What is a Discretionary Trust – Leigh Barker Tangible Assets

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A discretionary trust is a structure established to hold property for the benefit of other persons commonly known as beneficiaries who have no fixed entitlement or interest in the trust funds. A discretionary trust is governed by the terms of the trust deed and the trustee is the legal owner of the trust property.

Discretionary trusts generally have the power to determine which beneficiary will receive payments from the trust. In addition, the trustee can select the amount of trust property that the beneficiary receives.

Discretionary trusts still serve a useful function

> Asset protection – as no one individual is the owner of the assets held in a discretionary trust then property held by a trustee cannot be taken by a creditor
> Estate Planning – to hold assets for future generations of the same family
> Tax Planning – under current laws beneficiaries pay income tax at their marginal rates and since the trustee has the power to choose which beneficiary should be paid they may select the beneficiary with the lowest marginal rate

A discretionary trust is required to a tax file number (TFN) and where relevant an Australian Business Number (ABN) or GST registration. The trust deed specifies the powers of the trustee which are generally sufficient to manage the trust in an orderly manner.

As the legislation that governs discretionary trusts is often subject to parliamentary review a regular review of trust deeds is warranted to ensure that the structure is adapted to changes that effect business and family circumstances.

Please note: Prepared by Leigh Barker Tangible Assets, MWC Group, Accountant, Portfolio Finance, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

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What is a Debit & Credit

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Within the accounting system the concept of double entry bookkeeping whereby every accounting transaction affects at least two accounts.

The entry recorded on the left is known as the “debit” and the entry recorded on the right is known as the “credit”.

The debit entry can increase an asset or expense and decrease an income or liability account whereas a credit can decrease an asset or expense account and increase an income or liability account.

Within the accounting process there are rules that govern to use of debits and credits

  • Accounts with a debit balance increase when a debit is entry is added
  • Accounts with a credit balance increase when a credit is entry is added
  • The total dollar value of all debits must equal the total dollar value of all credits

The most common accounts where debits and credits are applied are as follows

  • Sales – debit accounts receivable & credit sales
  • Sales Invoice Paid – debit bank & credit accounts receivable
  • Cash Sales – debit bank & credit sales
  • Cash Purchase – debit expense account & credit bank
  • Bank Loan – debit bank & credit loan payable
  • Repay a Loan – debit loan payable & credit bank
  • Pay Employees – debit wage expense & credit bank
  • Bank Interest – debit interest expense & credit bank

Thus all accounting transactions are tracked as either a debit or credit in the accounting ledger.

Please note: Prepared by Leigh Barker Tangible Assets, Accountant at MWC Group, Portfolio Finance, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What is an Auditor – Leigh Barker

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An auditor is an independent person or company appointed to check and verify the accuracy of financial records. An auditor may be an external auditor who examines the financial records and business transactions of an entity in which there is no affiliation or an internal auditor responsible for providing independent and objective evaluations of an entities financial and operational activities.

External auditors are engaged to express an opinion that the financial statements of an entity are free from material misstatements. An external auditor will communicate to management and staff to obtain a detailed understanding of an entity, of the operations of the entity, financial reporting and internal control procedures.

External auditors conduct the audit in accordance with specified audit guidelines and the users of an entities financial statements rely upon the external auditor to present an unbiased and independent audit report.

Internal auditors while employed by the organisation they audit bring a systematic and disciplined approach in evaluating financial and business activities inclusive of the effectiveness of risk management, control and corporate governance. Internal auditors report to management on how to improve the overall structure and business practices of an entity.

Internal auditors are not responsible for implementing the activities of an entity. The role of an internal auditor is to advise the Board of Directors how to better implement their responsibilities. An internal audit report will summarise the findings, recommendations and generally contains an action plan for management to implement.

Please note: Prepared by Leigh Barker Accountant at MWC Group, Tangible Assets, Portfolio Finance, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What is an Accountant – Leigh barker Accountant

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An accountant is a trusted professional whose career is centred on dealing with money and figures.

An accountant will assist business to track income, expenditure and assets. In general an accountant is detailed, well organised and good at communications.

As one of the key roles in any business, the accountant monitors and records the flow of funds and has the responsibility of verifying the accuracy of all transactions ensuring that at all times they are recorded and reported within regulatory guidelines. Accountants obtain certifications from professional bodies and must abide by ethical standards and guiding principles where they practice.

Through financial statements the accountant assesses the health of a business by using their knowledge in areas such as accounting, law, math and finance. The accountant provides this information to business owners who in turn will evaluate business performance over a period of time.

While the main task of an accountant is to examine financial records to ensure that they are accurate, the following duties may also be performed by an accountant.

  • Prepare profit and loss statements
  • Prepare the balance sheet and cash flow statements
  • Prepare and review budgets against actual expenditure
  • Preparation and lodging of annual tax returns
  • Establish and maintain accounting procedures
  • Supervise data entry of financial transactions
  • Resolve accounting discrepancies
  • Compile financial information

Accountants can specialise in various fields such as financial accounting, management accounting, cost accounting, auditing, tax accounting, government accounting, non profit accounting and international accounting.

Please note: Prepared by Leigh Barker Accountant at MWC Group, Tangible Assets, Portfolio Finance, Gordon and West Pennant Hills. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What is Accounts Receivable

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Accounts receivable represents the money owed to a company for outstanding invoices for goods or services provided to a client. It is the right to received for delivering a service or product.

Accounts receivable is an enforceable claim for payment and is generally executed by raising an invoice which is either mailed or delivered electronically to the customer who is required to pay for the cost of goods or services within a specified timeframe which is commonly described as the terms of trade.

To record report accounts receivable a debit entry is posted to accounts receivable when an invoice is raised as receivable and credit entry is posted to accounts receivable when the payment is received for the invoice.

Payment terms are generally 30 days from the date of the invoice and in some instances late payment fees are charged if the invoice is not paid by the due date.

While recording an item in accounts receivable can be accomplished with relative ease, the process of collecting payments and maintaining the accounts receivable ledger can be a full time task.

The Accounts Receivable ledger is divided is generally reported as either current, 30 days, 60 days, 90 days or longer. The accounts payable report is commonly termed an aged trial balance where clients are typically listed in alphabetic order or by the amount outstanding, or according to the company chart of accounts. Zero balances are not usually shown.

Please note: Prepared by Leigh Barker West Pennant Hills – Accountant at MWC Group, Tangible Assets, Portfolio Finance and Gordon. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.

What is Accounts Payable – Leigh Barker West Pennant Hills

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Accounts payable is an accounting term used to describe the money owed by a business to its suppliers. Basically accounts payable is a short term debt and represents an obligation to creditors of either an entity. Accounts payable is classified as a current liability in the balance sheet as payment generally takes place within a short period of time. Accounts payable are usually due within a 30 to 60 day period and usually no interest is charged if the balance is paid on time.

Accounts payable can include such items as expenses, payroll costs, taxes, short term loans, physical goods, advertising, travel entertainment, office supplies, utilities etc.

Accounts payable occurs when a supplier of goods or services delivers ships or provides a service then issues an invoice and collects payment later.

To record and report accounts payable a credit entry is posted to accounts payable when an invoice is identified as payable and debits accounts payable when the payment is made for the invoice received.

While some interchange the terms “accounts payable” and “trade payables” the terms refer to similar but slightly different transactions. Trade payables comprise money owed for business materials and supplies while accounts payable is broadened to include all other short-term debts.

Thus is a newsagent owes money to the supplier of cards or magazines then this inventory forms part of its trade payables, whereas money owed for utilities or payroll related items it would form part of accounts payable. It is not uncommon to have both items reported in the accounts payable category.

Please note: Prepared by Leigh Barker West Pennant Hills – Accountant at MWC Group, Tangible Assets, Portfolio Finance, and Gordon. Note that all content of this blog is general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstance.