Hybrid Method Accounting
- A combination of the cash-basis and accrual methods of accounting
Adventures in Asset Accounting -
Tangible Assets -
is generally a physical asset, such as inventory, a vehicle, or a building
Intangible Assets - I not physical. Ex. A copyright, patent, or brand recognition.
o
Do not appear on the balance sheet but do add value to the business. All else being
equal, a buyer would pay more for the company that holds a patent for its technology
than the company that does not
Accumulated Depreciation
- a long-term asset like a vehicle can lose thousands of dollars in value each
year. We keep a running total of how much value it has lost in an account called
accumulated
depreciation
Contra-asset account- increase as a credit and decrease the balance with a debit. In other words, it has a
natural credit balance
Accounts Payable & Receivable
are for a service from a vendor
Ex. Month to month
Notes Payable & Receivable
are a written agreement
Ex. Auto Loan
Accounts uncollectible
- are receivables, loans or other debts that have virtualy no chance of being paid
Customer buys on credit, amount added to AR
Customer fails to pay, money move to "Aged" account
Customer still doesn't pay, money moves to "Doubtful" account
Customer is not expected to pay, money moves to account uncollectible
Bad Debt - Money not paid - two methods to write off:
1.
Direct write-off method
a.
Simple
b.
Takes care of uncollectible accounts in a single journey entries
c.
Easier with business owners with no accounting background
i.
Cons
Do not follow the matching principles
Could make a business seem more profitable than it actually is
2.
Allowance method:
a.
Company's analyz invoices and estimate the amount of bad debit expense
b.
Adheres to the matching princible
c.
More accurate books
i.
Cons
More complex
