Account-Accounting: Cryptocurrency

Account/Accounting method/Accounts Receivable Turnover: defined in CryptoCurrency

An Account in Cryptocurrency; is access to a computer, website or software that allows users to access the tools located within within their membership account.

Access is usually gained through a username and password, but with cryptocurrencies, it is strongly directed to be accessed with private key(s).

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Accounting Method, and What is an accounting method?

      An accounting method is the set of guidelines and rules businesses use to keep financial records and prepare financial reports for the purpose of taxation.

Deeper definition:

The accounting method helps in reporting income and expenses for the purpose of taxation, as well as decision-making by the management of a business. Taxpayers are required by the IRS to have an accurate method of showing their income and expenses. They are also obliged to ensure consistency in their accounting method of choice every year. The selection of the accounting method is usually based on tax minimization and regulation strategies.

There are two primary accounting methods used in record keeping: accrual basis and cash basis. Under the cash basis, expenses and incomes are recognized according to real-time cash flow. Income is recorded once the funds are received, as opposed to when they are earned. Likewise, expenses are recorded when they are paid, and not when they are incurred. This method allows for deferment of taxable income, which can be achieved through delayed billing that ensures payment does not come in the current year. Payments can also be accelerated by immediately paying bills that are received before the due date.
Companies that use the accrual basis of accounting recognize income and expenses as soon as they are earned or incurred, even if the cash associated with the transactions has not been transferred. In this basis, revenue is recorded when earned, even before it has been received. Likewise, expenses are recorded when incurred, regardless of when payments are made.

Accounting method example:

Company A has an annual rent of $12,000. The company has a policy of paying this amount at the beginning of the year. If the firm records the transaction on a cash basis, the rent expense will be recorded in January as $12,000. On the other hand, if the firm uses the accrual basis, the account entry for rent in January will be $1,000 ($12,000 divided by 12 months).

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Accounts Receivable Turnover and What is Accounts Receivable Turnover?

Accounts receivable turnover is the number of times per year that a business collects its average accounts receivable. Accountants and analysts use accounts receivable turnover to measure how efficiently companies collect on the credit that they provide their customers.

Deeper definition:

Accounts receivable turnover is described as a ratio of average accounts receivable for a period divided by the net credit sales for that same period. This ratio gives the business a solid idea of how efficiently it collects on debts owed toward credit it extended, with a lower number showing higher efficiency.
To calculate the accounts receivable turnover, start by adding the beginning and ending accounts receivable and divide it by 2 to calculate the average accounts receivable for the period. Take that figure and divide it into the net credit sales for the year for the average accounts receivable turnover. The formula looks like the following:

• Step 1: Beginning accounts receivable + ending accounts receivable / 2 = net accounts receivable
• Step 2: Net credit sales / accounts receivable = accounts receivable turnover

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Accounts receivable turnover example:

Corporation A has a beginning accounts receivable of $125,000 and an ending accounts receivable of $235,000 and a net credit sales of $2.8 million, the formula would look like this:

• Step 1: $125,000 + $235,000 = $360,000 / 2 = $180,000
• Step 2: $2,800,000 / $180,000 = 15.55

Corporation A has an accounts receivable turnover of 15.55. Company C, its biggest competitor has an accounts receivable turnover of 21, while Corporation B has an accounts receivable turnover of 10. Based on these numbers, Corporation B has the strongest collections.

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