On Launching a Business -

On Launching a Business -

Launching a business is an exciting endeavor. Many businesses succeed, but many businesses fail. Perform deep and diligent research about your industry and about business in general. You will need capital - money and resources, and you will need a fund reserve to carry you and your family over while the business starts producing. Set targets and constantly evaluate your business to assure that you are meeting those targets.

I've instructed would-be entrepreneurs to sit down, close their eyes and think, "How will you feel when you are successful with your business? [their answer] Great, how will you feel if the business is not working out and you are out of money? [their answer] Now open your eyes: It will be worse than you think!! You must take this seriously."

If you have a solid business idea, you should really act on it, but also be aware of when to obtain competent support in finance, accounting, operations, management, marketing and sales, and legal advice. Best of luck on your future endeavor!

- J. R. Hudson, President of Account Services, Inc.

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Web: http://www.AccountServices.com | Email: accountservices@usa.net | Ph: 206.264.5435
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Accounting Principles

If GAAP are not the principles used for preparing financial statements, then a business needs to make clear which other form of accounting they're used and are bound to avoid using titles in its financial statements that could mislead the person examining it.

If everyone involved in the process of accounting followed their own system, or no system at all, there's be no way to truly tell whether a company was profitable or not. Most companies follow what are called generally accepted accounting principles, or GAAP, and there are huge tomes in libraries and bookstores devoted to just this one topic. Unless a company states otherwise, anyone reading a financial statement can make the assumption that company has used GAAP.

GAAP are not cut and dried, however. They're guidelines and as such are often open to interpretation. Estimates have to be made at times, and they require good faith efforts towards accuracy. You've surely heard the phrase "creative accounting" and this is when a company pushes the envelope a little (or a lot) to make their business look more profitable than it might actually be. This is also called massaging the numbers. This can get out of control and quickly turn into accounting fraud, which is also called cooking the books. The results of these practices can be devastating and ruin hundreds and thousands of lives, as in the cases of Enron, Rite Aid and others.

GAAP are the gold standard for preparing financial statement. Not disclosing that it has used principles other than GAAP makes a company legally liable for any misleading or misunderstood data. These principles have been fine-tuned over decades and have effectively governed accounting methods and the financial reporting systems of businesses. Different principles have been established for different types of business entities, such for-profit and not-for-profit companies, governments and other enterprises.

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