Although much has been made of standard accounting procedures and GAAP, there are alternative methods of reporting finances that smaller companies can take advantage of. Hiring a third party business accounting management firm can help you determine which procedure will work to your company’s best advantage. It will also open your eyes to some little-known facts about financial statement preparation. For example, did you know that smaller companies can follow OCBA instead of GAAP procedures?
What is OCBA?
OCBA is an acronym that stands for Other Comprehensive Basis of Accounting. It’s a viable alternative to following GAAP standard accounting procedures when preparing your company financial statements that can save time and effort when it comes to preparing your company’s year-end tax returns.
When can a company follow OCBA instead of GAAP?
A perfect example of the kind of company that’s better suited to following OCBA is the sole proprietorship. In this case, the preparation of the company’s financial statements doesn’t have to strictly adhere to GAAP standard accounting procedures and can instead use the income-tax-basis approach, which is more conducive to the methods that will have to be reported on the company’s tax returns.
Why follow OCBA instead of GAAP?
One of the primary reasons why your company may want to follow OCBA instead of GAAP is that when it comes time to file your business tax return, IRS requirements will force you to recalculate certain figures — like depreciation. This isn’t always an issue for bigger companies, but for the privately owned “mom and pop shop” or the sole proprietorship, having to convert numbers to match the IRS-required formula can create a big strain on resources.
Hiring a business accounting management firm to handle all of the particulars with your company financial statements and tax returns removes the burden of having to keep up with ever evolving best practices. If you’re worried about not being “in control” of your finances, don’t. AccountingDepartment.com has established methods of communication between yourself and your dedicated bookkeeping specialist that you can take advantage of to stay in daily contact, including e-mail, IM and phone. To learn more about the benefits of outsourcing your bookkeeping needs, visit AccountingDepartment.com.
