How to get the help you need when investing

As a newbie investor, the world of trading in shares can seem somewhat daunting at first glance. It can, for example, appear to be quite confusing – especially with all the new terminology you need to learn. It can also seem a little too risky as well, and there’s a whole host of platforms to get to grips with. Luckily, though, help is at hand. Whether it’s from a professional advisor or from an online resource, there are lots of ways to educate yourself about the world of trading and move ahead in your trading career.

 

Professional advisors

In some cases, meeting with a professional financial advisor is a good move. That is often the route chosen by people who are taking their first steps into the world of investment and feel either confused or worried about what to do, or alternatively by people who have large sums of cash and don’t know what the most prudent course of action to protect it might be.

It’s important, however, to choose an advisor who is knowledgeable about the industry and who is regulated by the Financial Conduct Authority. Some advisors may offer lower fees or the promise of extremely high returns in order to attract your business, but such advisors are not always the most scrupulous and you may be exposing yourself to the risk of fraud or other problems.

Find a mentor

For some people, investing is more than a way to augment earnings, it’s a way of life. It could even be a part time or full time job. That is often the case for people who have left work and are looking for something they can do from home. If that is your plan, finding someone who has done this before to mentor you is a good idea as they can give you advice on how to make your new endeavour profitable while avoiding high levels of risk. (more…)

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When Expenses are Capitalized as Assets

Booking something as an asset or an expense is not always black or white. There are many gray areas in accounting. It’s easy to know that a car or a building is an asset, but what about routine repairs to that car or building? When is it an expense, and when should those repairs be added to the cost of that asset (capitalized)?

As discussed with prepaid assets and unearned revenue, such routine repairs would always be considered an expense if it would only affect the current period of time. For instance an oil change would always be an expense, since it affects the car right then to help it run better. It could conceivably increase the useful life of the automobile but not increase its worth.

Improvements are Assets not Expenses

On the other hand if the engine died and had to be replaced, this would probably increase the car’s life as well as its worth. So the engine expense would be capitalized. The best self check is to ask yourself if the expense only affects the current period of time or if it will be an ongoing use for a year or more. Is the cost an improvement or merely a repair or maintenance charge?

Since an oil change has to be done every few months, it is obviously a current period expense. But a new or rebuilt engine would logically be expected to last for several years. So that expense would be added to the cost of the car. (more…)

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When Expense becomes Asset and Revenue becomes Liability

The basic accounting equation explains how assets equal liabilities plus equity. The accounts that make up these assets, liabilities and equity are detailed on the company’s Balance Sheet. Income (or loss) is a part of the Equity section, and this information is detailed on the Income Statement. Revenues and expenses from a specific period of time are on the Income statement.

So what are expenses and revenues? Expenses are costs of doing business during a set period of time, usually a month. These can vary from rent to payroll. Revenues are earned during the same period of time. Depending on if the company is cash or accrual based, these revenues can be real or accrued, meaning that either cash or a receivable respectively is associated with them.

 

Income Statements Show Profits and Loss

In order for these expenses and revenues to impact only the reporting period, sometimes they must be posted as assets or liabilities. Let’s say that Business A pays their rent every month and receives cash receipts immediately upon service rendered. This company can post their rent and cash received as current expenses and revenues. (more…)

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