Quote: A CPA wants to know how to calculate profit and loss

[Black Bart]

Zee

Lighten up a little. I've been a practicing CPA 30 years. Each time I read this board I learn something new. It's humbling to see how much more knowledge many of the posters seem to have. Why not just share the knowledge without trashing the poster?

I don't think we set out to intentionally humiliate the poster, as the tone of his request seemed quite serious. Still, it raised doubts of authenticity because the questions asked would not normally come from a CPA or even anyone just familiar with double-entry.

Actually, I'm not even sure what the question is -- for instance, the line entitled "My thought: Sales price - interest on loan - broker's comm.........." seems to be asking what to do with a closing statement, or maybe even what one is. As I said, I'm not a CPA, but just plain old bookkeeping would say debits to the left, credits to the right (credit sales, debit (notes payable-bank), interest, commission, taxes, fees, (cash on hand), etc.

I think people here would be glad to help on a specific subject if they could, but the question (purportedly from a CPA) seemed to be asking for an explanation of basic accounting. Or at least, that's how it came across.

As a CPA, how did the question strike you? I don't mean to be a wise guy about it, but is it a question you'd ordinarily expect from your colleagues? But, either way, what is your response to it?

[geekgirldany]

Quote from a CPA
II've done all the steps (recorded all construction loans to a closing [dummy] account, created a sales receipt for the sale of the spec home, transferred the development costs [other asset account] to COGS - Homes, etc.) that QuickBooks help recommends. However,I still can't make heads or tails of the last part, where you close out the deal and "pay off" the construction loans. I don't truly understand where the profit or loss comes from in this series of transactions.

My thought:
Sale price - interest on loan - broker's commission - RE Tax - transfer tax - service fees -

To me if he did all the things he told you he did... then he should know the answer. I don't see how he could have closed out the construction loans correctly if he doesn't understand the "close out and pay off".

Okay I've found this FREE pdf file from the Sleeter group that gives in detail WIP accounting. Tell the CPA to look at page 23 for the sale/closing.

http://www.sleeter.com/free/downloads/UsingWIPAccts.pdf

[Zee]

I don't think we set out to intentionally humiliate the poster, as the tone of his request seemed quite serious. Still, it raised doubts of authenticity because the questions asked would not normally come from a CPA or even anyone just familiar with double-entry.

Actually, I'm not even sure what the question is -- for instance, the line entitled "My thought: Sales price - interest on loan - broker's comm.........." seems to be asking what to do with a closing statement, or maybe even what one is. As I said, I'm not a CPA, but just plain old bookkeeping would say debits to the left, credits to the right (credit sales, debit (notes payable-bank), interest, commission, taxes, fees, (cash on hand), etc.

I think people here would be glad to help on a specific subject if they could, but the question (purportedly from a CPA) seemed to be asking for an explanation of basic accounting. Or at least, that's how it came across.

As a CPA, how did the question strike you? I don't mean to be a wise guy about it, but is it a question you'd ordinarily expect from your colleagues? But, either way, what is your response to it?

The question suggested to me it was being asked by someone with zero CPA experience, perhaps someone coming out of industry in a non-tax or accounting area. I saw the poster as someone starting a practice for the first time (maybe part-time). After re-reading the post, I can also understand how others might have seen the post as not really serious and just wasting others time on the board.

I'll let the more knowledgeable answer the questions. Reading the board shouldn't be a substitute for individual research. But, it is helpful to determine if others read or interpret issues the same. It's helpful to get the input, even if the question might seem "stupid", or something anyone should know. I think it's best to just be polite in the responses to avoid the possibility that others simply won't ask a question in fear of being humiliated. Intentional posts designed to waste board time is another issue. I didn't read the post that way, maybe others did.

[Bees Knees]

I think it's best to just be polite in the responses to avoid the possibility that others simply won't ask a question in fear of being humiliated. Intentional posts designed to waste board time is another issue. I didn't read the post that way, maybe others did.

Unregistered posters have been known in the past to cause trouble on this board. There are those out there that wish this company to eat dirt and die. However, when unregistered posters such as NY Enrolled Agent and Ballscientist identify themselves, then we know their posts are legit as they have proven themselves in the past to be above board. That is not to say someone could not just simply come on and impersonate them. That would be a reason I would encourage all of our regulars to register, to avoid having someone else try to impersonate you. However, your suggestion to be polite in the responses is something we should always try to do. Something we think is a plant could very well be a legitimate question.

[New York Enrolled Agent]

Ok Bees - you made me feel like a registration pariah so I took the plunge!!!

Actually, I think you should mandate registration but since it's TTB's board ...

[Matt Sova]

completed contract method answer

OK, the house was being built and the bldr incurred 175k in costs and has const loans of 150k so, just before the house closes he has an asset called inventory in the amount of 175k and a liability called construction loan in the amount of 150k. The deal closes and has the following info on the closing statement:

Sales Price $225,000
Closing Costs ( 15,000)
Payoff Const Loan (150,000)
Cash to seller $ 60,000

Record the sale from the statement credit to Sales, Debit COGS - Closing Costs, Debit Const Loan Payable (this will remove the const loan from the Balance Sheet), and Debit Cash.

Create another Journal Entry to Credit Inventory (to remove it from the Balance Sheet) and Debit COGS - Houses.

What you end up with is an Income Statement that shows

Sales $225,000
COGS - Houses 175,000
COGS - Closing Costs 15,000

Net Income 35,000

Notice the Net Income is 25k less than the cash actually received. This is because they paid 25k more in construction costs than what they had borrowed on the loans.

[Black Bart]

Professional lacunae

...your suggestion to be polite in the responses is something we should always try to do.

Don't snicker at that high-falutin' word -- I read it in a book long ago and this is the first chance I've ever had to use it. Lacunae: an empty space or a missing part.

Dear Ballscientist,

On behalf of myself (and whoever else wants to join in), I extend my apologies. I believe that Zee and Bee are right -- we should maybe just try to answer the question if we can (Snag, Joe, ggdany, & Sova took good shots at it); erring on the side of the angels without a rush to judgment no matter how we read it. If a question or a questioner is phony, it'll probably come out soon enough and besides, if a little board time is wasted, so what? What else were we VIPs doing?

In regard to lacunae; I've got a few blank spots myself that I wouldn't particularly want pointed out here (although some already have been); maybe others do too. I've hesitated before about asking a question because I thought y'all would think it was ridiculous, so I agree that Zee's point about labeling a question "stupid" has a chilling effect which is detrimental to overall board development and quality. She also thought it was a question from one with "zero CPA experience." Others corroborated this to a certain extent by pointing out that working in one field as a CPA didn't necessarily help in another.

So anyhow, Ballscientist; if it was a genuine question, how about expanding on it a bit and telling us your take on all this? Besides, you've gotten everybody's curiousity up now which, if nothing else, makes you sort of an interesting character.

[Bees Knees]

Ok Bees - you made me feel like a registration pariah so I took the plunge!!!

Actually, I think you should mandate registration but since it's TTB's board ...

We feel honored, that the number one EA from NY finally decided to become official. The registration looks good on you. Did anyone remember to bring some treats?

[Joe Btfsplk]

Excellent answer

An example is always the best way to illustrate how to do things.

Once I read a complicated contract that explained how revenue was to be calculated & I attempted to interpret it by preparing an example. When I got to the end of it, I found an appendix to the contract that illustrated exactly how to do it--and it was a lot different than my attempt to prepare an example.

[Black Bart]

Man of Science

I wish he'd come on back and talk to us. This happens everytime -- he posts one or two things and suddenly disappears as if Scotty had beamed him up.

I'd like to know the story behind that first post, plus, I've got a question or two about UFOs.

[jainen]

I'm still a little chicken

You might expect me to jump right in on a thread about ridiculing someone's lack of knowledge. However, I had a completely different take on this. When I read the original post, I figured it was a software question. The CPA knew what he wanted to track, but didn't know how to enter it into QB in spite of "all the steps... that QuickBooks help recommends."

I usually avoid software questions so as not to expose to ridicule my own lack of knowledge. I think I've almost gotten this explanation to a point where I can use the new word Black Bart just taught us, but I'm still a little chicken.

[Zee]

Thank you

I think everyone here here has fully redeemed themselves for any harsh words to the original poster. If he reads the subsequent posts, a "thank you" is in order for all the good information provided. I've also been surprised at the lack of a simple "thank you" after poster's threads are answered with obvious time-consuming care. So, I'll simply say "thank you" for the poster (in case he doesn't return).

[Black Bart]

And thanks to you, Zee

I think everyone here here has fully redeemed themselves for any harsh words to the original poster. If he reads the subsequent posts, a "thank you" is in order for all the good information provided. I've also been surprised at the lack of a simple "thank you" after poster's threads are answered with obvious time-consuming care. So, I'll simply say "thank you" for the poster (in case he doesn't return).

for your nice job of refereeing this match.

I've also been surprised at the lack of "thank you"s. Maybe if they don't get replies quickly, they just go on to another board and never come back.

Now, please excuse me while I go flog my colleagues.

[Black Bart]

Perish, the thought.

You might expect me to jump right in on a thread about ridiculing someone's lack of knowledge.

I usually avoid software questions so as not to expose to ridicule my own lack of knowledge.

Re: "jump" -- Quite the opposite. Except for an occasional outburst (irresistable impulse I suppose), your manners of late have been downright "Southernly" (and I'm not just whistlin' Dixie).

Re: software -- I'm perfectly willing to overlook your lacunae -- just ask me anything you need to know. I'm right up to snuff with the latest version of DOS and did some BASIC programming in 1980.

[Black Bart]

Jack. Come home. All is forgiven.

C'mon back, Jack -- the lack (or not) of lacunae hasn't been resolved, but Zee's absolved you of all blame.

Now as a true Missourian, I'll bet you haven't changed your mind about Ballscientist's pedigree, so keep this in mind -- just because you're paranoid, it doesn't mean they're not after you.

"I come from a state that raises corn and cotton and cockleburs and Democrats, and frothy eloquence neither convinces nor satisfies me. I am from Missouri. You have got to show me." -- U.S. Rep. Willard Duncan Vandiver, 1899.