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Wednesday, September 22, 2010
Basic Inventory Accounting Techniques
Many accounting principles are taught, but there is no reason specified for why you are supposed to account this way. It is the method you are taught and you go along with it. In my personal experience, inventory accounting techniques were one of these principles that was taught but never explained. Throughout the course of this paper, I will explain why inventory count and techniques are important, explain three inventory techniques, and describe how to use them.
When you own a business, knowing how much inventory you have is crucial. How else are you supposed to know if you have a surplus or shortage of goods. What is even more crucial is the way that you account for this inventory as it leaves your possession. Especially in today's market, prices fluctuate rapidly. The item that came into your store a month ago probably does not cost the same as the identical product that came in yesterday. With a warehouse full of the same item, how do you differentiate between the products cost? How do you calculate what your profit off an item is if you do not know the original cost? Which numbers do you report to the IRS if you have several different costs of goods sold? This is all where inventory counts come in. That is why there is a system and regulations to follow when regarding inventory.
The first technique is FIFO, short for "first in, first out". In this technique, the oldest good in inventory is the next one to be sold. When referring to a good being sold, I'm not talking about a specific good being sold, but instead the monetary value attached to that good. The second technique is, LIFO, short for "last in, first out". This is the opposite of FIFO, with the last item checked into inventory being the first item to be sold. The third technique is weighted average. This technique does not give each individual good a price, but the good as a whole a price. In weighted average, each good, on paper, cost the company the same.
Now I will describe how to use each technique, starting with FIFO. Consider that at the beginning of the month you have 10 items purchased for $2.00 each. Then you get another shipment of 10 items at $2.50 each. To keep things simple, imagine these 20 items are the only ones you have in inventory. At the end of the month, you have sold 12 items. Using the FIFO technique, all 10 items purchased for $2.00 are sold because those were the oldest items in inventory. Then the two extra goods sold are accounted from the inventory received next. This would make the cost of goods sold $25.00. Now you would have eight items in inventory costing $2.50 each, for a total inventory of $20.00.
Using the same example, I will show LIFO used. At the end of the month, you again sell 12 items. This time, however, the ten items purchased this month will be the first ones sold. The remaining two items will come from the beginning inventory. Now the cost of goods sold is $29.00. The remaining inventory costs $16.00 on the books. Using this technique, as long as your inventory never gets to zero, the first items you bought will always be accounted in inventory.
The final technique I will discuss is Weighted Average. Using this technique, each good is assigned the same value, the average cost of good. To get the weighted average, the simplest way is to multiply the unit cost by the amount of units purchased for that amount. Do this for all different unit costs in the inventory. This will give you the amount you paid for all inventory in stock. Then divide this number by the amount of units in inventory. This is the weighted average. Now at the end of the month when you are calculating cost of goods sold, each good sold is recorded at this price. Using the previous example, the weighted average of the inventory would be $2.25 ( (10 x $2.00 + 10 x $2.50) / 20). Each of the twelve items sold would be marked as costing the company $2.25, totaling $27.00. The remaining inventory is equal to $18.00.
As you can see, the three different techniques used have brought different totals for cost of goods sold and inventory remaining, but if all the inventory was sold, the outcome would be equal among the different techniques.
When you own a business, knowing how much inventory you have is crucial. How else are you supposed to know if you have a surplus or shortage of goods. What is even more crucial is the way that you account for this inventory as it leaves your possession. Especially in today's market, prices fluctuate rapidly. The item that came into your store a month ago probably does not cost the same as the identical product that came in yesterday. With a warehouse full of the same item, how do you differentiate between the products cost? How do you calculate what your profit off an item is if you do not know the original cost? Which numbers do you report to the IRS if you have several different costs of goods sold? This is all where inventory counts come in. That is why there is a system and regulations to follow when regarding inventory.
The first technique is FIFO, short for "first in, first out". In this technique, the oldest good in inventory is the next one to be sold. When referring to a good being sold, I'm not talking about a specific good being sold, but instead the monetary value attached to that good. The second technique is, LIFO, short for "last in, first out". This is the opposite of FIFO, with the last item checked into inventory being the first item to be sold. The third technique is weighted average. This technique does not give each individual good a price, but the good as a whole a price. In weighted average, each good, on paper, cost the company the same.
Now I will describe how to use each technique, starting with FIFO. Consider that at the beginning of the month you have 10 items purchased for $2.00 each. Then you get another shipment of 10 items at $2.50 each. To keep things simple, imagine these 20 items are the only ones you have in inventory. At the end of the month, you have sold 12 items. Using the FIFO technique, all 10 items purchased for $2.00 are sold because those were the oldest items in inventory. Then the two extra goods sold are accounted from the inventory received next. This would make the cost of goods sold $25.00. Now you would have eight items in inventory costing $2.50 each, for a total inventory of $20.00.
Using the same example, I will show LIFO used. At the end of the month, you again sell 12 items. This time, however, the ten items purchased this month will be the first ones sold. The remaining two items will come from the beginning inventory. Now the cost of goods sold is $29.00. The remaining inventory costs $16.00 on the books. Using this technique, as long as your inventory never gets to zero, the first items you bought will always be accounted in inventory.
The final technique I will discuss is Weighted Average. Using this technique, each good is assigned the same value, the average cost of good. To get the weighted average, the simplest way is to multiply the unit cost by the amount of units purchased for that amount. Do this for all different unit costs in the inventory. This will give you the amount you paid for all inventory in stock. Then divide this number by the amount of units in inventory. This is the weighted average. Now at the end of the month when you are calculating cost of goods sold, each good sold is recorded at this price. Using the previous example, the weighted average of the inventory would be $2.25 ( (10 x $2.00 + 10 x $2.50) / 20). Each of the twelve items sold would be marked as costing the company $2.25, totaling $27.00. The remaining inventory is equal to $18.00.
As you can see, the three different techniques used have brought different totals for cost of goods sold and inventory remaining, but if all the inventory was sold, the outcome would be equal among the different techniques.
My Experience Finding an Accountant
I started my own business in March of this year, it was something of an accident really, I was buying and selling on eBay for a while and when I looked at my paypal account I realised that I was making more doing that than I was at my job. So I quit my job. That was a great feeling.
I thought that I would need an accountant to help me at the initial stage, to get the business started and then I would be able to do the accounting, but it didn't really work out like that.
First of all, finding an Accountant in Newcastle upon Tyne is no easy feat. The ones in the city centre are so unbelievably expensive, and they make you feel so small and insignificant - I went into a few and each time was just as disheartening.
I just wanted an ordinary account in Newcastle upon Tyne to show me the ropes, where oh, where was I to find such a person? I asked a few friends and while they had accountants they advised against using them - they were overcharging or just plain unhelpful according to my friends. So I widened my search. Eventually I found an accountant that I really liked in Whitley Bay. He made sense to me and didn't look down his nose, compared to what I'd already seen, he was a blessing.
However it was not just a case of showing me the ropes and letting me get on with it. How these guys do this every day is beyond me! It is easier to let them handle the lot! They have been really fair with me and I think that if I'd done it on my own it would have cost me more in mistakes than I paid to them in fees, so it is well worth it.
Conclusion
Trying to find an accountant in a big city is surprisingly difficult as some of the prices are astronomical. For a small business like mine, I just needed a reliable, honest accountant that would show me what I needed to know, and help me out along the way. I found a lot of the accountants in the city centre were trying to sell me too many packages and were over-complicating my affairs. Stick to your guns and remember that you don't need 'the works' you just need trustworthy advice.
My name is Rob Hurren and I invite you to save money using our accounting services! Our services come in many forms - payroll, tax returns, bookkeeping, business plans, tax returns, Vat returns, Annual and Management Accountants.
I thought that I would need an accountant to help me at the initial stage, to get the business started and then I would be able to do the accounting, but it didn't really work out like that.
First of all, finding an Accountant in Newcastle upon Tyne is no easy feat. The ones in the city centre are so unbelievably expensive, and they make you feel so small and insignificant - I went into a few and each time was just as disheartening.
I just wanted an ordinary account in Newcastle upon Tyne to show me the ropes, where oh, where was I to find such a person? I asked a few friends and while they had accountants they advised against using them - they were overcharging or just plain unhelpful according to my friends. So I widened my search. Eventually I found an accountant that I really liked in Whitley Bay. He made sense to me and didn't look down his nose, compared to what I'd already seen, he was a blessing.
However it was not just a case of showing me the ropes and letting me get on with it. How these guys do this every day is beyond me! It is easier to let them handle the lot! They have been really fair with me and I think that if I'd done it on my own it would have cost me more in mistakes than I paid to them in fees, so it is well worth it.
Conclusion
Trying to find an accountant in a big city is surprisingly difficult as some of the prices are astronomical. For a small business like mine, I just needed a reliable, honest accountant that would show me what I needed to know, and help me out along the way. I found a lot of the accountants in the city centre were trying to sell me too many packages and were over-complicating my affairs. Stick to your guns and remember that you don't need 'the works' you just need trustworthy advice.
My name is Rob Hurren and I invite you to save money using our accounting services! Our services come in many forms - payroll, tax returns, bookkeeping, business plans, tax returns, Vat returns, Annual and Management Accountants.
Monday, September 20, 2010
Toluna and OnlyCashSurveys
It used to be that if you needed extra money for any reason - your child's graduation gift, a new roof for the house, whatever - you would simply ask your boss for some overtime, and more often than not, your request would be granted.
Those days feel far gone at this point. Most men and women are no longer worried about overtime, they are simply worried about keeping their jobs. Salary freezes, decreases in benefits, absolutely no overtime - what used to be a nightmare job now seems like a gift from the employment gods in today's market.
So what to do if you are looking for a little extra money? One way that people seem more and more drawn to these days is making money by taking online surveys. While earning money this way will never allow you to quit your job or even to buy a new car, it may take the squeeze off of month to month bills and expenses.
There are a couple things to remember when looking into online surveys. In order to avoid scam operations, don't sign up with a company that demands your information without offering you anything but promises in return. Legit survey companies like Toluna or OnlyCashSurveys.com will be upfront about how they operate.
Do they work with point systems like Toluna or in monetary rewards like OnlyCashSurveys.com? Still other companies will offer you prize rewards for completing the surveys. You have to know what you need and expect and then find a company that offers you the best circumstances.
But most important, and this cannot be stressed enough, you should never have to pay anyone to give you surveys. Market research companies provide access to these surveys for free so that you are more willing to take them - remember, getting your information is in their best interest, that's why they pay you. If someone is demanding a one time fee or a membership fee, walk away. That person is trying to scam you.
The best way to avoid the scam is by trying to go straight to the market research company themselves. Avoid Jen and Bill's personal website promising to explain to you how they made $50,000 a year taking surveys. Jen and Bill are lying. Go straight to the source and figure out how to make taking surveys for money work for you.
Those days feel far gone at this point. Most men and women are no longer worried about overtime, they are simply worried about keeping their jobs. Salary freezes, decreases in benefits, absolutely no overtime - what used to be a nightmare job now seems like a gift from the employment gods in today's market.
So what to do if you are looking for a little extra money? One way that people seem more and more drawn to these days is making money by taking online surveys. While earning money this way will never allow you to quit your job or even to buy a new car, it may take the squeeze off of month to month bills and expenses.
There are a couple things to remember when looking into online surveys. In order to avoid scam operations, don't sign up with a company that demands your information without offering you anything but promises in return. Legit survey companies like Toluna or OnlyCashSurveys.com will be upfront about how they operate.
Do they work with point systems like Toluna or in monetary rewards like OnlyCashSurveys.com? Still other companies will offer you prize rewards for completing the surveys. You have to know what you need and expect and then find a company that offers you the best circumstances.
But most important, and this cannot be stressed enough, you should never have to pay anyone to give you surveys. Market research companies provide access to these surveys for free so that you are more willing to take them - remember, getting your information is in their best interest, that's why they pay you. If someone is demanding a one time fee or a membership fee, walk away. That person is trying to scam you.
The best way to avoid the scam is by trying to go straight to the market research company themselves. Avoid Jen and Bill's personal website promising to explain to you how they made $50,000 a year taking surveys. Jen and Bill are lying. Go straight to the source and figure out how to make taking surveys for money work for you.
Who Is Alpha Market Research
As an Online business owner, there are three things you want more than anything else:
* More Traffic
* More Sales
* More Profits
Let's face it. This is getting harder to do every day!
That is, unless you've got Alpha Market Research, Inc. and the AMR Success Strategy working for you.
Look around. Thanks to the Internet and Social Media traditional means of advertising have changed dramatically. If you expect to win in today's Online business environment, your ability to leverage this relatively new medium and drive traffic to your Website is critical. This however, demands more and more of your valuable time and attention.
The Problem: How effective is your Website?
Sure, you get plenty of traffic. You may even generate a 'reasonable' amount of sales from your Website. But how do you know what your potential customers think when they land on your homepage? How do you know you aren't leaving money on the table?
The Solution: Alpha Market Research, Inc., The Website Testers, and the AMR Success Strategy.
How important is it for you to get a honest, unbiased opinion, from your potential new customers and affiliates?
At AMR, with the presence of our 400,000 Website Testers, we help you improve the effectiveness of your site by providing the necessary impartial feedback on just how impressive your Website is - while at the same time, you have "live" potential new customers intently viewing your Website for quite some time, not just clicking through once and disappearing.
After realizing the benefits from the critical value of the Website test and the underlying value of advertising for new customers, the 3rd critical step in the AMR Success Strategy is that you receive an "Army" of Affiliates.
Soon to be millions, this "Army" of affiliates will begin marketing your products for free! There is no need of additional capital for marketing - your cost comes only at the time the order is actually placed. Commissions go to AMR and AMR pays the affiliate for creating the order for you.
This is the beginning of making Internet marketing history. Let Alpha Market Research, Inc. and the AMR Success Strategy push your profits to the sky!
Mitchell is an Online entrepreneur and Internet marketing expert based in Colorado, USA. As a business coach and personal mentor, he assists serious Marketers in building lucrative and sustainable online businesses with multiple streams income.
* More Traffic
* More Sales
* More Profits
Let's face it. This is getting harder to do every day!
That is, unless you've got Alpha Market Research, Inc. and the AMR Success Strategy working for you.
Look around. Thanks to the Internet and Social Media traditional means of advertising have changed dramatically. If you expect to win in today's Online business environment, your ability to leverage this relatively new medium and drive traffic to your Website is critical. This however, demands more and more of your valuable time and attention.
The Problem: How effective is your Website?
Sure, you get plenty of traffic. You may even generate a 'reasonable' amount of sales from your Website. But how do you know what your potential customers think when they land on your homepage? How do you know you aren't leaving money on the table?
The Solution: Alpha Market Research, Inc., The Website Testers, and the AMR Success Strategy.
How important is it for you to get a honest, unbiased opinion, from your potential new customers and affiliates?
At AMR, with the presence of our 400,000 Website Testers, we help you improve the effectiveness of your site by providing the necessary impartial feedback on just how impressive your Website is - while at the same time, you have "live" potential new customers intently viewing your Website for quite some time, not just clicking through once and disappearing.
After realizing the benefits from the critical value of the Website test and the underlying value of advertising for new customers, the 3rd critical step in the AMR Success Strategy is that you receive an "Army" of Affiliates.
Soon to be millions, this "Army" of affiliates will begin marketing your products for free! There is no need of additional capital for marketing - your cost comes only at the time the order is actually placed. Commissions go to AMR and AMR pays the affiliate for creating the order for you.
This is the beginning of making Internet marketing history. Let Alpha Market Research, Inc. and the AMR Success Strategy push your profits to the sky!
Mitchell is an Online entrepreneur and Internet marketing expert based in Colorado, USA. As a business coach and personal mentor, he assists serious Marketers in building lucrative and sustainable online businesses with multiple streams income.
How to Identify Fraudulent Survey Sites and Get Your Commission
So you found a paid internet survey site and took their surveys. Then, you didn't get paid for the surveys you took. This is an all too common theme in the survey industry. Once, there were many such scam survey sites. Now, due to tougher regulations, survey companies are changing their tactics in order to keep making money.
When looking at a survey site, make sure that it has a schedule of when and how you will get paid. This information will let you know that the company is willing to stand by what they claim. They will pay you for your work.
Many company that sell products want to know how those products are received by the consumer. So, they hire good survey companies to find out how and why consumers buy the products they do. These survey companies then pay consumers for their much-needed opinions on certain products and services.
Good survey companies rely on their reputation to get consumers to fill out surveys. The do not spam. So if you get emails from survey companies, be sure to check them out first. In fact, check out any survey company you are considering. Go to forums on featuring such companies. You can find reviews on just about any survey site out there. Search engines will help you find what you need. Check out the Better Business Bureau. The BBB lists all companies that have had a complaint. They also list all contact information (if available) for said companies. If the company you are considering is listed, check out what the BBB and other consumers have said about it.
In order to do your research, you will need information on the company. So, make sure that the survey site has the company's contact information listed prominently. Also, make sure that the information is current. You can check this by going to the BBB or by using a search engine.
Even though most companies have changed tactics, there are still some fraudulent sites out there. It may take some time, but reading and researching will keep you from falling victim to scam survey sites. So, be sure to do your research and keep these things in mind when choosing the best paid survey site for you. By doing this, you can start your way to making money from home.
When looking at a survey site, make sure that it has a schedule of when and how you will get paid. This information will let you know that the company is willing to stand by what they claim. They will pay you for your work.
Many company that sell products want to know how those products are received by the consumer. So, they hire good survey companies to find out how and why consumers buy the products they do. These survey companies then pay consumers for their much-needed opinions on certain products and services.
Good survey companies rely on their reputation to get consumers to fill out surveys. The do not spam. So if you get emails from survey companies, be sure to check them out first. In fact, check out any survey company you are considering. Go to forums on featuring such companies. You can find reviews on just about any survey site out there. Search engines will help you find what you need. Check out the Better Business Bureau. The BBB lists all companies that have had a complaint. They also list all contact information (if available) for said companies. If the company you are considering is listed, check out what the BBB and other consumers have said about it.
In order to do your research, you will need information on the company. So, make sure that the survey site has the company's contact information listed prominently. Also, make sure that the information is current. You can check this by going to the BBB or by using a search engine.
Even though most companies have changed tactics, there are still some fraudulent sites out there. It may take some time, but reading and researching will keep you from falling victim to scam survey sites. So, be sure to do your research and keep these things in mind when choosing the best paid survey site for you. By doing this, you can start your way to making money from home.
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