Bookkeeping – Schedules (Lesson 23)

Schedules are supporting documents, commonly referred to as work papers to augment and justify journal entries. Common examples include depreciation and amortization schedules, tax calculations and loan balances.

With accounting there are books (journals) and ledgers for source entry of information. A trial balance is used to monitor the types of accounts. With the use of parent-child accounts and control accounts bookkeepers can generate a wide array of reports. Unfortunately, this still lacks the breath of supporting information needed. Therefore, the profession uses schedules to augment reports.

Schedules are the raw detail for economic transactions. They are used to calculate depreciation for fixed assets. Amortization schedules are used for intangibles and loan repayment plans. Schedules are used to calculate tax obligations, reconcile bank accounts and as supporting documentation for general journal entries.

Basically, schedules are the source calculations for a wide array of required entries.

This lesson is designed to introduce you the various schedules used in accounting. In addition, it teaches you how to organize the information and the method to transfer the information to the respective journals. This lesson is not going to cover some of the more advanced schedules; those are cover in other lessons. It will include technology guidance as appropriate.

Various Types of Schedules

The following are the various schedules used by bookkeepers from the most common to the least. Each has a short description of the respective schedule to aid in understanding.

Bank Reconciliation

Most small businesses have several accounts and at a minimum should be reconciled monthly. The businessecon.org site teaches bank reconciliation via Bank Reconciliation – Introduction. That particular article includes a free spreadsheet that you can download and use for your personal records.

Fixed Assets

Almost every small business buys fixed assets. These are long-term tangible items with a value of at least $500 (the recommended threshold of value) to record as a fixed asset. The schedule is generated to calculate depreciation deductions and used to comply with the Internal Revenue Code.

Most modern day accounting software including QuickBooks have a fixed asset module included. This software requires you to identify the date of purchase, the asset account to post the initial value, the depreciation period and the corresponding method of depreciation. Generally, the month to month entries are automatically posted to the ledgers.

Amortization

There are two forms of amortization in accounting. The first is similar to depreciation except in this case the business is amortizing an intangible asset. Examples include organizational costs, patents, copyrights and goodwill. Just like depreciation the business uses the Internal Revenue Code for the respective time period of amortization.

The second form of amortization is associated with a long-term debt (loan). Generally, the lender provides a schedule you use to make monthly payments. The schedule indicates the interest component and the principle portion due. All loan schedules include the principle balance remaining after each payment. Microsoft’s Excel includes a template for an amortization schedule whereby you input the necessary information and it will generate the schedule for you.

Tax Obligations

When calculating income tax, you will need to know the various tax rates for each tier of income. In general, a spreadsheet is created indicating actual income to date, expected income for the balance of the year, and taxes per tier level of income. Taxes are calculated for both the federal and state levels.

Most small businesses elect S-Corporation status or use the limited liability designation and are therefore exempt. However, you will still need the schedules for the local revenue tax, business license, sales tax and meals tax. In addition, it is recommended to create spreadsheets for property taxes, franchise fees and any other auxiliary tax.

Distributions, Dividends and Capital Accounts

The Internal Revenue Code requires proper documentation for the owners of every business. Naturally it is easier if there is only one owner. Often, this isn’t the case.

Normally the duty is the responsibility of the head accountant or CPA. But in really small businesses it defaults to the bookkeeper. If you track the payments to the owner(s) correctly throughout the year the schedule is easy to create and update. This lesson will not go into the details here, but there is a lesson in the advanced bookkeeping section related to this subject.

Organization of Information

The best tool for generating schedules is spreadsheet software. The best out there is Excel. For really small businesses it is suggested to create two files. One for bank reconciliations and the other is labeled ‘Schedules’. The bank reconciliation spreadsheet file name identifies the respected account such as ‘Wells Fargo # 1832’ using the last four digits of the account number as a unique identifier.

You may have to create a file for each of your primary (heavy usage) accounts such as operating and payroll. Each tab within the spreadsheet represents a reconciliation period (usually a month). It is best to do this step weekly with reconciliations. Thus, the tab will indicate the ending date. In addition, there is always a tab for month ends.

There are several articles in the accounting section of businessecon.org explaining file structure with electronic storage. Store the spreadsheet in the respective accounting folder by year.

For the other schedules you will most likely only need one spreadsheet with a title ‘Schedules – Year’. There is one tab for each of the respective schedules.

If the business uses a fixed asset module with the accounting software, then your depreciation schedules are stored via the accounting program.

Posting the Entries

The journal of choice with bookkeeping is the general journal. Once you have completed the respected schedule you will have some information related to an issue. You now have to enter this information into the journal. The dual entry rule remains in effect. Often bookkeepers are stumped because they end up with one value, a single number.

‘How do I enter this?’

Most likely the value is some form of expense, therefore the debit is to an expense account. The credit is the amount that is owed to somebody or a reduction in value of an asset. Therefore, a credit is entered to a liability or asset account. Here is a basic entry comparison schedule:

                                                     DR                            CR
Bank Reconciliation                Expense                    Bank Account
Fixed Asset Depreciation        Expense                    Accumulated Depreciation
Amortization of a Loan           Interest Expense       Cash (Connected to the Loan Payment)
Amortization of a Loan           Long-Term Debt       Cash (Connected to the Loan Payment)
Taxes                                       Expense                     Current Liabilities
Dividends/Distributions          Equity                        Cash

Sometimes the opposite is true. Often in bank reconciliations the bank may withdraw a fee or charge (increase in the bank balance). Now you credit the expense and debit the cash account (increase the bank account balance on the books). Most accounting software programs do this automatically with their internal bank reconciliation program. You simply enter the difference.

Summary – Schedules

In accounting the bookkeeper is responsible to create the raw detail for economic activity. Schedules are used to explain and calculate these values. From this information a general journal entry is created to post the information to the correct ledgers.

Schedules are generated using spreadsheets and stored in the appropriate file structure for the respective accounting year. ACT ON KNOWLEDGE.

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