RABCPA PC Blog
In our firm we have many techniques to reconstruct income. Two of the most popular and widely used are, bank deposit analysis and financial status analysis.
Under the bank deposit analysis, we take a look at all your deposits and compare your gross income reported to the total deposits in the bank. This is a simple but straightforward method to get a good idea of any inconsistencies.
The second one financial status analysis, also called the Cash-T analysis. In the Cash -T Analysis we basically reconstruct your lifestyle. Once we know your lifestyle we can figure out how much money you will need to support that lifestyle.
After looking at these two basic methodologies we can then proceed to more complex analysis.
Posted October 18, 2017 by Forensic Accounting
The importance of understanding finances cannot be understated, financial mistakes will be long-lasting. I think a good template for teaching financial planning in high school is the same one that we use for drivers’ education.
Most kids learn to drive initially by constantly watching their parents drive. At some point in high school they have to take a driver’s education class which requires them to pass a written exam at the end of that class. Once this exam is passed they spend 15 hours of driving with a professional driver. After that they receive what’s known as a temporary driving permit. With restrictions they continue to drive for one year and if they have a good driving record they then can take a driver’s test. If they pass the driver test they still have a two-year probationary period under which your driving is monitored. The whole training takes between two and three years before they earn their driver’s license.
I would propose a similar type of education requirement for financial planning, where you’d have to take a class and pass a written test; upon passing that written test you’d be given a bank account, credit card, investment account, a retirement account, and a small loan. These accounts would be set up and monitored by an experienced professional. For one year you would use these various accounts for spending, your credit card, paying a small loan off, balancing your checkbook, investing a small portion in a retirement account. After one year, your performance would be evaluated to make sure you properly handle these various accounts. After you met those requirements you then would go to the next phase where you’d actually use these accounts for a period of two years which again, would be monitored by professionals. After two years, if you didn’t have any major problems you then would be free to manage these accounts on your own.
I think the best way to learn financial planning and finances not only by studying but actually doing it, and the plan that I’ve outlined would accomplish both of these goals.
Posted October 12, 2017 by Educational Videos
There are many ways that people become billionaires, some inherit it, some get lucky and some earn it. For the ones that earn it, being able to accurately forecast the future is a key aspect. There is one common technique they use to forecast the future.
They use the 2 and 10-year spread on government bonds to do this. The Federal Board of Governors of the Federal Reserve publishes a weekly summary of selected interest rates called H.15. On this lists you can find the yields for the 2 and 10-year bond. By tracking these two yields and calculating the spread between them you can actually gauge the future expectations for the economy. If the bond yield is compressing it means were probably heading for recession if the bond spread is increasing were probably heading for an expansion. Knowing this information will be very useful as you can imagine.
Posted September 8, 2017 by Educational Videos