The text book definition of “sunk costs” reads something like this: Sunk Costs: Costs that were incurred in the past that cannot be recovered and thus are irrelevant for decision making. Well most costs are incurred in the past so that part of the definition is not all that helpful. More central is the idea [...]
The following item was reported in a recent American Institute of Certified Public Accountants communication: “The Exempt Organizations Division of the IRS had posted on the IRS web site a controversial document setting forth the Service’s view on what constitutes good governance practices for tax-exempt entities. Included in the document was the suggestion that audit [...]
It is a widely accepted belief that risk is an important factor in investment decisions. The income method of investment valuation stipulates that the price an investor is willing to pay for an investment is a function of the future expected cash flow, discounted by a rate that reflects the risk associated with receiving this [...]
Financial accounting strives to answer two basic questions: how did the business do last year, and what did the business own and owe at the end of the year? The answers to these questions are summarized in two basic statements, the income statement and the balance sheet. If you have even a passing knowledge of [...]
Financial statement users hope that historical performance reflected on income statements might provide some meaningful grounds for predicting a company’s future performance. In the case of well established businesses operating in stable environments this would be a reasonable expectation. It’s too bad that in the real world there are so few businesses like this. Nonetheless, [...]
Small non-profit organizations are very vulnerable to fraud.When I say small, I mean small: organizations that raise less than $100,000 per year and have only one paid staff person or no paid staff persons. I’m talking about neighborhood associations, sports and recreation leagues and all manner of civic, political and religious groups. These small organizations [...]