generally be indicative that an activity is engaged in for profit, where the investment or losses are comparatively small. Moreover, an opportunity to earn a substantial ultimate profit in a highly speculative venture is ordinarily sufficient to indicate that the activity is engaged in for profit even though losses or only occasional small profits are actually generated.

(8) The financial status of the taxpayer. The fact that the taxpayer does not have substantial income or capital from sources other than the activity may indicate that an activity is engaged in for profit. Substantial income from sources other than the activity (particularly if the losses from the activity generate substantial tax benefits) may indicate that the activity is not engaged in for profit especially if there are personal or recreational elements involved.

(9) Elements of personal pleasure or recreation. The presence of personal motives in carrying on of an activity may indicate that the activity is not engaged in for profit, especially where there are recreational or personal elements involved. On the other hand, a profit motivation may be indicated where an activity lacks any appeal other than profit. It is not, however, necessary that an activity be engaged in with the exclusive intention of deriving a profit or with the intention of maximizing profits. For example, the availability of other investments which would yield a higher return, or which would be more likely to be profitable, is not evidence that an activity is not engaged in for profit. An activity will not be treated as not engaged in for profit merely because the taxpayer has purposes or motivations other than solely to make a profit. Also, the fact that the taxpayer derives personal pleasure from engaging in the activity is not sufficient to cause the activity to be classified as not engaged in for profit if the activity is in fact engaged in for profit as evidenced by other factors whether or not listed in this paragraph.

Note that the IRS will disallow:
-personal residence operation costs
-salaries paid to children for 'chore type' work
-excessive car and truck expenses.
-personal furniture, home entertainment equipment, toys, etc.

Health Care - Rudy Giuliani's Plan

2007-06-07T16:26:00.000-04:00

Well, with an election year coming up we will, without a doubt be seeing some new ideas to improve government and the economy. Rudy Giuliani proposed his solution to health care reform. It basically came down to the individual handling the small day-to-day stuff and the health care plan handling the big/non-routine items.

Rudy's quote: “Health insurance should become like homeowners insurance or like car insurance: You don’t cover everything in your homeowners policy. If you have a slight accident in your house, if you need to refill your oil in your car, you don’t cover that with insurance. But that is covered in many of the insurance policies because they’re government dominated and they’re employer dominated.”

Like any idea, it has its merits and its pitfalls. A problem with this idea is that different people will have different definitions of the routine items. A $300 bill to individual A might be nothing; but a $300 bill to individual B could set them back heavily.

I guess from my point of view, I'm always willing to 'raise my deductible' to save some bucks; but there is a lot to be defined in Rudy's proposal. It is an intriguing idea, though. Considering that health care costs are spiraling out of control and us employees may find ourselves paying more of the monthly bill for the service if the costs continue to skyrocket.

Most Overpaid CEO's in America

2007-06-06T13:51:00.001-04:00

Just don't know what to say to this...

clipped from articles.moneycentral.msn.com

The most overpaid CEOs in America

Company CEOs 2005 2006
Dell (DELL, news, msgs),
Kevin Rollins,
Michael Dell*
$39,314,839
$153,223,079
Eli Lilly (LLY, news, msgs)
Sidney Taurel
$16,643,068
$10,799,582
Ford Motor (F, news, msgs)
William Ford Jr., Alan Mulally**
$7,905,158
$19,501,100
Time Warner (TWX, news, msgs)
Richard Parsons
$12,668,761
$13,095,627
Wal-Mart Stores (WMT, news, msgs)
H. Lee Scott
$10,610,858
$8,956,062
*2006 = Michael Dell's pay; 2005 = Kevin Rollins' pay.
**2006 = Alan Mulally's pay; 2005 = William Ford's pay.
Pay = base salary, bonus, other pay, gains from exercising options, value of incentive stock that vested and increases in the value of pension plan.
Source: The Corporate Library

MapQuest Still Competing With Google

2007-06-04T11:12:00.000-04:00

MapQuest tries new direction - The Denver Business Journal:

This article states that MapQuest still attracts 49 million unique visitors compared to Google Maps 30 million.

In 2004, MapQuest, uLocate, Research in Motion and Nextel launched MapQuest Find Me, a service that operates on GPS-enabled mobile phones.

On May 29, the company announced the beta launch of a new product, MapQuest Advantage, a suite of mapping tools that it developed with San Jose, Calif.-based Adobe Systems Inc.

The hope is to attract more developers to use its software.

Just wanted to mention it...can’t help rooting for the underdog.

What Not To Bring To An IRS Audit

2007-06-01T14:30:00.000-04:00

I came across this little article in a sample issue of Bottom Line magazine titled, 'What You Should NEVER Bring to an IRS Audit'. The article states that the most common audit mistake is to bring (and provide) to the auditor past years tax returns. Doing so, the article says, expands audit risk because you are giving the auditor more to look at and thus allowing him to see patterns in income and expenses that might exist. People often supply past returns because the audit notice says to.

Apparently there is an IRS rule that states that you are required to provide only the information which pertains to the tax year being audited unless there is an issue with carryover items or the like.

I looked at a couple publications briefly on the IRS webpage (Pub #1 and #556) and I didn't come across anything to support this. I'll have to look into it further because I would like to know for certain if this is the case (not that I'm planning on getting audited, but it is always helpful to know what the playing field is like just in case). If anyone has an immediate answer, please comment.

Two New Search Engines...Alternatives to Google!

2007-05-31T15:54:00.000-04:00

Whether you're an accountant or an engineer, information is important. Most of the information nowadays we find on the internet. Google is definitely the most popular means of searching, but new ones are popping up.

These look like a couple interesting alternatives to google: Mahalo and Hakia

We'll have to see how they develop. Mahalo is very 'human based'. It is actually moving forward having real people "searching, filtering out spam, and hand-crafting the best search results possible". If they can do it, it may be a way to get quality results in a short list.

Hakia doesn't have the 'human factor'. It is a search engine with a different (supposedly) algorithm for determining results. According to the site, "similar to the human brain's cognitive skills - rather than by the mere occurrence (or popularity) of search terms".

Let me know what kind of results you see.

Links to all 50 States Departments of Revenue/Finance

2007-05-26T22:56:00.000-04:00

I hope you'll find this post with all the links useful. You can also find this list on my website through the following link: AccountingHelpDesk Sales Tax Links

Below you will find links to the Departments of Revenue/Finance for all the states. Particularly useful for sales tax, but they contain a wealth of information for all individual and business taxation issues.

	Alabama
	Alaska
	Arizona
	Arkansas
	California
	Colorado
	Connecticut
	Delaware
	District of Columbia
	Florida
	Georgia
	Hawaii
	Idaho
	Illinois
	Indiana
	Iowa
	Kansas
	Kentucky
	Louisiana
	Maine
	Maryland
	Massachusetts
	Michigan
	Minnesota
	Mississippi
	Missouri
	Montana
	Nebraska
	Nevada
	New Hampshire
	New Jersey
	New Mexico
	New York
	North Carolina
	North Dakota
	Ohio
	Oklahoma
	Oregon
	Pennsylvania
	Rhode Island
	South Carolina
	South Dakota
	Tennessee
	Texas
	Utah
	Vermont
	Virginia
	Washington
	West Virginia
	Wyoming

Top 10 Bookkeeping Mistakes By Small Business

2007-05-25T20:58:00.000-04:00

I came across an article on allbusiness.com which seems to have merit. They compiled a list of top bookkeeping mistakes by small buisinesses. While I don't know what the basis was behind their research, most of the points in their list do make sense. Here is what they list:

Not saving receipts of less than $75: The IRS doesn't require you to save all these receipts; but if it adds further support to all the deductions you take, why not just put them all in a folder.
Doing it yourself: Wouldn't your business be better served if you were able to concentrate on the actual business instead of bookkeeping. A competent bookkeeper can probably do the job with much more efficiency and accuracy.
Forgetting to track reimbursable expenses: So many small business owners pay for expenses out of their own pocket either by paying cash or using their credit card. Care should be taken to account for all of these so they get properly expensed by the corporation and ultimately reimbursed.
Not properly classifying employees: You can run into trouble by not classifying employees properly. See my page on independent contractors.
Lack of communication: Your bookkeeper can only be as good as the information provided to him/her.
Not reconciling monthly: I wish I could tell you I reconcile my personal checkbook every month, but that just isn't reality. As far as your business goes, good accounting starts with a reconciled bank account.
No backup: Even with todays technology, a paperless office is just not reality. For audit purposes, a paper trail should always exist. Most everybody has had experience with a computer failure. Virus software is not perfect. Keep a backup of all your data for when the inevitable hits and don't give up on paper just yet.
Not deducting sales tax: Don't include sales tax in your income figures. Sales tax should be posted to a liability account for future remittance to the taxing authority.
Petty cash nonchalance: Use a formal petty cash system with a set amount in petty cash. Use a petty cash slip or submit a receipt when funds are taken out.
Miscategorization or overcategorization: Use proper bookkeeping to post transactions to the correct expense accounts. Establish a 'happy median' between having too many expense accounts in your chart of accounts (web page on charts of accounts coming soon) and having too few.

Visit my website for more information for the accountant or bookkeeper including career information and links to useful sites. http://accountinghelpdesk.com

Classification as an Independent Contractor or Employee

2007-05-25T08:56:00.001-04:00

Let's face it, the distinction between an employee and an independent contractor has been and will remain a major focus of the IRS.

In its Revenue Ruling 87-41, 1987-1 C.B. 296, the IRS listed twenty factors or elements to consider in determining whether sufficient control is present to establish and employer-employee relationship. Following is a list of the twenty factors. It should be noted that not all the factors need be present to establish an employer/employee relationship. These factors are meant to be guides to determine the likelihood that a worker is an employee or an independent contractor.

The Twenty Factors:

Instructions: A worker who is required to comply with other persons' instructions about when, where, and how he or she is to work is ordinarily an employee. This control factor is present if the person or persons for whom the services are performed have the right to require compliance with instructions.
Training: Training a worker by requiring an experienced employee to work with the worker, by corresponding with the worker, by requiring the worker to attend meetings, or by using other methods, indicates that the person or persons for whom the services are performed want the services performed in a particular method or manner.
Integration: Integration of the worker's services into the business operations generally shows that the worker is subject to direction and control. When the success or continuation of a business depends to an appreciable degree upon the performance of certain services, the workers who perform those services must necessarily be subject to a certain amount of control by the owner of the business.
Services Rendered Personally: If the Services must be rendered personally, presumably the person or persons for whom the services are performed are interested in the methods used to accomplish the work as well as in the results.
Hiring, Supervising, and Paying Assistants: If the person or persons for whom the services are performed hire, supervise, and pay assistants, that factor generally shows control over the workers on the job. However, if one worker hires, supervises, and pays the other assistants pursuant to a contract under which the worker agrees to provide materials and labor and under which the worker is responsible only for the attainment of a result, this factor indicates an independent contractor status.
Continuing Relationship: A continuing relationship between the worker and the person or persons for whom the services are performed indicates that an employer-employee relationship exists. A continuing relationship may exist where work is performed at frequently recurring although irregular intervals.
Set Hours of Work: The establishment of set hours of work by the person or persons for whom the services are performed is a factor indicating control.
Full Time Required: If the worker must devote substantially full time to the business of the person or persons for whom the services are performed, such person or persons have control over the amount of time the worker spends working and impliedly restrict the worker from doing other gainful work. An independent contractor on the other hand, is free to work when and for whom he or she chooses.
Doing Work on Employer's Premises: If the work is performed on the premises of the person or persons for whom the services are performed, that factor suggests control over the worker, especially if the work could be done elsewhere. Work done off the premises of the person or persons receiving the services, such as at the office of the worker, indicates some freedom from control. However, this fact by itself does not mean that the worker is not an employee. The importance of this factor depends on the nature of the service involved and the extent to which an employer generally would require that employees perform such services on the employer's premises. Control over the place of work is indicated when the person or persons for whom the services are performed have the right to compel the worker to travel a designated route, to canvass a territory within a certain time, or to work at specific places as required.
Order of Sequence Set: If a worker must perform services in the order or sequence set by the person or persons for whom the services are performed, that factor shows that the worker is not free to follow the worker's own pattern of work but must follow the established routines and schedules of the person or persons for whom the services are performed. Often, because of the nature of an occupation, the person or persons for whom the services are performed do not set the order of the services or set the order infrequently. It is sufficient to show control, however, if such person or persons retain the right to do so.
Oral or Written Reports: A requirement that the worker submit regular or written reports to the person or persons for whom the services are performed indicates a degree of control.
Payment By Hour, Week, Month: Payment by the hour, week, or month generally points to an employer-employee relationship, provided that this method of payment is not just a convenient way of paying a lump sum agreed upon as the cost of a job. Payment made by the job or on straight commission generally indicates that the worker is an independent contractor.
Payment of Business and/or Traveling Expenses: If the person or persons for whom the services are performed ordinarily pay the worker's business and/or traveling expenses, the worker is ordinarily an employee. An employer, to be able to control expenses, generally retains the right to regulate and direct the worker's business activities.
Furnishing of Tools and Materials: The fact that the person or persons for whom the services are performed furnish significant tools, materials, and other equipment tends to show the existence of an employer-employee relationship.
Significant Investment: If the worker invests in facilities that are used by the worker in performing services and are not typically maintained by employees (such as the maintenance of an office rented at fair value from an unrelated party), that factor tends to indicate that the worker is an independent contractor. On the other hand, lack of investment in facilities indicates dependence on the person or persons for whom the services are performed for such facilities and, accordingly, the existence of an employer-employee relationship. Special scrutiny is required with respect to certain types of facilities, such as home offices.
Realization of Profit or Loss: A worker who can realize a profit or suffer a loss as a result of the worker's services (in addition to the profit or loss ordinarily realized by employees) is generally an independent contractor, but the worker who cannot is an employee. For example, if the worker is subject to a real risk of economic loss due to significant investments or a bona fide liability for expenses, such as salary payments to unrelated employees, that factor indicates that the worker is an independent contractor. The risk that a worker will not receive payment for his or her services, however, is common to both independent contractors and employees and thus does not constitute a sufficient economic risk to support treatment as an independent contractor.
Working For More Than One Firm at a Time: If a worker performs more than de minimis services for a multiple of unrelated persons or firms at the same time, that factor generally indicates that the worker is an independent contractor. However, a worker who performs services for more than one person may be an employee of each of the persons, especially where such persons are part of the same service arrangement.
Making Services Available to the General Public: The fact that a worker makes his or her services available to the general public on a regular and consistent basis indicates an independent contractor relationship.
Right To Discharge: The right to discharge a worker is a factor indicating that the worker is an employee and the person possessing the right is an employer. An employer exercises control through the threat of dismissal, which causes the worker to obey the employer's instructions. An independent contractor, on the other hand, cannot be fired so long as the independent contractor produces a result that meets the contract specifications.
Right To Terminate: If the worker has the right to end his or her relationship with the person for whom the services are performed at any time he or she wishes without incurring liability, that factor indicates an employer- employee relationship.

The IRS has a publication in the form of a brochure which summarizes many of the tax court findings in plain english. This Publication (#1779) looks at the many facts used by the tax courts and breaks them down into three main categories: behavioral control, financial control and relationship of the parties. The brochure stresses that every case is unique and it is important to consider all the facts.

Behavioral Control: A worker is an employee when the employer has the right to direct and control the worker. Note that the employer doesn't have to actually direct or control; merely have the right to do so. Examples given are Instructions and training. By receiving extensive instructions on how to do the work, the worker is likely deemed to be an employee. In the same way, if the employer provides training as to procedures and methods for doing work; this also suggests that the worker is an employee.

Financial Control: Having a significant investment in your work, you may be deemed an independent contractor. The brochure doesn't define significant investment, but I imagine it would mean, for example, lawn care person providing mowers and such to do lawn work. A worker may also be deemed and independent contractor if they are not reimbursed for business expenses. Finally, the recognition of a profit or loss signifies that you are in business for yourself and thus an independent contractor.

Relationship of the Parties: Receiving benefits (insurance, pension, vacation pay, etc.) is a good indicator that the worker is an employee.

Follow this link for an interesting article on the subject: CFO.com: Employers Hit for Misclassifying Workers

Visit My Website for Accounting & Bookkeeping Information

2007-05-24T22:54:00.000-04:00

My First Blog Posting!!!
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