Freelancers have to submit their VAT returns on time even if they are not able to pay off the whole amount in time. If they avoid paying this amount, then they can become a target for a tax audit. They have to remain consistent in paying these taxes in time because they can become a target for a tax authority if they become a persistent offender. VAT Registration is dependent on the actual turnover of the freelancer that they make per year, and it is an indirect tax that has to be paid by the employer who hires his services. They have to be filed in time so that people can reclaim refunds, and if freelancers have incurred expenses then they can also reclaim VAT by showing the proper documents. One thing a person has to realize that the size of your earnings have to be big enough to be worth reclaiming, else this tax can become more of a burden than a cure. Hence, all those people who intend to use this system for their benefit on a long term bases, have to understand the finer details and calculate the amount that they would end up saving if they use this system.

Many professionals have opted to become a Contractor Accountant to break themselves away from their ties of a regular day job. These are the kind of people who have found that they have the right skills that can help them make more amount of money compared to a full time day job. It is a natural human tendency to prefer to regular day job as it provides many benefits along with the regular pay. Working as a contractor takes away the benefits that most people get in a day job, and keeps them from thinking about the possibility of freedom they can achieve from being a freelancer. Yet, this is a game that only the people with the right kind of motivation can play. The need of a skilled accountant never goes out and it is up to the accountant if they can play their cards right to make up for the lost benefits. It is a sharp mind that can find the true path in the world of freelancing by solely depending on their personal skills. It also depending on the way they deal with a specific company by giving them quick service. If they can build a good relationship with them, then the flow of work can remain a constant.

Many professionals in the world have changed their course towards freelancing as an option to free themselves from the right knit schedule. These professionals have found out that they can make more money when they dispense their services in the form of contracts. This has been a boon for many small companies that cannot hire full time employees. The economy has not been very supporting of businesses and they have been looking for ways to cut down their over all expenses. Contractor Accountants have changed the way they have worked in their lives, and set themselves free from their mental bonds that kept them from taking up this option. Life is all about change, and saving money along with time is the best way to do it. The fast life that most people live in these times has made them unhappy, and it is ripping the bonds between families. In this modern age, people are not able to find the time to spend with their families, hence freelancing has given them a great choice to be more close to them. Children are the most important link towards the future, and they always need the right attention of their parents. These are just some of the reasons that this option is the best way to go for both companies that are struggling to survive, and professionals that want to make more money by spending less amount of time on the job.

IFRS is an acronym for International Financial Reporting Standards. It is a set of principles and regulations for reporting many different operations in the financial statements.

Very much like USA uses US GAAP, Canada uses its own Canadian GAAP, Great Britain applies UK GAAP etc., the whole world will use its global GAAP – IFRS.

Why do we need IFRS?

Today, everything on the globe comes closer than ever before. All things are harmonizing and people study how to behave globally.

And really, it is clear in each move you make – it is possible to purchase the same products in any location, you can find similar meals in “Jack in the box” anywhere in the world and it is also possible to fly wherever on earth within one day.

Accounting together with financial reporting is not any exception. That is where IFRS has its own position – it will act as a harmonized group of regulations with respect to financial reporting around the globe.

Do you know the primary benefit of IFRS?

Here, in the globalizing planet, the crucial idea is the ability to compare.

Picture yourself as the owner of multinational company who wants to examine economic outcomes of your organizations from various areas. But – every single area applies its own bookkeeping guidelines!

Let’s say that revenues are reported on accrual basis in some area, and on cash basis in a different location. How can you know which of your organizations reaches nicer revenues when these results are incomparable?

Or possibly, you are a tiny investor acting in the stock market. Investors usually review financial reports of their potential shares prior to buying. How can you read all the documents when everybody reports differently?

You get the understanding. IFRS gives us harmonized guidelines for bookkeeping and presenting the financial information, so that everybody understands financial reports from any place in the world. And not only this – if some corporation tries to get abroad funding or enter the stock exchange, it should prepare its financial reports in line with IFRS.

What countries present their financial statements according to IFRS?

Currently, more than 120 countries follow IFRS, some of them entirely, a few of them partially. In ideal case, IFRS should be implemented globally by 2015.

In fact, undoubtedly one of the key participants in the worldwide economy, the USA continues to use their own US GAAP. Under this circumstance, US GAAP and IFRS will converge and also gradually reduce dissimilarities. The IFRS convergence process should have been completed until 2012.

But, FASB (setter of US GAAP) and IASB (setter of IFRS) slowed up the convergence progress and latest due date is approximately 2015. Additionally, SEC (Securities and Exchange Commission) should have decided with regards to inclusion of IFRS for U.S. companies by the end of 2011, but the decision has been postponed by several months.

You can find helpful information, examples and free e-book about IFRS at http://www.ifrsbox.com – a site dedicated to online IFRS training: helping accountants, chief financial officers, finance students and anyone interested in understanding IFRS and its application in their daily job.

Handle paper once.

Buy yourself an expanding plastic folder, the concertina type, and keep it within arms reach. Label each of the tabs to cover all instances of paperwork. These include supplier quotes, supplier invoices, client quotes, client invoices, expenses, government documents and bank statements.

Open your mail weekly, print any emailed PDFs and file paperwork under the correct tab. Prevent paper accumulating on your desk and crowding your productivity. Handle every piece of paper once and you’ll make life easier when you do you books at the end of the month.

Report monthly profit and loss.

Don’t be talked into buying software. For a service-based business, MS Excel will suffice. Setup MS Excel using two sheets. One tab for expense items (out), and the other for income (in). From these two sheets you can quickly calculate monthly profit and loss. At the very least record income so you can chase accounts receivable (people who owe you).

Check you have been paid by ticking off income line items on your bank statement. Note any missing sums or discrepancies and chase them up diligently. The more granular the Excel spreadsheets, the more data you capture when you import later into a professional accounting application.

Money makes relationships.

Set a recurring day in your calendar to do the books each month. This is a sacred day when you put aside all other duties and ensure you maintain good relations with stakeholders by paying them on time. Brand your company a good pay master and you will receive triple back in reputation.

By being disciplined about the pay day, you condition suppliers to your billing cycle and reduce the number of nuisance inquiries on outstanding payments. If you are drafting contracts include a clause on the billing cycle.

Summon a finance advisor.

Create a fictitious finance advisor. They are going to be your exchequer when it comes to all matters of money. They are a great asset to the team, especially when the money you are spending is not yours. Each time you reach for the cheque book or the credit card, your finance advisor will appear and interrogate your decision to purchase.

Look after the pennies, and the pounds will take care of themselves. Give them their own email address and watch them come to life as they chase payments and scrutinise expenses large or small. Pretty soon you will develop a six sense for numbers and won’t need a report to tell you how well the company is performing.

Your new friend will help during negotiation. Ask them to budget for salary, suppliers and cash expenses. When lured into situations where you may be tempted to overspend, explain to the other party that ‘finance’ has set a budget. Refusing to spend beyond a limit gives you leverage when negotiating salaries and supplier quotations.

Read part 2

Purchasing bookkeeping software requires some research because there is several software out there that does the same thing. For example, there is Sage Peachtree, Intuit Quick Books, Sage Simply Accounting, Microsoft Money, and more. You can even use Microsoft Excel to create a bookkeeping system (you will however need to have good knowledge of accounting & Excel to do that). You will also need to learn to use the program which can either be done through a bookkeeper, reading the program manual, online, or simply learn on your own through trial and error. A budget of $100 – $700 can be sufficient for software depending on the complexity of the version you purchase.

Setting up the program is not a hard step; you only have to follow the steps provided when you insert the CD into the CD drive of your computer. The program will set itself up automatically into your desktop and you just have to find its icon. Once you do it will promote you to create a new file for your company (or simply click on file and then new) and follow the steps.

It’s important to keep all your business receipts, cheques, and statements in tact because you will need to enter those into the software to get an accurate picture of the business. Create a filing system that perhaps separate paper by where it’s from (vendor, customer, etc…). Not having your records in tact can be difficult because you will end up assuming numbers to enter in the bookkeeping software violating the first Accounting Principal, maintaining evident for each purchase or revenue entering the business. Assuming numbers will also end in inaccurate results for your business. However this would not occur to someone with some accounting knowledge.

While having accounting knowledge is not crucial, but it’s very beneficial for the business owner specially if there is no bookkeeper in the business. You do not have to be a star in accounting, but knowing the difference between assets, liabilities, revenues, equity, and expenses would be a good step in reading your financial statements. Many websites now offer free introductory accounting course to learn about different financial statements, and the meaning of those numbers that come up from different receipts and business interactions. Being able to analyze the outcome of the financial statements would give the owner a good idea about what each number means and what has to be done to improve revenue and decrease expenses. http://www.free-ed.net is a good website for those who want to get free course in accounting and different business aspects.

Having backups for your bookkeeping computer file is important in case of hardware failure or inability to access the computer. If the system of your business goes down, you won’t have to worry about your records and re-creating them over again. Simply save another copy of the file(s) in a floppy disk, CD, USB stick, or online. Make sure you have 2-4 different copies at least stored in different Medias and kept safely to avoid any scratches or damages to them.

After you create your bookkeeping file and everything is ok, make sure you regularly enter any transactions occurred to the business in the software. If you forget, it will pile up and before you know it you’re electronically a year behind in your bookkeeping system and trust me it’s not fun catching up. Enter all the transactions that occur that involved money. Print monthly statements to review the well-being of your business and see what you will need to do to increase your revenues and continue operating effectively.

In this article, I want to discuss the actual contents of the exam, but before that here is a summary of the CPA exam requirements you must meet to sit for it:

• 150 credit hours of accredited education
• A certain minimum number of credit hours in accounting courses
• A certain minimum number of credit hours in other business/related courses
• Bachelor’s degree

The Prometric CPA Exam Format

The Prometric CPA Exam is divided in four parts: Financial Accounting & Reporting (FAR), Audit & Attestation, Regulation and Business Environment & Concepts.

It would take about 2 days to complete the exam if you were to take all parts together, with each part lasting half a day. You need a score of at least 75 out of 100 to pass each part.

Most of the questions are in multiple choice (MC) format, with the rest interactive simulations (what we didn’t have in the old pen and paper exam) and essays. I don’t mean interactive where you can communicate and collaborate with others. The exam is “closed book”, and you will be signing an affirmation stating that you will not disclose the contents of the exam to anyone.

The simulation, or interactive part of the exam involves researching professional material from sources like the FASB and AICPA. When you become eligible to sit for the exam, you can apply for a free subscription to these materials so you can practice conducting research using them.

Essays are graded by a human based on the content of the essay, as well as the writing capability of the candidate. Graders are typically looking for candidates who can articulate answers in a clear and concise manner applying appropriate use of English. Needless to say that the answers must adequately address the question asked.

Here is a rough estimate of the relative question format in each part:

• FAR- 60% MC, 40% Interactive
• Audit & Attestation – 60% MC, 40 Interactive
• Regulation – 60% MC, 40 Interactive
• Business Environment & Concepts – 85% MC, 15% Essays

Here is a rough breakdown of the sub topics covered within each of the 4 major topics.

Financial Accounting & Reporting

• 8-12% Government
• 8-12% NFP (Not for Profits)
• 17-23% Concepts / Theory
• 27-33% Accounting & Disclosures
• 27-33% Transactions

Audit & Attestation

• 12-16% Audit Engagement Preparation & Planning
• 12-16% Accounting & Reviews
• 16-20% Internal Control Environment
• 16-20% Auditor’s Professional Responsibilities
• 16-20% Audit Procedures & Gathering Evidence
• 16-20% Audit Reporting

Regulation

• 11-15% Federal Income Tax
• 12-16% Gain/Loss Tax
• 13-19% Personal Income Tax
• 15-19% CPA Ethics
• 17-21% Business Law
• 18-24% Tax

Business Environment & Concepts

• 10-14% Strategy
• 12-16% Operations
• 15-19% Information Technology
• 16-20% Governance
• 16-20% Economics
• 19-23% Finance

Waiving the CPA Exam Requirements

One special circumstance in which the CPA exam requirements can be waived is in the instance an already licensed CPA practices as a traveling consultant or permanently moves to another State and continues to practice as an accountant.

Because the CPA exam’s governing body, the American Institute of Certified Public Accountants (AICPA) is a national entity, there is a concept of “reciprocity among States” that it has put in place that allows a State to grant you a CPA license based on your existing license from another State.

If you passed the CPA exam in State A, State B will likely recognize that. However, State B may have its own set of CPA license requirements. It is best to check with your State Board of Accountancy for specifics around its own CPA requirements.

Concluding Thoughts on the CPA Exam Requirements

Now that you know what the CPA exam requirements are and what the exam is like, I recommend getting yourself a quality CPA course to prepare you to pass the exam with flying colors. The CPA exam is one of the most challenging exams with the lowest passing rate. A good CPA course can help you prepare the best you can be and on your way to earning a healthy CPA salary.

Courses come in self-study form, multi-media interactive as well as in class taught by a live person. Pick whichever method you tend to learn from the best. The key is to prepare well and well in advance so that you are calm and confident when going into the exam day.

I hope this brief summary of the CPA exam helped. Please let me know if you have any questions about the CPA exam requirements. I would be happy to help.

Each State has its own requirement dictating the amount and nature of ethics related CPE a CPA must take each year. Ethics is one of the CPA exam requirements and such a hot topic that full blown regulations have been formed to govern corporate behavior. The two most notable compliance regulations of recent are the Sarbanes Oxley (SOX) and the Dodd-Frank Acts.

Though the CPA ethics exam does not guarantee inappropriate behavior, it is meant to provide the foundation that would likely curb inappropriate behavior. The CPA ethics exam is part of the CPA license requirements, required by most States after a CPA candidate has passed the CPA exam. Although many choose to take the ethics exam prior to the CPA exam (most States allow you to do that), I recommend waiting until after so that you can focus all your energy on passing the CPA exam, which is the tougher one.

Who Governs and Administers the Ethics Exam?

The CPA ethics exam is usually administered by the American Institute of Certified Public Accountants (AICPA), except in a handful of States where another party administers the exam. There are some States that do not require a candidate to take the CPA ethics exam. However, candidates are required to take a short ethics course within a certain time frame after passing the CPA exam. (Note: The ethics course is not like one of the many and heavily advertised CPA courses online that are geared toward the Prometric CPA exam)

According to my son who recently took it, the CPA ethics exam is not too difficult given some practice of multiple choice questions. The AICPA’s ethics course is a self study course that you can take online at your convenience. It mostly goes through the AICPA Code of Conduct, which you can read about on the AICPA’s website. The material focuses heavily on the concept of “Independece”, or the objectivity necessary to be a “good” CPA.

You take the ethics exam electronically and get your scores instantly upon submission. Each exam packet comes with its own unique serial number that you have to input online. When you first go online to take the exam, you may see a large overwhelming answer sheet. Don’t worry, you won’t have to complete all of it. The exam itself is only 40 questions.

If you are a better test taker using pen and paper, you will have the option to do so and mail in your answer sheet directly to the State Board of Accountancy. However, the snail mail method can take weeks before you find out your score. If you decide to go this route, remember to make a copy of your test sheet before sending it in. I am personally very paranoid about the mail system.

AICPA Ethics Exam Tips and Must Know Information

Keep in mind that you have a full two years to study and take the exam from the time of your purchase. In the unfortunate event that you miss the deadline, you can ask for a 30 day extension by contacting AICPA directly. You can reach them at 888-777-7077.

The exam is fairly straight forward, but in the event you need assistance, there is a really cool free resource called the “Ask the Ethics Expert”. This is a website where you can ask up to three questions about the AICPA CPA Ethics exam and get answers for free.

How Much Does the CPA Ethics Exam Cost?

Not nearly as much as the CPA exam! You can purchase the CPA Ethics exam online from the AICPA website for under $150.

If you are an AICPA member, you pay a discounted price closer to $100. If you wish to shop around for more cost effective options, you can contact your State board and ask them for recommendations. They will usually have a list to share with you. I cannot guarantee that other programs will be more cost effective.

If you end up getting it from the AICPA, the CPA course you want to get is the one titled: “Professional Ethics: AICPA’s Comprehensive Course”.

Here is what you get with the AICPA’s version of the CPA ethics exam:

• 11 Hours of CD Courses
• 2 Year Time Frame to take the exam from the time you purchase the course
• 40 multiple choice question test (you need a 90% to pass)
• Electronic submission capability
• Studying for the CPA Ethics Exam

I and my son both admit that studying this material for 11 hours can be quite brutal. The good news is that you don’t have to. There is some material you can do away without, but you have to use your best judgment to ensure you are not doing without the critical information you need to know to pass the exam.

As I was looking at some of the more recent questions on the exam, the single best tip I can give you is not to settle on the first best answer that sounds correct. The exam is multiple-choice and is geared to trick you. Be careful and read every option in detail before arriving at your final answer.

In the unfortunate event that you fail the exam, you can retake it up to 2 more times for a total of 3 times if you prefer the online method. However, you can retake it again after your third attempt but this time you will have to mail in your answer sheet.

So there you have it. A complete synopsis of the CPA Ethics exam. See, back in the day, I had some heavy books to study to prepare for the exam. Now days, you have some pretty slick, interactive online resources that are easier to digest and work with. I recommend you check it out.

My suggestion to you is to take the ethics exam as soon as you finish the CPA exam and get it out of the way. I wish you all the best in passing the CPA ethics exam. Go get that big CPA salary. Please let me know if I can be of any help to you.

We all know that there is a legal requirement to maintain accurate accounting records covering your business transactions. The tax man, the VAT man and a miscellany of compliance regulations means that accurate bookkeeping records are essential.

Notwithstanding the above, keeping correct information is vital if you want to run your business successfully and effectively.

But, how to do it, and which method to use, is a problem for many new and growing small businesses.

Many years ago, there was only one real choice, your bookkeeping records were kept manually with Cash Books and Ledgers to help you organise records. Even today many small businesses still use handwritten records even though they can take up a significant amount of your business time and it is very easy to make errors.

Accounting Templates

One of today’s alternative to handwritten ledgers are, Accounting or Bookkeeping Spreadsheets.

You can easily set up your bookkeeping spreadsheet to record and analyse your business transactions, you arrange your data in columns and rows, and, using the spreadsheet functionality, all of your totals will simultaneously calculated.

However, this method is no better than handwritten records, it is still prone to errors which may go unnoticed, and if no reconciliation procedures are carried out, then your data will be inaccurate and misleading.

Accounting Software

So, the obvious choice must be to use accounting software.

Here, you only need to record your transactions once and all the corresponding entries are performed automatically. This enables you to maintain a check on your customers and suppliers, VAT is dealt with automatically and most systems will prepare a number of useful accounting reports.

However, in my experience, the use of proprietary accounting software can have some drawbacks for new and smaller businesses.

Firstly there is the issue of cost. Accounting software is relatively expensive and an annual maintenance contract is often required, which can add significantly to the cost.

Secondly, Small Business Accounting Software is usually designed with a ‘one size fits all’ philosophy, and in an attempt to match the software’s functionality with your requirements, the developers compensate by having complicated set up routines. Great, if you understand what you are doing, but potentially disastrous if you get it wrong. So, it is essential that you obtain professional help to minimise these problems. This again increases your costs.

Thirdly, in my experience many business people find that even the most basic accounting system is too complicated, and, if they do not have good bookkeeping skills they will fail to use the system correctly.

Is there a solution?

There appears to be little choice for many small businesses (those with less than 100 transactions a month). The requirement is for an inexpensive, easy to use, easy to set up and easy to understand bookkeeping template system.

In an earlier article ‘Accounting Software – are accounting spreadsheets the answer for small businesses’I examined the basic requirements for small business accounting. I concluded that provided good control mechanisms were in place, then a well-designed accounting spreadsheet could be the answer for many small businesses.

- Equity

- Debt

These both areas are distinguished below separately

Equity: Generally, the term equity related to the ordinary shares only. Equity finance is the investment in an organization by the organization’s shareholders, represented by the issued ordinary share capital plus reserves. There are also other parts of share capital like “preference shares” but those are not treated as equity because their characteristics are related to debt finance. Equity finance can be raised through three main sources. The first source is internally generated funds also named as retained earnings. These are the earnings retained in the business (un-distributable profits to ordinary shareholders).The main advantage of raising finance through retained earnings is that, it is cheap and quick to raise and requiring no transaction cost. The second main source of equity finance is right issues. Right issues are simply an offer to existing shareholders to subscribe for new shares at a discount to the current the current market price. The main advantages to right issues are that it rarely fails and it is cheaper than a public share issue. The third main source of raising equity finance is to issue new shares to public. Large amount of finance can be generated through new shares issue but on the other side, it is much costly than other sources of equity because it require heavy transaction costs and some other professional fees.

Debt: Debt finance, usually in the forms of debentures, bonds or other loans used as a source of finance as an alternative to equity. Debt can be in many forms like Bank loans, Loan notes and Redeemable or Irredeemable debt. There are many advantages of debt finance. Like, Form the point of view of investor, debt is low risky. And from the point of view of organization, debt is cheap, does not dilute control and has predictable cash flows. On the other side debt finance has also some disadvantages like, form the point of view of investor debt has no voting rights and form the point of view of the organization, debt is inflexible and increases the risk at high levels of gearing.

Main differences between Equity finance and Debt finance:

The main difference between equity and debt is that, the debt is treated as the cheap source of finance because it is less risky than Equity. The repayment of debt takes priority over all other equity investments. On the other side of coin Equity finance is considered are a risky and costly source of finance because for some large Investments, Internally generated funds are not sufficient. And issuing new shares requires extra costs (mentioned above). In short there is a strong need for any organization to maintain a balance between these two main sources of finance to perform and support their business in efficient manner.