Business Guidance and Knowledge for the Small Business Entrepreneur
Day to day activity for accounting is comprised of multiple functions. These include entering purchases, running a payroll, issuing cash disbursements, reconciling banking activity and generating basic reports.
The next section of bookkeeping (advanced skill sets) introduces the bookkeeper to the different organizational methods and explains why certain kinds of transactions are handled differently than standard entry practices. In addition some tax knowledge is infused throughout as the tax code impacts much of how accounting is performed.
The closing process is designed to finalize the financial information for that period of time. It involves correction of errors, posting omissions and confirming balances
of accounts. Once done, the bookkeeper and management can prepare reports with a high level of confidence with their accuracy.
The trial balance is a special report used by accountants and bookkeepers. It is NOT a management nor a financial report. Its primary purpose is verification of account balances and compliance to the dual entry system (debits equal credits). It is generally utilized as the first step in the closing process for interim and annual reporting. Experienced bookkeepers use the trial balance to spot egregious errors and obvious discrepancies.
One of the many tasks for bookkeeper in their daily operations is reconciling accounts including bank accounts, accounts receivable, accounts payable and many others. Invariably, the balances are off and need adjusting. To reset or balance the account the bookkeeper must use an adjusting journal entry.
A journal entry with multiple lines of entry affecting several different ledgers (accounts) is commonly referred to as a complex entry. Many bookkeepers shy away from them as they feel intimidated by the difficulty involved and do not want to make an error. This lesson helps the bookkeeper understand how to break the complex entry down into a series of standard entries.
Every day bills arrive from vendors that are mere repetition like the electric or phone bill. They basically recur every so often (mostly monthly). The bookkeeper must create a new entry as a part of his/her daily functions. This repetition consumes time and is a nuisance.
Many small business owners are actively involved in the community and thus donate time and money to their favorite cause. In almost every case the owner believes the donation is a business deduction. It is NOT a business deduction for tax purposes except under the C-Corporation status; however, the business is still writing the check. Therefore the bookkeeper must still track the deduction and identify the donation properly so the gift is deductible on the owner’s personal tax return.
There is much more to transportation with bookkeeping than accounting for vehicle operations, addressing mileage reimbursements or tracking auto costs related to owners and family members. Bookkeepers must track the following too:
The Internal Revenue Service scrutinizes expenses that can and often are benefits to owners. The most common benefit is the use of a company owned car for personal travel including using the car to get to and from work. Owners would love to have this cost of travel paid by the company and deductible for tax purposes.
Some small businesses manage transportation costs in incremental payments by utilizing mileage reimbursement. It is a very advantageous system if used correctly. Other small businesses augment their existing vehicle fleet by paying employees via mileage reimbursement for the use of the employee’s automobile.
