Average Cost vs. Standard Cost   Average cost determines the total amount of product purchased in a given period. On the other hand, a standard cost estimates the actual costs of a company’s production process.   For example, a small business may set the standard cost of a donut at $5, but the average cost can be $7 […]

What are Accounting Gifts?    Accounting gifts refer to financial or tangible assets without expecting anything in return. It reminds us of Oprah’s “You get a car! You get a car!”   A business owner may give their employee an accounting gift as a bonus. The important part is to keep track of taxes, as some gifts […]

What is an Exemption Trust?   An exemption trust reduces the estate taxes of a married couple when one of them passes away. When the first member of the couple dies, the assets are placed in a trust. When the surviving spouse dies, the assets are distributed to the trust’s beneficiaries, typically the children, who don’t […]

What is AOP in Finance?   AOP, aka Annual Operating Plan, is a business roadmap for a year. It outlines expenses and expected revenues for the year. For example, if your small business aims to increase sales by 30%, the AOP will detail marketing, hiring, or any other spending you will do in one year.   It […]

Yellow Book Audit Vs Single Audit A Yellow Book Audit is a specialized audit designed to assess the financial statements of an organization while also evaluating its internal controls and compliance with funding requirements and generally accepted accounting principles (GAAP). Unlike a standard financial audit, a Yellow Book Audit is conducted under both Generally Accepted […]

What Happens to Cash When Selling a Business?   When selling a business, the cash stays with the seller unless negotiated otherwise. Cash is not considered an asset but part of the sale proceeds. Suppose you sell your restaurant and keep the $50,000 in the business bank account. That $50k goes to you.   It might seem […]

Buying Into an Existing Business as a Partner  When you buy into an existing business, you purchase a share of ownership in an established business. This way, you become a partner and receive profits based on your ownership percentage.  For example, you buy an existing coffee shop with 30% ownership. If the monthly profits are $100k, […]

Difference Between CPA and CFO Think of a CPA and a CFO as two different kinds of financial doctors for your business. A CPA is like your general physician, focused on diagnosing tax issues, keeping financial records in check, and ensuring you don’t overpay the IRS. A CFO, on the other hand, is more like […]

Burn Rate Explained in 100 Words  Burn rate is the speed at which a company, especially an early-stage startup, burns through its cash reserves while trying to reach profitability. Think of it as a countdown timer; the faster your company spends money without generating enough revenue, the sooner the timer runs out. Investors and founders […]