“Should I hire a bookkeeper or do my own bookkeeping?” That’s a question I heard many times while I was working as a Staff Accountant for a local CPA firm.
It’s amazing how often a business structure gets started without the owner(s) first answering this very important accounting question, because the reality of being both a business owner and doing your own business books can be overwhelming if you are not well prepared.
Doing your own accounting could actually be the best thing for you to do! Just as long as you are well aware of all of the details that go into following the proper accounting procedures.
While bookkeeping 101 will provide you with helpful information on everything from setting up a chart of accounts better understanding your balance sheet and profit and loss statemnets. For example, did you know that the accounts payable account is used to record the bills of a business that are outstanding and is also referred to as A/P which is Accounts Payable for short? Or that accounts receivable is the term that bookkeepers and accountants use to refer to the outstanding money that is owed to you for sales that you have already made that haven’t been paid for yet? There is much to be learned on the 101 page.
- The basic accounting forms page is a great resource of free accounting templates and tax deduction lists for an easier tax time. The free bookkeeping forms, excel & Quick Books templates you find here should be very helpful. Please feel free to go ahead and download and/or copy any of the bookkeeping templates you find on the forms page.
Arizona Withholding Tax Rates and Withholding Base are changing effective July 1st 2010
Employers can visit: www.azdor.gov/Business/WithholdingTax.aspx
Direct your employees to the new fillable forms at: www.azdor.gov/Forms/Withholding.aspx
Anything that is owed to others is a liability. Liabilities are often referred to as “payables”.
Liabilities are generally separated into two groups:
Current Liabilities
Debts to others that are due in a short period of time and are paid with current assets.
Long-term Liabilities
Debts that are “fixed” or paid over a long period of time, often for plant assets.
Common Liability Accounts:
Current Liabilities:
• Notes Payable – Promissory notes to creditors.
• Accounts Payable – What you owe others on account.
• Unearned Revenue – You’ve been paid, but haven’t delivered.
• Salaries Payable – Salaries you owe employees.
• Interest Payable – Interest you owe.
• Taxes Payable – Taxes you owe.
Long-Term Liabilities:
Liabilities that are carried over a number of years or at least more than one accounting cycle. Examples of long-term liabilities are mortgages payable, bonds payable, and long-term notes.
Sales tax levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. It may be levied each time a commodity changes hands—as from manufacturer to wholesaler, from wholesaler to retailer—and is then called a transactions, or turnover, tax. Many oppose the tax as being regressive, i.e., as placing a disproportionately heavy burden on the poor; but it yields a large revenue, and governments find it easy to collect. As of 1999, 45 states, the District of Columbia, a number of cities and counties, and many foreign countries levied sales taxes. A modern variant of the sales tax is the value-added tax.
Paycheck calculators to better understand your paycheck.
www.paycheckcity.com
Liabilities are reported on a balance sheet and are usually divided into two categories:
- Current liabilities — these liabilities are reasonably expected to be liquidated within a year. They usually include payables such as wages, accounts, taxes and accounts payables, unearned revenue when adjusting entries, portions of long-term bonds to be paid this year, short-term obligations and others.
- Long-term liabilities — these liabilities are reasonably expected not to be liquidated within a year. They usually include issued long-term bonds, notes payables, long-term leases, pemsion obligations, and long-term product warranties.
Federal/national, state/provincial, and/or local agencies require employers to perform various payroll functions, such as withholding amounts from employees’ compensation to cover income tax, social security and medicare.
Payroll taxes are levied by government agencies on employees’ wages, tips, and other compensation. The amounts withheld by employers from employees’ pay for federal income, social security, and Medicare taxes are considered to be trust-fund taxes, because the money is held in a special trust fund for the U.S. government. Amounts withheld for state and local income taxes are held in trust for the state and local governments.
A bank reconciliation statement is a statement prepared by organizations to reconcile the balance of cash at bank in a company’s own records with the bank statement on a particular date.
This statement is the most common tool used by organizations for reconciling the balance as per books of company with the bank statement and is made at the end of every month. The main objective of reconciliation is to ascertain if the discrepancy is due to error rather than timing.
The difference between the two records on a given date may arise because of the following:
- Checks drawn but not yet presented to the bank.
- Checks received but not yet deposited in the bank.
- Interest credited and not recorded in the organization’s books.
- Bank charges debited but not recorded in the organization’s books.
Bank Reconciliation Statement process is being outsourced to professional accounting firms by large organizations. This helps them have an accurate view and also ensure that the company’s bookkeeping is good. Accounting firms make monthly reconciliation statements for clients and help them determine any discrepancy.
The Profit and Loss (P&L) Statement is also known as the Income Statement. It shows how well a company buys and sells inventory (or services) to make a profit. A business must create a profit in order to survive and remain solvent. Careful analysis of the components of a P&L is important in determining the cash flow available to repay existing debt, finance additional debt (for business expansion), or to reinvest in the company.
Just as the Balance Sheet is a snapshot of the financial condition of a company at a certain point in time, the Profit and Loss statement shows the results of financial operations over a period of time. The amount of time could be a month, a quarter of a year, a half year, or a year.
The categories of a profit and loss statement are arranged in a specific order regardless of the legal form of the business (i.e., sole proprietor, C corporation, etc.). Within each category, revenues and expenses may be listed separately or grouped. Financial reporting needs to remain consistent over a period of time. Listing the same type of expense under different headings year after year may raise a red flag.
Accounting refers to the practice of tracking a business’s income and expenses and using those figures to evaluate its financial status.
One of the most basic accounting services is bookkeeping, which involves keeping a record of all financial transactions and then preparing financial statements such as balance sheets and income statements. Accountants can then take this information and roll it into tax services, another basic accounting service.
But the business of accountants goes beyond just basic number-crunching. Accountants include a number of other services in their repertoire: auditing services, tax planning, business consulting, business valuation, and financial planning, just to name a few.
