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Accounting for US based Companies

Absolutely! Here’s a comprehensive yet simple breakdown of Accounting for US-based companies — including key principles, reporting standards, and compliance requirements.

1. Accounting Standards in the US

  • US GAAP (Generally Accepted Accounting Principles):
    The standard framework for financial accounting in the U.S., set by the FASB (Financial Accounting Standards Board).
    US GAAP is rules-based, unlike IFRS (used globally), which is more principles-based.

🔷 2. Key Financial Statements Required Every US-based company prepares the standard four core financial statements:

  1. Income Statement (Profit & Loss)
    • Reports revenue, expenses, and net income.
  2. Balance Sheet
    • Shows assets, liabilities, and equity at a specific point in time.
  3. Cash Flow Statement
    • Tracks cash inflows and outflows (operating, investing, financing).
  4. Statement of Shareholders’ Equity
    • Details changes in owner’s equity over time.

🔷 3. Common Accounting Practices in the US

  • Accrual Basis Accounting: Revenue and expenses are recorded when earned/incurred, not when cash is exchanged. Required under GAAP.
  • Double-entry Accounting: Every transaction affects at least two accounts.
  • Depreciation Methods: Straight-line is common; MACRS is used for tax.
  • Revenue Recognition: Follows the 5-step model under ASC 606.
  • Lease Accounting: Follows ASC 842 (right-of-use asset approach).
  • Expense Categorization: Operating vs. Non-operating; Direct vs. Indirect.

🔷 4. Tax Reporting & Compliance

  • Governed by the IRS (Internal Revenue Service).
  • Key forms:
    • Form 1120: For corporations (C-corps)
    • Form 1065: For partnerships
    • Form 1040 Schedule C: For sole proprietors
  • Sales Tax Compliance: Varies by state (collected at point-of-sale).
  • Payroll Taxes: FICA, FUTA, Medicare, etc., must be withheld and reported.
  • 1099/ W-2 filings: For contractors and employees respectively.

🔷 5. Tools Commonly Used

  • Accounting Software:
    • QuickBooks (very common for SMBs)
    • Xero, FreshBooks
    • NetSuite, Sage Intacct (for midsize to enterprise)
  • Payroll Software: Gusto, ADP, Paychex
  • ERP Systems: Oracle, SAP, Microsoft Dynamics

🔷 6. Audits & Internal Controls

  • Public companies must follow SOX (Sarbanes-Oxley Act): requires internal control audits and accurate financial reporting.
  • Audits are conducted by external CPA firms (especially for publicly traded or investor-backed firms).

🔷 7. Special Considerations

  • Currency: Always in USD.
  • Fiscal Year: Often matches the calendar year but can vary.
  • Reporting Frequency: Monthly for internal, quarterly/annually for external.