Virtual reality is a fairly new technology that is driving a new industry on its own. Businesses around the world are now leveraging this innovation to offer their customers better services. The demand for virtual reality by non-commercial markets such as households and health is also growing because of the new tech’s appeal.
Because of the infancy of virtual reality, you may experience some challenges in your financial management and accounting. For this reason, you need to get a well-trained virtual reality accountant to perform these responsibilities. It is equally important that you, as a business owner, also know the basics of how virtual reality accounting works.
Below are some basic principles our experienced team of virtual reality financial advisers compiled on the accounting for virtual reality businesses:
Does A Virtual Reality Firms Offer Goods, Services, or Both
Every business offers at least one of two types of products; namely goods or services. Goods are tangible items that are handed over by the business to their clients in exchange for some monetary value. Services, on the other hand, are intangible actions that a business will do for its client for a set period.
Your virtual reality firm can offer either one of these two; and, because of the nature of VR businesses, you can even offer both. The accounting for each type of product will vary on how you will recognize revenue and expenses. The most prevalent difference between these two is the existence of inventories.
Accounting For Virtual Reality Good And Services
If you own a virtual reality firm that sells goods such as VR goggles, or VR gaming consoles, your virtual reality accountant will need to include the inventory asset account metrics when reconciling your books. This account will help you monitor and take into consideration the inflow and outflow of these inventories. This policy also means that your financial records will recognize both the movement of an asset account and a revenue account whenever you sell your products. The direct expense for your sales will also be the cost of goods that you sold.
On the other hand, if you are a virtual reality firm that offers services only, this asset account will be absent from your books. Instead, your virtual reality bookkeeper will directly recognize your revenue for every sale that you make. Expenses for your services will not come directly from any goods; rather, it will likely be the payroll expense that you spent to provide your service.
If your virtual reality firm offers both of these products, you can expect a hybrid of these two accounting methods. By providing both goods and services, your virtual reality accountant will face challenges in segregating your income and expenses.
Our expert team of virtual reality CPAs is trained in handling these kinds of issues. We have years of experience handling businesses with all types of products. Whether you’re a goods or service provider, you can rely on us to provide you with reliable records and reports for your virtual reality firm.
Tax Planning For Your Virtual Reality Firm
The tax treatment for virtual reality firms that sell goods, services, or both also varies. For example, some states require businesses to apply sales tax to goods and services, while for some states; this tax is only applied to the sale of goods.
The existence of some taxes can even depend on the platform you’re using to sell your goods. For example, a 2018 Supreme Court ruling allowed some states to tax sales made through the internet. This ruling means that if you have a firm in Colorado or Connecticut that sells your virtual reality products online, you are expected to report the sales tax you charged customers. However, if your business is located in Illinois, you may be exempted from this tax.
Knowing what taxes apply to you is crucial in formulating a tax plan. Ignorance of these tax ruling can result in you paying way more than what you owe the government. Even worse, you can end up paying fines for unintentionally skipping on some of your tax dues.
Our team of tax planning specialists has extensive experience creating tax strategies for companies within the technology industry. We can also help you in the preparation and filing of your tax dues to make sure that you are paying the right amount of taxes. If you want to learn more, let’s talk. Set an appointment with our expert accountants now!
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