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Mueller Pye & Associates CPA
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Mueller Pye & Associates CPA's posts

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Tax elections...what are they and why are they important?

New businesses need to be cognizant of the various tax elections available for reporting income, valuing inventory, adopting a fiscal year, depreciating equipment and entity classification.

We have help several of our clients choose wisely and we can help you!

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Depreciation: the allocation of cost of assets to periods in which assets are used.

Confused?

Call us! We will make sure you understand your options & maximize the tax savings from your depreciation write-offs, which is critical to your cash flow.
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Entity Selection - there is no single right answer, though rules of thumb abound!

Call us! We can help you reach that ultimate decision with an analysis of key factors, including the ownership structure of your enterprise, income tax rules, liability protection & long-term objectives.
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What does overstated mean?

When an accountant states that a reported amount is overstated, it means two things:
1. The reported amount is incorrect, and
2. The reported amount is more than the true or correct amount.
For example, a company reports that its prepaid insurance is $8,000. However, the true or correct amount of prepaid insurance is only $7,000. The accountant will say that the reported amount for prepaid insurance is overstated by $1,000.
Because of double-entry accounting or bookkeeping, another general ledger account will also have a reporting error. In our example, if Prepaid Insurance is overstated (too much being reported) it is likely that Insurance Expense will be understated (too little is being reported).

What is the difference between gross profit and net profit?

Gross profit is sales revenues minus the cost of goods sold.
The term net profit might have a variety of definitions. I assume that net profit means all revenues minus all expenses including the cost of goods sold, the selling, general, and administrative (SG&A) expenses, and the nonoperating expenses. At a corporation it may also mean after income tax expense.

Happy 4th of July to all our loyal clients!

How can a company have a profit but not have cash?

A company can have a profit but not have cash because profit is computed using revenues and expenses, which are different from the company’s cash receipts and cash disbursements. In other words, there is a difference between revenues and receipts. There is also a difference between expenses and expenditures.
To illustrate, let’s assume that a new company uses the accrual method of accounting. It provides $10,000 of services to its clients in its first month and the clients are allowed to pay in 30 days. The company will have $10,000 of revenues in its first month, but the cash will not be received until the second month. If the company’s expenses are $7,000 in the first month, the company will report a profit of $3,000 but will not have received any cash from its clients.

What does it mean to amortize a loan?

To amortize a loan usually means establishing a series of equal monthly payments that will provide the lender with 1) interest based on each month’s unpaid principal balance, and 2) principal repayments that will cause the unpaid principal balance to be zero at the end of the loan. While the amount of each monthly payment is identical, the interest component of each payment will be decreasing and the principal component of each payment will be increasing during the life of the loan.

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Hire The smartCPA™ to help with business

We can “do it all” from business strategies to billing accounts. Or, you can do it yourself, but not all by yourself. Mueller & Associates, CPA, The smartCPA™; is your resource for training, support and advice on all your business needs.

Don’t just take our word for it; read what our clients say at www.TheSmartCPA.com

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smartCPA™ helps with smart decisions

Mueller & Associates, CPA, the smartCPA™ will help you understand how to use your own financial reporting tools and software so you can make smartDecisions!

Don’t just take our word for it; read what our clients say at www.TheSmartCPA.com
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