I gotta say something about this

[Root beer]

I was working on my accounting homework, and this just cracked me up. I hope you all find the humor in this too.

We're working on bond payment and calculating maturity values.

My professor was telling us when you calculate total maturity value by days, divide the days the interest accrued by 360 days. And immediately in class someone pointed out "isn't there 365 days in a year?!?!" My professor was quick to reply "There is, but bankers had bright idea that it was easier to calculate in their head by 360 rather than 365."

At the time I just sat there starring  into space, and as I'm doing my assignment right now, I just started laughing. They change the days in year from 365 to 360, so they can calculate in their head easier. It makes me wonder, despite the fact they change the days in the year, how many of them miscalculated relating to today's economic condition? ;D Makes you wonder if any of them got it wrong and they told the borrower wrong number and borrower either paid less or more.

I mean, yeah, we make mistakes, but I find it funny if you change the rules and still got the calculation wrong. That humorous part. ;D

[Dan:]

It would be worse if they calculated using only the number of days they work...

[Maxximus Redneckus]

It would be worse if they calculated using only the number of days they work...

you aint lying  ;D man if the GOV and state employees around here got paid for actual work they did ,There would be a EPODEMIC of homeless ppl driving beemers and benzes

[Long Mike]

Humor can be found in the oddest subjects, by the oddest people.   ;D

[Lund Explorer]

That's just about right Root Beer.  To them, there's always 30 days in each month.......

If you really want to mess with someone someday, wait until you have a tax client who can't afford to pay their taxes by the due date.  The IRS has a Form 9465 Installment Agreement Request.  The form is pretty easy in that the taxpayer chooses how much they want to pay, and what day the payment is due.

Except when you read line #12.....

"Enter the day you want to make your payment each month.  Do not enter a day later than the 28th."

Even the IRS computers can't figure out when February 30th is! ;D

[Lund Explorer]

Humor can be found in the oddest subjects, by the oddest people. ;D

Hey!  I was still typing mine before I knew you were talking about me!

[Root beer]

I got to admit though, accounting lot harder than I thought it be, only because the definitions are different. Net income, revenue, and expense all means something different in full accrual accounting than what we grew up thinking it was.

Half the people in my class still gets problems wrong relating to the revenue matching principal.  : My professor does pretty darn good job, it just rest of class don't get it.  Like Sam or Catt said "Some of us are born with it, some of us never ever gets it." ;D

Lund, let me ask you this, my professor told us there was a big debate somewhere out there about what comes first, Revenue or Expense? He believes revenue. He said it a lot like asking what came first chicken or the egg?  ;D

[SirSnookalot]

Expenses come first, you have costs involved to set up a business even before the first sale is made, sales and revenue really the same thing.

[.ghoti.]

Hey, I'm all for easier calculations.

How about we get together, and float a referendum to change the value of pi to 3? ;D ;D ;D

[Root beer]

Expenses come first, you have costs involved to set up a business even before the first sale is made, sales and revenue really the same thing.

Remember we are talking full accrual accounting here. The accounting system in which every publicly owned companies used. 

Here how my professor who sees it along with the FASB. (he a CPA, been a CPA for 26 years)

You do not have an expense until you have a revenue. If you buy merchandise, but you haven't sold it, you have no expense, because the merchandise is just pure asset. In full accrual accounting nothing is consider an expense until it helped you earn revenue. If it didn't help you earn revenue it not an expense. But many assets do become expense eventually as they are used up to earn revenue.

When buildings are used up to help earn revenue, they are expense through depreciation. If it didn't help earn revenue it just sits on the balance sheet under asset at historical cost. While it true they bought the asset, but since they haven't used it up to help them earn revenue they have no expense. Pretty complex accounting system, eh?

I have pretty good idea why FASB or government came up with this guideline, but at the risk of sounding like idiot, I'm be quiet.  ;D

I did pretty darn good on first test that covers this stuff. Something to add to resume for my internship.

[SirSnookalot]

You do not have an expense until you have a revenue. If you buy merchandise, but you haven't sold it, you have no expense, because the merchandise is just pure asset. 

Money paid on a lease (upfront security deposit) for space is not an asset, it's a cost and occurs before the first of the revenue starts.  Insurance would be another example of a non asset cost upfront expense.

[Lund Explorer]

I think regardless of what form of accounting you are using, the first is "Investment".

Investment should initially come from the shareholders, with additional amounts that could come from financing.  Prior to a business starting actual operations, all expenses should be capitalized to be amortized upon start up.  Furthermore, expenditures for inventories, or raw materials (in the event that the business is a manufacturer) are also capitalized.

Theoretically, revenue should come prior to expense, but that may not actually be the case.  Internal Revenue Code (as well as GAAS/GAAP) determines that expenses begin to be incurred upon the start of the actual operation of the business.  Therefore, you can have the possibility that a business may be operating for any certain amount of time before actually generating any sales/revenue.  So, from the way I see it, either could come first.

I'm not saying that I'm disagreeing with your prof., just putting a slightly different spin on the question. 

[Lund Explorer]

Hey, I'm all for easier calculations.

How about we get together, and float a referendum to change the value of pi to 3? ;D ;D ;D

** No warning, simply deleted **

-Kent  a.k.a. roadwarrior

Global Moderator

[Root beer]

Hey, I'm all for easier calculations.

How about we get together, and float a referendum to change the value of pi to 3? ;D ;D ;D

From this day on forward, our children will do calculation using the pi as number 3, instead of 3.14. For this reason, our children will have easier calculation in their head.

[J Francho]

Poor [ch960]!  All anyone remembers is 3.14, when its as simple as 22/7 

[Root beer]

Money paid on a lease (upfront security deposit) for space is not an asset, it's a cost and occurs before the first of the revenue starts. Insurance would be another example of a non asset cost upfront expense.

That would be rent expense and if you put it up front before you started operating the business, it can be consider "pre-paid expense", if you leased an equipment to own, it a capital lease and GAAP requires it to be treated as an asset since you will purchase it later.

Insurance can be an asset if it as not yet been used over the entire accounting period to help earn revenue. Until it completely used up, it an asset. Here an example of what I'm saying, I'm give you balance sheet to Wal-Mart, notice "pre-paid expense" under asset.

http://finapps.forbes.com/finapps/jsp/finance/compinfo/FinancialIndustrial.jsp?tkr=WMT&period=qtr

They bought insurance or something in advance, but they do not expense it until it is used up to earn revenue. Until then, it an asset.

What you are describing for most part is called "Cash Basis Accounting", but you never see corporations doing that. They will not have an expense until they have a revenue, from what I've been taught. When you ran your business and you did it as you describe in your post, that just fine and dandy, but major corporations cannot do it for most part. Got have revenue before expense. I'm thinking it related to stock prices and tax reasons.

Probably hardest thing about working towards my CPA license is learning all kinds of accounting procedures and tax laws.

[tyrius.]

Got have revenue before expense.

Why are we having an accounting discussion here?  Seriously, it's lame.

Oh and the above is wrong.  If it were true then no company would ever experience a loss.

[Root beer]

Got have revenue before expense.

Why are we having an accounting discussion here? Seriously, it's lame.

Oh and the above is wrong. If it were true then no company would ever experience a loss.

I guess I should start suing the people that wrote my textbook, my professor, the AICPA who gave my professor his creditability as a CPA, and then retired with all the damage money since everything I've been taught will be useless.

Revenue-Expense=net loss or net income. All I said it is believed that revenue will occur before expense. And when that revenue does occur, lets hope that the number for revenue is higher than expense. 

If the company never have revenue, then well, they create no asset, thus, they become obsolete. After all, the whole point of a business is to create asset and make net asset go up. (cash is an asset)

I just started this post to show how funny it was, that bankers change the days to 360 to make it easier to calculate. And then pointed how, how I thought accounting was harder than I first perceive it to be.

I like how, Lund, said when business first gets together it "investment" from the paid in capital. Then once operation starts going that when revenue and expense are created.

[J Francho]

Accounting semantics are about as much fun as watching paint dry.....part of the reason I try not to talk about my job here, LOL.

[Root beer]

Accounting semantics are about as much fun as watching paint dry.....part of the reason I try not to talk about my job here, LOL.

Well, I can't go fishing due to fact it getting cold and lack of gas money. ;D Actually weather been perfect lately, but I lack gas money and dad will not loan me gas money, only money for school. And my dad hasn't taking me fishing, because he spent all of his money on building him a "mancave" downstairs. He put new walls up, new furniture, new flooring, flat screen tv, etc. I helped him with it and still didn't get gas money go fishing. >

[SirSnookalot]

but I lack gas money and dad will not loan me gas money, only money for school

Simple remedy........get a job  !

I worked at the A&P stocking shelves at midnight while attending the Univ of Mich.

[Root beer]

but I lack gas money and dad will not loan me gas money, only money for school

Simple remedy........get a job !

I worked at the A&P stocking shelves at midnight while attending the Univ of Mich.

Had one, quit it. It was too hard for me juggle between the two. I got screwed in a biology class and a English class where we had do tons of researched paper during my 1st semester of college with a part-time job. (At least I thought it was part-time I worked 35 hours or more a week.) Some people can do it, but I couldn't, kudo to those people. I had to be focus on one thing to really do well. My GPA has gone up dramatically since I've quit. I even did better in my English II class than I did in English I. ;D

Tyrius, there is a matching principal at work here. You can buy advertising, but you cannot expense it until it is used to help earn revenue. If you bought it for more than one accounting period, you can only expense it during the accounting period in which it was used to help earn revenue.

But as far as the sentence you quoted me, if you were a merchandising company that sold fishing gears, you cannot expense the goods you sold until you sold it. That was point I was getting at. But some things are deprecated and amortized as an expense when they are used to help earn revenue.

P.S. I'm on scholarship, I got 2nd chance after I quit my job. 3/4 are paid by scholarship and my dad helps with 1/4 or student loan does. My student loan will be less than 8 grands when I graduate. I guess there plus side to everything.

[Lund Explorer]

but I lack gas money and dad will not loan me gas money, only money for school

Simple remedy........get a job !

I worked at the A&P stocking shelves at midnight while attending the Univ of Mich.

Hmmm, I worked as an "MP" watching other people stock missile silos while attending the University of North Dakota.

[vatech]

Here's an accounting joke for you nerds, see if you get it.

Before his death, Heath Ledger had a son. His name was General.

[tyrius.]

Tyrius, there is a matching principal at work here. You can buy advertising, but you cannot expense it until it is used to help earn revenue. If you bought it for more than one accounting period, you can only expense it during the accounting period in which it was used to help earn revenue.

You're still wrong.  You're second sentence is incorrect.  I'm not really sure why you're trying to "teach" people who do this for a living when you're only in your first accounting class.

If you purchase advertising services you expense them in the period that the services were performed, even if the business has ZERO revenue you still book the expense.