One challenging aspect of small business accounting in Stamford, CT is tallying and reporting fixed assets. Unlike cash money, the value of fixed assets can change based on market value, and the rules by which you must account for fixed assets can be a bit more complicated than those regulating cash income. Luckily, business owners can take advantage of a small business accounting service in Stamford, CT that can help navigate the sometimes murky waters of fixed assets.
A fixed asset is defined as a physical item that has financial worth, such as land, a building, a car, equipment, software, and even office decor. Generally accepted accounting practices, or GAAP, govern small business accounting in Stamford, CT and help them determine the cash value and depreciation of fixed assets, as well as how they are taxed. Each fixed asset is tracked in a separate ledger, and they all appear together on a balance sheet and in the financial statement for the company. The value in the financial statement is determined based on the price of the fixed asset and its depreciation. The cost can include not only the money paid to purchase the item, but further costs such as delivery and installation. One important aspect of running a business is determining a set dollar amount at which a company's property ceases to be an asset and becomes an expense. This is often done by determining its depreciation. The dollar amount is stated in the company's accounting manual and is reflective of a national accounting standard.
There are multiple ways by which small business accounting in Stamford, CT can calculate depreciation under the regulations of GAAP. One way is straight line depreciation in which the initial price is divided by the lifespan of the object in question. It is recalculated each year, entered into the ledger, and the balance is deducted from the initial price of the item. At the end of the item's lifespan, it has a value of zero. Another method of determining the depreciation rate is to use declining balance depreciation, in which accountants multiply the initial price of the item by a standard depreciation rate, usually a value twice that of the straight line depreciation rate. Thus, this method is often referred to as the double declining depreciation method.
As you can see, making these calculations and keeping them balanced in a company's ledgers and database can be quite a complicated procedure. A small business accounting service in Stamford, CT can make the process much simpler. Plus, accountants have expert knowledge and plenty of experience with depreciation rates and GAAP. Utilizing their services can keep your company running smoothly and effectively.