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A company asks whether contracts that have been signed but not yet recognized as revenue (unbilled revenue) should be included in DSO calculation, and the issue of inaccurate monthly DSO caused by concentrated month-end invoicing. Based on industry practices, this article analyzes best practices for DSO calculation, points out that unbilled revenue should generally not be included in DSO, and recommends using quarterly average or rolling average methods to smooth month-end invoicing fluctuations.
A customer signed a contract in 2016 and paid in full, with half of the revenue recognized and the other half remaining on the books for an extended period due to project cancellation. This article explores how to compliantly clear such unearned revenue balances.
Regarding the accounting treatment of bank standby letters of credit in new leases, this article confirms that lessees generally do not need to recognize balance sheet items, related fees should be amortized over the benefit period, and disclosure is required in the notes to the financial statements. The article also discusses possible exceptions and sources of guidance.
The company has sold some assets, but the actual cash will not be received until after the year-end closing. This article discusses how to handle this transaction in the 2018 accounts, particularly whether an accrual can be made when the gain on the sale is significant and documentation is sufficient.
A nonprofit foundation constructed a campus for a university and, through a capital lease agreement, stipulated that the buildings would be transferred at one-third of the cost price after the lease term. The foundation correctly accounted for the capital lease but recorded the asset disposal difference as a donation rather than a sales loss. This article explores whether this treatment complies with generally accepted accounting principles and analyzes the distinction between donations and sales losses.
When a company's equity becomes negative due to dividend distributions or acquisitions of minority interests, standard financial calculation formulas may fail. This article analyzes handling principles under such extreme cases, emphasizing the need to make judgments based on cash flows, valuation purposes, and industry practices.
One company incurred startup expenses for another company, and the shareholder wants to convert this expense into a loan to the shareholder. This article analyzes how to record this transaction in QuickBooks and notes that a professional accountant should be consulted.
The IRS requires S-Corp shareholders to receive "reasonable" compensation but does not provide specific standards. This article analyzes the audit risks that may arise from excessively low compensation and explores how to set the optimal compensation level.
Under ASC 840, for a 10-year lease where the peak of the deferred rent liability occurs after 4 years, meaning the liability continues to increase within the next 12 months, how should the current and noncurrent portions be classified? A common practice is to classify the entire amount as noncurrent, but clear guidance is lacking. This article outlines relevant considerations and accounting literature for reference.
When LLC members convert previously contributed funds in the form of debt into member equity, they may face tax issues related to cancellation of debt income (COD). Based on actual cases, this article analyzes how to support the argument that such conversion does not generate COD through valuation reports (income approach and market approach) and tax law precedents, and provides key points for drafting a white paper.