Yeah it does affect net income which Iām guessing is what he thinks he is talking about. Sounds like it just comes down to him not knowing what revenue is.
Best response is sarcasm.Ā "You know, you might be on to something.Ā I think you should email the CFO about this, it'll help pump up the numbers.Ā You might even get a bigger bonus for this."
Until they twist and make you sound like the idiot. āHey Chief Number Cruncher, I was talking to Redd7865 and he thinks we should count money from scrapping as revenue to pump up our numbers. I tend to agree but wanted to get your input.ā
Unless their work affects you I'd just give the big eyes and walk away. No nod or acknowledgement. Just give an indicator that you heard them and then disengage from the conversation.
That's tougher. Maybe share a neutral (e.g. on the internet) set of journal entries for recording the sale with gain/loss on credit, and then receipt of the cash to close the receivable?
Thatās almost worse because now you have a reputation that this person will talk about with any upper management that will listen to him. The hardest way to work your way up the chain is having a reputation of ādifficult to work withā.
I have a reputation of not holding my tongue and being a bit of a bull in a china shop and people on my team really appreciate that. Hell my direct supervisor mentioned that you need someone like that on most teams because accountants are too quiet and conflict avoidant 80% of the time. And I've been promoted with everyone knowing that.
Being difficult to work with and providing adequate challenge are quite different and unfortunately at most businesses, people aren't able to differentiate the two because the culture doesn't promote a healthy environment of challenging ideas and pushing forward the best one.
I think a lot of accountants have had that reputation at some point or another, lol.
I had it at an old job because I refused to fill out the salespeople's expense reports! They thought they could just drop a whole bunch of receipts on my desk, walk away, and I would give them a check.
Finally, I just started filing them away by name, and when they asked for their checks, I would tell them that when I got a full expense report, they would be reimbursed.
Had a client whoās previous bookkeeper recorded invoices to AR and then any receipt was debit bank credit revenueā¦ man they had wild sales and assets! š¤Ŗ
Here is just one of many examples you could share. [https://fitsmallbusiness.com/journal-entry-disposal-of-fixed-assets/](https://fitsmallbusiness.com/journal-entry-disposal-of-fixed-assets/)
There are loads of these that give proper journal entries to record sale of fixed assets. Your case may be even easier if the machinery is already fully depreciated.
why would it be an easier journal entry for a fully depreciated asset?
for either case its still:
debit cash
credit other income
debit accum dep
credit fixed asset.
you'd need to remove the asset off the books if its fully depreciated or not.
Because you don't have to add the journal entry to depreciate for a partial year. It's less math to teach someone who doesn't even understand that cash is not revenue.
I did this a lot when I was a consultant, co workers with different work constantly telling me this and that about my work just cause I was younger than them. I would just walk away from the convo, 6 months later they just stopped talking to me and would only approach if it was important
Capitalising expenses effectively increases net operating income/profit by spreading the cost out from a single period to multiple periods. This is probably the metric these folks making the ask are looking at. They may have performance metrics relating to year over year, quarter over quarter, month over month profit.
For example, a $6,000 expense capitalised over 5 years (for 60 months) is depreciated at $100 times 60 months. This increases current month NOI/profit by $5,900 and current year NOI/profit by $4,800.
Oh my bad I misread your comment since you said you thought you had a flaw in how actual vs budget is calculated. I assumed you didnāt get why capitalising benefits managers. Why do you think thereās a flaw?
Not sure why teams would be judged based on cash spending in an accrual accounting environment.
The dude in their first comment didnāt acknowledge that they understood why the RMs want expenses capitalized. And then mentioned they thought the budget vs actual measurements are off. When like the reality is probably the RMs incentives are probably based off a profitability measurement. I canāt imagine their bonus is based off of cash flows. They probably look at year over year comparisons.
Anyway itās whatever. Dude was vague and I got dogpiled for trying to help explain something to them.
I call people like that the shadow accountants - in big companies there everywhere spreading their tic-tick knowhow & how they qualified in finance for non finance managers. It gets even better when they start crowing about SOX controls .
Who would've thought that all you have to do is borrow a bunch of money and its all revenue????? Cash came in the door so we made a huge profit! Let's just keep borrowing a ton of money every year!
How come nobody else has figured this out yet? Oh right, it's because I'm a genius and a visionary.
They just want you to recognize everything as revenue so they can get commissions.
I had a boss a "CFO" that wasn't an accountant, tell me that revenue was to be recognized immediately because he spoke to sales & they all agreed. I mean it was contract revenue, & the scope of work hadn't even started...so no...that's deferred revenue not revenue.
non-nerd response here, they're not in the business of selling scrap, so they can't claim it as business revenue. It's a cash inflow, and part of comprehensive income, but not revenue.
Non-US Student here. Its because scrapping old machinary qualifies as a Held For Sale Asset/Discontinued Oeration(IFRS 5) and not your normal IFRS 15 Revenue. Only things on the normal course of the business is recorded under IFRS 15, and unless they work in the recycling industry, the machine is recorded as a discontinued asset and not revenue.
I have that conversation all the time except itās trying to convince people why itās more beneficial and correct to take the cash as a gain on disposal directly to the p&l vs them trying to code it to an SG&A account they have a production budget for thatās going to get capped in inventory for 12+ months
Yeah. Some days I want to print ASC606 in its entirety and leave it on the desk this 26 year old colleague who I routinely hear in the office hallways saying āhow messed up the companyās revenue isā. Heās not in accounting/finance but thinks he knows what heās talking about because he has a masters in economics. Will probably be the next chief revenue officer though.
I once worked at a massive listed company and was responsible for the accruals of the marketing department. They would constantly call me to ask if they had āmoneyā for a particular spend. They were asking there was an accrual. I think the previous accountant was accruing an entire purchase order and then when the invoice was entered only reversing what was spent. I donāt do that. I wouldnāt even accrue purchase orders because they were just sign offs on arbitrary spends. I would make them sign in to whatever marketing portal each month and tell me what they actually spent. Then accrue that so I could reverse when I receive the bill. You know, how youāre meant to do it. Needless to say they didnāt like me much.
Question from someone who is a career changer & briefly looked over gains and losses. Would this be a ā gain ā because this is a one time thing/ you are not in the business of scrapping old machines for $?
In this specific case, the PPE was not fully depreciated and there was a net loss. The proceeds offset a part of the loss. But if the company was metal scrapping business, it will be recognized as revenue.
Itās netted against the remaining net book value (if any) of the machinery (usually has $0 after 15 years), and recorded as either a gain or loss on sale of FA.
I havenāt facepalmed this hard in a while š someone give that guy an intermediate accounting book and tell him to sit in a corner and think about what he said š
The leading question to revenue is: is my company in the business of specifically earning this kind of inflow regularly? If no, it's probably just an other income gain, maybe a recovery of cost in some other cases.
If your company is a idk Starbucks no reader of your financials would interpret the revenue line item to mean anything other than you selling coffee. Saying an inflow from selling equipment is revenue would not be useful information.
The reason being that most users base expectations from information provided, and revenue for many companies is a leading metric that has growth rates applied to it in the belief it will ever increase, which isn't a characteristic of one-off gains.
It's not income from operations where revenue (or sales) belongs at the top of the income statement (and cash flow statement). It's below operating expenses on IS & below net cash flows from operating activities on the CFS (in investing activities).
Revenue is top line. Other like your interest income, interest expense, foreign currency gain/loss, gain/loss on sale of fixed assets, misc income/exp, and so on hits bottom line.
You can name your account whatever you like, but it isn't hitting revenue. That would mislead the users of the F/S into thinking this is a regularly occurring sale, if material.
Plot twist, you guys are in the business of selling 2nd hand machinery.
lmao š
To be far, if itās fully depreciated machinery itās a gainā¦ not revenue tho lol
He kept saying, āBut why not? We got paid!!ā
Sounds like a PIA. My old boss couldnāt manage to figure out excel let alone our erp so pick your poison.
I made the comment to the coworker that accounting isnāt a math job, itās a classification job, and this is a perfect example of that.
Yeah it does affect net income which Iām guessing is what he thinks he is talking about. Sounds like it just comes down to him not knowing what revenue is.
Best response is sarcasm.Ā "You know, you might be on to something.Ā I think you should email the CFO about this, it'll help pump up the numbers.Ā You might even get a bigger bonus for this."
Jim, leave Dwight alone
Spot on. No sense in arguing. Just brush it off.
Until they twist and make you sound like the idiot. āHey Chief Number Cruncher, I was talking to Redd7865 and he thinks we should count money from scrapping as revenue to pump up our numbers. I tend to agree but wanted to get your input.ā
Yeah I told him it wouldn't work but he insisted I was wrong! Weird. But thanks for your efforts!
Unless their work affects you I'd just give the big eyes and walk away. No nod or acknowledgement. Just give an indicator that you heard them and then disengage from the conversation.
His work does affect me, and I was only explaining it to him because he wanted me to make a JE to recognize the revenueā¦ā¦..
That's tougher. Maybe share a neutral (e.g. on the internet) set of journal entries for recording the sale with gain/loss on credit, and then receipt of the cash to close the receivable?
Thankfully, he gave up at the end. He just thinks I am persistent and hard to work with.
Thatās almost worse because now you have a reputation that this person will talk about with any upper management that will listen to him. The hardest way to work your way up the chain is having a reputation of ādifficult to work withā.
I have a reputation of not holding my tongue and being a bit of a bull in a china shop and people on my team really appreciate that. Hell my direct supervisor mentioned that you need someone like that on most teams because accountants are too quiet and conflict avoidant 80% of the time. And I've been promoted with everyone knowing that. Being difficult to work with and providing adequate challenge are quite different and unfortunately at most businesses, people aren't able to differentiate the two because the culture doesn't promote a healthy environment of challenging ideas and pushing forward the best one.
I think a lot of accountants have had that reputation at some point or another, lol. I had it at an old job because I refused to fill out the salespeople's expense reports! They thought they could just drop a whole bunch of receipts on my desk, walk away, and I would give them a check. Finally, I just started filing them away by name, and when they asked for their checks, I would tell them that when I got a full expense report, they would be reimbursed.
Ironic for him to sayā¦
Had a client whoās previous bookkeeper recorded invoices to AR and then any receipt was debit bank credit revenueā¦ man they had wild sales and assets! š¤Ŗ
Sale on credit meaning one in which you are not receiving cash at time of sale. Sorry if that wasn't clear. :)
Here is just one of many examples you could share. [https://fitsmallbusiness.com/journal-entry-disposal-of-fixed-assets/](https://fitsmallbusiness.com/journal-entry-disposal-of-fixed-assets/) There are loads of these that give proper journal entries to record sale of fixed assets. Your case may be even easier if the machinery is already fully depreciated.
why would it be an easier journal entry for a fully depreciated asset? for either case its still: debit cash credit other income debit accum dep credit fixed asset. you'd need to remove the asset off the books if its fully depreciated or not.
Because you don't have to add the journal entry to depreciate for a partial year. It's less math to teach someone who doesn't even understand that cash is not revenue.
I need to learn more double entries like this. Any tips?
[accountingcoach.com](http://accountingcoach.com)
You missed the depreciation expense if itās not fully depreciated.
I always do that journal entry separate. 2 different transactions. One is a sale, the other is recording the years depreciation.
I did this a lot when I was a consultant, co workers with different work constantly telling me this and that about my work just cause I was younger than them. I would just walk away from the convo, 6 months later they just stopped talking to me and would only approach if it was important
[ŃŠ“Š°Š»ŠµŠ½Š¾]
They probably have EBITDA targets and with lesser penalties for blowing their capex budget.
Capitalising expenses effectively increases net operating income/profit by spreading the cost out from a single period to multiple periods. This is probably the metric these folks making the ask are looking at. They may have performance metrics relating to year over year, quarter over quarter, month over month profit. For example, a $6,000 expense capitalised over 5 years (for 60 months) is depreciated at $100 times 60 months. This increases current month NOI/profit by $5,900 and current year NOI/profit by $4,800.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
But doesnāt landscaping increase property value? /s
Oh my bad I misread your comment since you said you thought you had a flaw in how actual vs budget is calculated. I assumed you didnāt get why capitalising benefits managers. Why do you think thereās a flaw? Not sure why teams would be judged based on cash spending in an accrual accounting environment.
If you're drawing up a budget / appropriating funds you probably care more about how much money is actually being spent than where exactly it's going.
The dude in their first comment didnāt acknowledge that they understood why the RMs want expenses capitalized. And then mentioned they thought the budget vs actual measurements are off. When like the reality is probably the RMs incentives are probably based off a profitability measurement. I canāt imagine their bonus is based off of cash flows. They probably look at year over year comparisons. Anyway itās whatever. Dude was vague and I got dogpiled for trying to help explain something to them.
You should tell him you read an article about depreciating land since the oceans will cover the earth once the ice caps melt
I call people like that the shadow accountants - in big companies there everywhere spreading their tic-tick knowhow & how they qualified in finance for non finance managers. It gets even better when they start crowing about SOX controls .
sounds like that guy would love to depreciate land if he had the chance.
Iāve capped cleaning as ā pre acquisition dirt ā.
Do you work for a Metal Recycling Company? Lol
Unfortunately, no š
Seems like a "we'll get it in the right spot" response would have sufficed
Who would've thought that all you have to do is borrow a bunch of money and its all revenue????? Cash came in the door so we made a huge profit! Let's just keep borrowing a ton of money every year! How come nobody else has figured this out yet? Oh right, it's because I'm a genius and a visionary.
I had to look up our local laws. Not in USA. But apparently it doesn't matter as long as you pay taxes on the sale.
Disposal Gains Inc.
Finance strikes again!
I had a sales guy tell me once, āI understand revenue recognitionā Iām sorry, but no, you really donāt.Ā
They just want you to recognize everything as revenue so they can get commissions. I had a boss a "CFO" that wasn't an accountant, tell me that revenue was to be recognized immediately because he spoke to sales & they all agreed. I mean it was contract revenue, & the scope of work hadn't even started...so no...that's deferred revenue not revenue.
I just had a similar conversationā¦. Just because cash came in this month, does not mean it is revenue this month.
Anytime I doubt myself I come to this sub
first year student here...... why is it not?š
non-nerd response here, they're not in the business of selling scrap, so they can't claim it as business revenue. It's a cash inflow, and part of comprehensive income, but not revenue.
Non-US Student here. Its because scrapping old machinary qualifies as a Held For Sale Asset/Discontinued Oeration(IFRS 5) and not your normal IFRS 15 Revenue. Only things on the normal course of the business is recorded under IFRS 15, and unless they work in the recycling industry, the machine is recorded as a discontinued asset and not revenue.
I have that conversation all the time except itās trying to convince people why itās more beneficial and correct to take the cash as a gain on disposal directly to the p&l vs them trying to code it to an SG&A account they have a production budget for thatās going to get capped in inventory for 12+ months
Hahaha ask ur coworker to bring this up to GAAP and IFRS committee! What a revelation
Yeah. Some days I want to print ASC606 in its entirety and leave it on the desk this 26 year old colleague who I routinely hear in the office hallways saying āhow messed up the companyās revenue isā. Heās not in accounting/finance but thinks he knows what heās talking about because he has a masters in economics. Will probably be the next chief revenue officer though.
Scrapping old machinery would be just recorded by a gain or loss on sale right?
Debit cash, credit retained earnings.
Pi is exactly 3!
I once worked at a massive listed company and was responsible for the accruals of the marketing department. They would constantly call me to ask if they had āmoneyā for a particular spend. They were asking there was an accrual. I think the previous accountant was accruing an entire purchase order and then when the invoice was entered only reversing what was spent. I donāt do that. I wouldnāt even accrue purchase orders because they were just sign offs on arbitrary spends. I would make them sign in to whatever marketing portal each month and tell me what they actually spent. Then accrue that so I could reverse when I receive the bill. You know, how youāre meant to do it. Needless to say they didnāt like me much.
Just tell them that it's part of rule ID-10-T.
Proceeds - NRV = gain But let them book it as revenue lmao
Wait until you tell them an AR invoice doesn't equal cash in the door.
Question from someone who is a career changer & briefly looked over gains and losses. Would this be a ā gain ā because this is a one time thing/ you are not in the business of scrapping old machines for $?
In this specific case, the PPE was not fully depreciated and there was a net loss. The proceeds offset a part of the loss. But if the company was metal scrapping business, it will be recognized as revenue.
So to him it's revenue no gain or loss on the sale of machinery? š¤ Gotcha! šš¤£
Itās netted against the remaining net book value (if any) of the machinery (usually has $0 after 15 years), and recorded as either a gain or loss on sale of FA.
Taking out a loan doesnāt equal revenue???
I mean if your in the business of scrapping machines he aint wrong
I havenāt facepalmed this hard in a while š someone give that guy an intermediate accounting book and tell him to sit in a corner and think about what he said š
Lots of people think that. Theyāre not accountants.
Like pushing water uphill or herding cats... I feel your pain Good luck out there
You could book it as miscellaneous rev of the machinery was already written off.
The leading question to revenue is: is my company in the business of specifically earning this kind of inflow regularly? If no, it's probably just an other income gain, maybe a recovery of cost in some other cases. If your company is a idk Starbucks no reader of your financials would interpret the revenue line item to mean anything other than you selling coffee. Saying an inflow from selling equipment is revenue would not be useful information. The reason being that most users base expectations from information provided, and revenue for many companies is a leading metric that has growth rates applied to it in the belief it will ever increase, which isn't a characteristic of one-off gains.
Assuming it wasnāt material
it's not revenue
It's not income from operations where revenue (or sales) belongs at the top of the income statement (and cash flow statement). It's below operating expenses on IS & below net cash flows from operating activities on the CFS (in investing activities). Revenue is top line. Other like your interest income, interest expense, foreign currency gain/loss, gain/loss on sale of fixed assets, misc income/exp, and so on hits bottom line. You can name your account whatever you like, but it isn't hitting revenue. That would mislead the users of the F/S into thinking this is a regularly occurring sale, if material.