According to Mr. Sandless' accounting policies, when are expenses recognized?
Mr_Sandless Franchise · 2025 FDDAnswer from 2025 FDD Document
Basis of Accounting-The accompanying financial statements have been prepared on an accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to disbursement of cash.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 41–42)
What This Means (2025 FDD)
According to Mr. Sandless' 2025 Franchise Disclosure Document, the company uses the accrual basis of accounting. This means that Mr. Sandless recognizes expenses when a liability is incurred, regardless of when cash is disbursed. This accounting method is in conformity with accounting principles generally accepted in the United States of America.
For a prospective franchisee, understanding this accounting policy is crucial for managing their own business finances. It dictates that you must record expenses when the obligation to pay arises, not necessarily when you physically pay the bill. This can impact your financial statements and tax obligations.
Adhering to generally accepted accounting principles (GAAP) is important for ensuring the accuracy and consistency of financial reporting. This allows for better comparison of financial performance over different periods and with other businesses. Franchisees should consult with a qualified accountant to ensure they properly implement these accounting policies in their Mr. Sandless franchise.