As far as accounting or bookkeeping software is concerned, the two reports that are vital for financial purposes are the Balance Sheet and the Income Statement. I will explain what each one is and what purpose they serve. The Balance Sheet is simply a listing of balances of your assets and liabilities. Assets are anything major you purchase of value such as furniture, equipment, autos, computers, software etc. Assets are also any money you have in banks or other investments you such as CD’s. Liabilities are basically any debt obligations that you owe such as loans on the equipment or car you purchased for the business. It could also include things such as a line of credit at your bank or if you took out a home equity loan to use for business. The purpose of a balance sheet is to show what you are worth in terms of your business. Banks use this information to determine how you have been handling your business and may use this information to decide whether or not you are a good credit risk. Sometimes companies that you want to do business with will ask for the balance sheet.
Next, What is an Income Statement?
Provided by Alamo Bookkeeping Associates LLC
Saturday, February 20, 2010
Wednesday, February 10, 2010
Entering Each Item
So why enter each item? Well the advantage of entering each item in your bookkeeping system is so that if in the future you need to search for a transaction, you know you will be able to find it because you entered every single purchase. For example; you are a real estate investor and you know you bought some shrubs from Home Depot less than a year ago for a house but don’t remember exactly when. You now have some trees that have died and since Home Depot gives a one year warranty you need to find when you bought them to pull that particular receipt. You can do a search for landscape expenses in Quickbooks and get a listing of all the landscape purchases you made to find the transaction you are looking for. If you had done summary entries instead, you might have to look thru several months of receipts before you found the receipt you needed. So the main advantage is being able to search for transactions. Another reason may be because you know that you want to sell your business down the road and want to be able to show the transactions to a perspective buyer, in which case they may want to see the particular transactions you do for the business and not summary entries. Bottom line is you need to consider your future needs as to whether you should go ahead and enter each transaction or just summary entries.
Next, what kind of reports do I need to run?
Tuesday, January 12, 2010
Enter each item, or summary entries?
So if you have a lot of transactions each month, you may want to consider whether you need to enter each item separately or if you want to do some summary entries. Obviously summary entries would be easier on your fingers. However, if you need to go back to search for information, then you may not want to enter all of your info as summary entries. A summary entry would be for instance, you add up all the expenses for gas on your debit card and instead of entering each debit in your accounting software you enter a total as one check or journal entry. Let’s say you also paid for gas several times by cash. You could add up all the cash receipts for gas for the month and enter those as a summary entry. Remember for gas you can also track miles instead of actual (see previous post), but I am using this as an example. The same could be done for business meals. Let’s say you have a construction company and you buy breakfast for your workers in the mornings. You could enter a summary entry for those purchases instead of entering each receipt for breakfast sandwiches at McDonald’s. Your bank statement would still serve as a detail back up.
Next, why enter each item?
Provided by Alamo Bookkeeping Associates LLC
Next, why enter each item?
Provided by Alamo Bookkeeping Associates LLC
Thursday, January 7, 2010
What’s the best way to enter my expenses?
Alright, now that we’ve discussed the major expense categories, we should discuss the various ways you can track them. As I have mentioned previously, if you don’t have a lot of expenses, let’s say 25 or less for the year, you can probably just do a spreadsheet. However if you have a regular business that has a regular amount of receipts, what is the best way to track these?
My advice is to go thru your monthly business bank statement, which as I advised previously you should have opened a separate business account for your business and not run it thru your personal account. If you also are using a credit card for your business, you also want to try to keep a clean card that is only used for the business. You can then use that as a record for data entry.
There are several bookkeeping programs out there, and the one I use is Quickbooks so I will discuss that one. The other programs out there are similar.
I have also used DacEasy which is a program I also like, and of course there are others such as Peachtree.
Next, enter each item, or do summary entries?
Monday, December 28, 2009
Entertainment
Most people understand what a business meal is, but what is business entertainment? Entertainment can be a variety of things, from an opera to a concert or basketball game. Are these deductible? Yes under the same conditions as for meals. The entertainment has to be with other people, you have to discuss or conduct business and you are allowed to deduct 50% of the expense on your tax return. On your books it would be at 100%. However you going to the movies every weekend with your girlfriend or boyfriend does not count; so don’t try to pull that one. You also need to document in a calendar or other record who the event was with and for what purpose.
Provided by Alamo Bookkeeping Associates LLC
Provided by Alamo Bookkeeping Associates LLC
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