Ruben Tedjasukmana

OKRs in the Finance Department Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: OKRs in the Finance Department! I will _________ (objective) and that will be measured by _______ (key results). This is the main concept of OKRs. Objectives are the overarching goals a company aims to accomplish. Key Results are specific, measurable outcomes that indicate progress toward those objectives. This framework encourages alignment, focus, and transparency within teams, helping to drive performance and accountability. ▶️ 𝗪𝗵𝗮𝘁 𝗶𝘀 𝗶𝗻𝗰𝗹𝘂𝗱𝗲𝗱: • Improve Financial Efficiency and Cost Management • Strengthen Compliance and Risk Management • Enhance Financial Reporting and Analysis • Optimize Working Capital and Cash Flow • Enhance Stakeholder Communication and Engagement • Foster Professional Development and Team Engagement ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 Planning and forecasting 💠 Cash flow management 💠 Financial statement analysis 💠 Valuations Start here: https://bojanfin.com/ ~~~~~~~~~

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M&A handbook Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: Want to learn more about M&A? 𝗛𝗲𝗿𝗲 𝗶𝘀 𝗺𝘆 𝗠&𝗔 𝗼𝗻𝗲 𝗽𝗮𝗴𝗲𝗿. 𝗛𝗲𝗿𝗲 𝗶𝘀 𝘄𝗵𝗮𝘁 𝗶𝘀 𝗶𝗻𝗰𝗹𝘂𝗱𝗲𝗱 ABOUT M&A PROCESS  1. Strategic planning  2. Preliminary target search  3. Evaluation of public available data  4. Initial Contact  5. NDA agreement  6. Initial business valuation  7. Letter of intent  8. Due diligence  9. Final valuation of target 10. Negotiation 11. Considering financing sources 12. Legal aspects 13. Purchase price allocation 14. Integration 15. Goodwill impairment BUY SIDE ROLE • Performing financial modeling and valuation. • Conducting internal research on potential investment and financing opportunities. • Identifying investors and recruiting capital to manage. • Earning the most favorable risk-adjusted return on capital. • Determining whether to buy, sell, or hold investments. • Overseeing clients' money. SELL SIDE ROLE • Advertising and selling securities. • Generating liquidity for listed securities. • Assisting clients with getting in and  out of positions. • Providing equity research analysis of indexed companies. • Performing financial modeling and valuation. • Advising corporate clients on major transactions, mergers and acquisitions. • Creating and building relationships with new businesses and corporations. • Facilitating increasing debt and/or equity. ....and more others ~~~~~~~~~ Want this visual in PDF? DOWNLOAD HERE: https://lnkd.in/dMfXzTZ4 ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 Planning and forecasting 💠 Cash flow management 💠 Financial statement analysis 💠 Valuations Start here: https://bojanfin.com/ ~~~~~~~~~

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M&A handbook Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: Want to learn more about M&A? 𝗛𝗲𝗿𝗲 𝗶𝘀 𝗺𝘆 𝗠&𝗔 𝗼𝗻𝗲 𝗽𝗮𝗴𝗲𝗿. 𝗛𝗲𝗿𝗲 𝗶𝘀 𝘄𝗵𝗮𝘁 𝗶𝘀 𝗶𝗻𝗰𝗹𝘂𝗱𝗲𝗱 ABOUT M&A PROCESS  1. Strategic planning  2. Preliminary target search  3. Evaluation of public available data  4. Initial Contact  5. NDA agreement  6. Initial business valuation  7. Letter of intent  8. Due diligence  9. Final valuation of target 10. Negotiation 11. Considering financing sources 12. Legal aspects 13. Purchase price allocation 14. Integration 15. Goodwill impairment BUY SIDE ROLE • Performing financial modeling and valuation. • Conducting internal research on potential investment and financing opportunities. • Identifying investors and recruiting capital to manage. • Earning the most favorable risk-adjusted return on capital. • Determining whether to buy, sell, or hold investments. • Overseeing clients' money. SELL SIDE ROLE • Advertising and selling securities. • Generating liquidity for listed securities. • Assisting clients with getting in and  out of positions. • Providing equity research analysis of indexed companies. • Performing financial modeling and valuation. • Advising corporate clients on major transactions, mergers and acquisitions. • Creating and building relationships with new businesses and corporations. • Facilitating increasing debt and/or equity. ....and more others ~~~~~~~~~ Want this visual in PDF? DOWNLOAD HERE: https://lnkd.in/dMfXzTZ4 P.S. Check our Pre-Black-Friday offer! ~~~~~~~~~

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7 types of financial model Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: I issued 1000+ invoices to corporate clients for consulting services last year. When I analyse what bring more value to me the answer is Any service including or building or advising on financial models. 𝗧𝗵𝗲 𝗺𝗼𝗿𝗲 𝗺𝗼𝗱𝗲𝗹𝘀 𝗸𝗻𝗼𝘄, 𝗺𝗼𝗿𝗲 𝗽𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝘆𝗼𝘂 𝗵𝗮𝘃𝗲!! 1️⃣ Three Statement Model Binds the income statement, balance sheet, and cash flow statement to forecast a company's future financial performance. 2️⃣ DCF Model Estimates a company's value by discounting its future cash flows to present day. 3️⃣ LBO Model Evaluates the feasibility and returns of acquiring a company using borrowed funds. 4️⃣ M&A Model Assesses the financial impact of merging or acquiring companies, considering synergies and dilution. 5️⃣ Budgeting Model Allocates financial resources for future operational activities based on planned expenses and expected income. 7️⃣ Forecasting Model Predicts future financial performance, often based on historical data and trends. 7️⃣ Project Evaluation Model Analyzes the financial viability and attractiveness of potential projects, considering costs, benefits, and risks. ~~~~~~~~~ Want this file? Like and comment and then download here: https://lnkd.in/dKW8TS_B ~~~~~~~~~ 📌 Join 26.000 receiving finance resources for career and business development: https://lnkd.in/dw-fNrYB ~~~~~~~~~

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7 types of financial model Credits to Bojan Radojicic follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: I issued 1000+ invoices to corporate clients for consulting services last year. When I analyse what bring more value to me the answer is Any service including or building or advising on financial models. 𝗧𝗵𝗲 𝗺𝗼𝗿𝗲 𝗺𝗼𝗱𝗲𝗹𝘀 𝗸𝗻𝗼𝘄, 𝗺𝗼𝗿𝗲 𝗽𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝘆𝗼𝘂 𝗵𝗮𝘃𝗲!! 1️⃣ Three Statement Model Binds the income statement, balance sheet, and cash flow statement to forecast a company's future financial performance. 2️⃣ DCF Model Estimates a company's value by discounting its future cash flows to present day. 3️⃣ LBO Model Evaluates the feasibility and returns of acquiring a company using borrowed funds. 4️⃣ M&A Model Assesses the financial impact of merging or acquiring companies, considering synergies and dilution. 5️⃣ Budgeting Model Allocates financial resources for future operational activities based on planned expenses and expected income. 7️⃣ Forecasting Model Predicts future financial performance, often based on historical data and trends. 7️⃣ Project Evaluation Model Analyzes the financial viability and attractiveness of potential projects, considering costs, benefits, and risks. ~~~~~~~~~ Want this file? Like and comment and then download here: https://lnkd.in/dKW8TS_B ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 40 Lessons 💠 7 Hours of video course 💠 50+ Excel modeling sheets 💠 330 pages of PDF modeling tutorial Start here: https://bojanfin.com/ ~~~~~~~~~

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7 types of financial model Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: I issued 1000+ invoices to corporate clients for consulting services last year. When I analyse what bring more value to me the answer is Any service including or building or advising on financial models. 𝗧𝗵𝗲 𝗺𝗼𝗿𝗲 𝗺𝗼𝗱𝗲𝗹𝘀 𝗸𝗻𝗼𝘄, 𝗺𝗼𝗿𝗲 𝗽𝗼𝘁𝗲𝗻𝘁𝗶𝗮𝗹 𝘆𝗼𝘂 𝗵𝗮𝘃𝗲!! 1️⃣ Three Statement Model Binds the income statement, balance sheet, and cash flow statement to forecast a company's future financial performance. 2️⃣ DCF Model Estimates a company's value by discounting its future cash flows to present day. 3️⃣ LBO Model Evaluates the feasibility and returns of acquiring a company using borrowed funds. 4️⃣ M&A Model Assesses the financial impact of merging or acquiring companies, considering synergies and dilution. 5️⃣ Budgeting Model Allocates financial resources for future operational activities based on planned expenses and expected income. 7️⃣ Forecasting Model Predicts future financial performance, often based on historical data and trends. 7️⃣ Project Evaluation Model Analyzes the financial viability and attractiveness of potential projects, considering costs, benefits, and risks. ~~~~~~~~~ Want this file? Like and comment and then download here: https://lnkd.in/dKW8TS_B ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 40 Lessons 💠 7 Hours of video course 💠 50+ Excel modeling sheets 💠 330 pages of PDF modeling tutorial Start here: https://bojanfin.com/ ~~~~~~~~~

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The accounting cycle is a fundamental concept💫 Credits to Sasa Pejic, follow him for more accounting insights! Here's the original post It serves as the foundation of our industry It ensures financial data's accuracy and reliability Here's 10-step accounting cycle checklist: 1. Identification of Transactions: Before any entry, recognize economic events relevant to the business. Whether it's a sale, a purchase, or any financial activity - if it can be measured, it starts here 2. Documenting Transactions Documentation is everything! Whether it's invoices, receipts, or purchase orders, ensure each transaction has a paper trail. 3. Journal Entries The general journal becomes the initial home for our transactions. Using the double-entry system, each transaction impacts at least two accounts 4. Posting to Ledger: From the general journal, these entries find their way into specific accounts in the general ledger giving us a clearer picture of each account's status 5. Trial Balance Once the ledger's dust has settled, a trial balance is prepared to ensure the debits match the credits. It's a preliminary check before the real magic begins 6. Adjusting Entries: Not all transactions fit neatly within an accounting period. Accruals, prepayments, and estimated items are adjusted to reflect the true financial picture 7. Adjusted Trial Balance Post adjustments, another trial balance is prepared to ensure everything still aligns. 8. Financial Statements: With all data refined and ready, the income statement, balance sheet, and cash flow statement come to life. 9. Closing the Books: Temporary accounts like revenues, expenses, and dividends are zeroed out to prepare for the next accounting period. 10. Post-Closing Trial Balance: One last check to ensure the books are balanced, and only permanent accounts remain active Each step ensures that your financial data is: 1. Accurate 2. Consistent 3. Ready for analysis

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Working Capital Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: There are several formulas to calculate working capital, depending on the specific analysis we aim to conduct. 1 ) The difference between Current Assets and Current Liabilities. 2) The difference between Current Assets (excluding cash) and Current Liabilities (excluding financial debt). The first formula is primarily used when assessing a company's liquidity. However, in financial planning, working capital is typically utilized to project cash flows, and the term used for this is usually net (operating) working capital. In such cases, we often employ the second formula that excludes cash and financial debt, as these categories are planned independently. So when it comes to the working capital projection we need to forecast each category, including accounts receivable, inventories, accounts payable, other current assets, and other current liabilities. Let's see how to do this. If you need this model in Excel, it is free for download at my website BojanFin .com under Free download section. ~~~~~~~~~ 📌 Become a member of the Corporate Finance Learning platform. Lifetime access and live updates to all courses and materials + each month new excel models, templates and infographics. 👉 Learn more here: https://lnkd.in/eUCwSaSd ~~~~~~~~~

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3 Statements Model Credits to Bojan Radojicic,  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: No more uncertainty. Learn 3 statements modeling 𝗧𝗵𝗶𝘀 𝗶𝘀 𝗲𝗮𝘀𝗶𝗲𝘀𝘁 𝗳𝗹𝗼𝘄 𝗶𝗳 𝘆𝗼𝘂 𝗮𝘀𝗸 𝗺𝗲 Import historical data and operating inputs Set the assumptions 👇 𝗖𝗿𝗲𝗮𝘁𝗲 𝗯𝗮𝘀𝗶𝗰 𝘀𝗰𝗵𝗲𝗱𝘂𝗹𝗲𝘀 Revenues Cogs Gross profit Headcount Salaries Selling costs G&A costs CAPEX schedule NWC scheduled Financing schedule Income tax schedule 𝟯 𝗦𝘁𝗮𝘁𝗲𝗺𝗲𝗻𝘁𝘀 Balance sheet projection Income statement projection Cash flow statement projection. Quality diagnostics and consistency checks. ~~~~~~~~~ Want this file? Like and comment and then download here: https://lnkd.in/dhd6qD6q ~~~~~~~~~ 📌 Become a member of the Corporate Finance Learning platform. Lifetime access and live updates to all courses and materials + each month new excel models, templates and infographics. 👉 Learn more here: https://lnkd.in/eUCwSaSd ~~~~~~~~~

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How to Analyze Income Statement Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: Watch how to analyze INCOME STATEMENT (IS) First, make sure you have IS layout that reflects your business functions. 𝗘𝘅𝗮𝗺𝗽𝗹𝗲 𝗼𝗳 𝘀𝗶𝗺𝗽𝗹𝗲 𝗮𝗻𝗮𝗹𝘆𝘀𝗶𝘀 𝘀𝘁𝗲𝗽𝘀: • Prepare periodical Income Statement that is subject to the analysis • Analyze movement in key categories, like revenues, EBITDA, Net income • Gross margin - the profitability of core operations by examining the proportion of revenue remaining after deducting the direct costs • EBITDA margin - insights into a company's ability to generate operating profits from its core operations • Net margin - measures company's overall operations by examining the proportion of revenue remaining after deducting all expenses • A higher revenue per employee indicates that employees are generating more revenue for the company, which suggests higher efficiency and effectiveness in utilizing human resources. • Net profit per employee reflects the efficiency and productivity of a company's workforce in generating profits. • EBITDA to interest - Assess a company's ability to cover its interest expenses with EBITDA. It helps investors, creditors, and analysts evaluate a company's financial health and its capacity to meet its interest obligations. • And most importantly: do not forget to compare this achievements with budgeted and with competitors ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 40 Lessons 💠 7 Hours of video course 💠 50+ Excel modeling sheets 💠 330 pages of PDF modeling tutorial Start here: https://bojanfin.com/ ~~~~~~~~~

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Budgeting Mega Cheat Sheet Some companies already started their 2025 budget process! I have had to do multiple budgets in my career Knowing which method to choose and how to organize your budget can save you a lot of time! This is why I've spent hours to compile all my budgeting experience in one Mega Cheat Sheet On top you can get my budgeting checklist here: https://lnkd.in/edvf5exs Here's what is inside: • Historical Budgeting • ZBB Budgeting • Annual Budgeting • Rolling Forecast • Top-Down Budgeting • Bottom-Up Budgeting • Budgeting for Stability • Budgeting for Growth • Activity Based Budgeting • Incremental Approach • 10 Scenario Analysis Frameworks Which one is your favorite method?

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There is often a general misunderstanding of the difference between accounting and finance. The best part is we provide both services. Which one is more important though is generally dependent on the stage of the company. In general, we find that start-ups and early growth companies generally need accounting far more than finance services, because the ability to perform finance tasks is extremely difficult and untrustworthy with bad accounting. Once the foundational accounting is in place, the finance aspects of the department get much easier to execute. Below is a summary of the differences that we often have to educate companies about. Accounting: Record Keeping: Accounting involves the systematic recording of financial transactions, which is crucial for maintaining accurate financial records. Compliance: Ensures compliance with laws and regulations, such as tax laws and financial reporting standards. Financial Statements: Produces essential documents like balance sheets, income statements, and cash flow statements that provide a snapshot of the organization's financial health. Internal Control: Helps in setting up internal controls to prevent fraud and errors. Budgeting: Assists in budgeting and controlling costs. Finance: Strategic Planning: Finance focuses on managing an organization’s assets and liabilities, including capital structure and investment strategies. Investment Decisions: Involves making decisions about where to allocate resources to generate the highest returns. Funding: Deals with raising capital through various means such as equity, debt, or internal financing. Risk Management: Identifies and manages financial risks to protect the organization's assets and earnings. Performance Analysis: Uses financial data to analyze performance, guide business strategy, and drive growth.

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Finance Modeling handbook Credits to Bojan Radojicic, follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: No Financial modeling skills > no chance for predicting financial health > no progress in career > no progress in business at all. I tried to include the most important facts about financial models into readable one-page high-resolution PDF content. 𝗪𝗵𝗮𝘁 𝗶𝘀 𝗶𝗻𝗰𝗹𝘂𝗱𝗲𝗱: → Data collection flow → Assumptions → Model types → Formatting → Error check and validations → Do's and Don'ts in modeling → Modeling tips → 10 Excel formulas → Examples → Consistency checks ~~~~~~~~~ Want this file? Like and comment and then download here: https://lnkd.in/dPHx6V7A ~~~~~~~~~ 📌 If you want to upgrade your career in finance, start with our Corporate Finance Modeling Masterclass: 💠 Planning and forecasting 💠 Cash flow management 💠 Financial statement analysis 💠 Valuations Start here: https://bojanfin.com/ ~~~~~~~~~

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Top 7 Internal Controls Credits to Nathan Liao, CMA, follow him for more practical finance content. Here's the original post ----- Top 7 Internal Controls To Safeguard Cash 👇 Let’s define internal control first: Internal control is a system of policies, processes, and procedures implemented by a company to ensure: 1. Effectiveness and efficiency of operations 2. Reliability of financial reporting 3. Compliance with regulations & internal policies It's the safety net that: - Catches errors - Deters fraudulent activities - Aligns a biz operations with its objectives Cash, being the most liquid of all assets It is more susceptible to errors or even fraud Whether it's cash sales, payments, receipts, or transfers, every transaction presents an opportunity for discrepancies Applying these 7 internal controls to cash: 1️⃣ Dual Custody: Never let cash handling or recording rest on the shoulders of a single individual. Segregation of duties ensures that the person handling cash isn't the same person recording it. 2️⃣ Reconciliation Ritual: Regularly match bank statements with ledger balances. Any variances? Investigate immediately. 3️⃣ Physical Safeguards: Invest in safes, locked cash drawers, and secured transaction areas. It's not just about keeping cash safe but also ensuring the integrity of cash-related transactions. 4️⃣ Limit Access: Not everyone needs access to cash or cash records. Restricting access automatically reduces the potential for errors or foul play. 5️⃣ Timely Deposits & Payments: Letting cash sit idle increases the risk. Make prompt deposits and ensure payments are scheduled properly. 6️⃣ Documentation: Maintain clear, thorough records of all cash transactions. An untraceable cash flow is a red flag in any audit. 7️⃣ Regular Audits: Surprise internal audits can deter mismanagement and ensure that controls are functioning as intended. --------------- Safeguarding cash isn't just about the numbers It's about maintaining trust and transparency ---- Follow our page Accounting ABCs to learn more about the fundamentals of Accounting

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CAPEX planning model Credits to Bojan Radojicic  follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: Are you ready for CAPEX planning? These my favorite steps when it come to CAPEX planning 𝗣𝗥𝗘-𝗠𝗢𝗗𝗘𝗟𝗜𝗡𝗚 𝗦𝗧𝗘𝗣𝗦 Review investment plan with CEO and Departments heads Obtain relevant current fixed asset database Align CAPEX plan with the company's strategic objectives Review historical CAPEX data to identify trends and patterns Evaluate useful life of new assets Assess the feasibility, potential benefits, and risks of expenditure 𝗠𝗢𝗗𝗘𝗟 𝗕𝗨𝗜𝗟𝗗𝗜𝗡𝗚 List existing types of fixed assets List newly planned investment Input expected useful life for both Input value of expected investments Input expected disposals Make aggregated projections of purchase value Run depreciation plan Calculate accumulated depreciation Calculate carrying value How about you? ~~~~~~~~~ DOWNLOAD HERE: https://lnkd.in/e2nZMGt2 ~~~~~~~~~

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Prepaid & Accrual Expenses Calculator Credits to Bojan Radojicic follow him for more finance insights! ~~~~~~~~~ 𝙏𝙝𝙚 𝙤𝙧𝙞𝙜𝙞𝙣𝙖𝙡 𝙥𝙤𝙨𝙩 𝙞𝙨 𝙝𝙚𝙧𝙚: A prepaid expense, also known as a deferred expense, refers to a cost that a company pays in advance for goods or services that will be received or consumed in the future. Instead of recognizing the entire expense at the time of payment, the company initially records the payment as an asset on its balance sheet. Over time, as the goods or services are used or consumed, the prepaid asset is gradually recognized as an expense on the income statement. In essence, prepaid expenses represent costs that have been paid in advance but are recognized as expenses over the accounting periods in which they provide economic benefits to the company. These expenses are typically spread out or "amortized" over the periods during which the related benefits are received, ensuring that expenses are matched with the revenue they help generate, as per the accrual accounting method. Common examples of prepaid expenses include prepaid rent, prepaid insurance premiums, and prepaid subscriptions. 𝗣𝗥𝗘𝗣𝗔𝗜𝗗 𝗘𝗫𝗣𝗘𝗡𝗦𝗘𝗦 𝗠𝗢𝗗𝗘𝗟 The model is designed in such a way that it is automated. Properly inputting the necessary data is crucial for the model to function adequately. The prepaid expenses are recognized by the model based on the number of periods (months and days) to which the specific expense relates. 𝗪𝗵𝘆 𝗣𝗿𝗲𝗽𝗮𝗶𝗱 𝗖𝗼𝘀𝘁𝘀 𝗔𝗿𝗲 𝗥𝗲𝗰𝗼𝗴𝗻𝗶𝘇𝗲𝗱 𝗼𝗻 𝗮𝗻 𝗔𝗰𝗰𝗿𝘂𝗮𝗹 𝗕𝗮𝘀𝗶𝘀: 𝗠𝗮𝘁𝗰𝗵𝗶𝗻𝗴 𝗣𝗿𝗶𝗻𝗰𝗶𝗽𝗹𝗲 The matching principle in accounting states that expenses should be recognized in the same period as the revenues they help to generate. By recognizing prepaid expenses over time, the expense recognition is matched with the period in which the benefit is received. 𝗔𝗰𝗰𝘂𝗿𝗮𝘁𝗲 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗣𝗶𝗰𝘁𝘂𝗿𝗲 This method provides a more accurate reflection of the company's financial health at any given time by ensuring that assets and expenses are recorded in the appropriate periods. 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) require that expenses be matched with revenues in the period in which they are incurred, regardless of when the cash transaction occurs. 𝗕𝘂𝗱𝗴𝗲𝘁𝗶𝗻𝗴 𝗮𝗻𝗱 𝗣𝗹𝗮𝗻𝗻𝗶𝗻𝗴 Recognizing expenses as they are incurred helps in better budgeting and planning, as it gives a clearer view of the company's recurring expenses and cash flows. 𝗧𝗮𝘅 𝗣𝘂𝗿𝗽𝗼𝘀𝗲𝘀 For tax purposes, companies must adhere to the accrual basis of accounting to recognize expenses in the period in which they are incurred, not when they are paid. ~~~~~~~~~ DOWNLOAD HERE: https://lnkd.in/dnHYDg8a ~~~~~~~~~

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