Monday, August 9, 2010

Debits, Credits, and Other Nincompoopery

A late-night talk-show host some years ago now quipped about an our-of control accounting firm debacle, “If your accountant is Arthur Andersen . . . today is the last day you could have your tax documents shredded by April 15th.”

Let’s face it; the accounting profession has committed sufficient buffoonery ove the years to rival the stench of Yellowstone’s sulfur pots. That’s not to say that accounting is suspect. Yet accountants can be. Watch out for such fatheads.

Many admit that accounting is a yawner, that accountants are . . . well, lackluster. Make no mistake though, for your expression activity to be a trade or business you need to pay attention to its basic accounting. That doesn’t necessarily mean that you have to know debits and credits or hire a high-falutin’ CPA. If you choose a CPA or other tax professional, make certain it’s someone you can trust. A double-entry system of accounting isn’t necessary, although it certainly won’t hurt if it’s done correctly. The key is accuracy, meticulousness, and using the data in conjunction with a vibrant, viable business plan. Regulations and court cases point out that those who maintain good books and records for their activities are more likely to have “intent to profit” and thereby escape the “hobby” label even when they have successive losses.

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