Accounting First
  • Home
  • Blog
  • Tools
  • Home
  • Blog
  • Tools

Blog thoughts

Expenses - Chart of Accounts

9/30/2015

0 Comments

 
We have all heard, "You have to spend money to make money."  In business the money spent is often referred to as an expense.  What is an expense?  The IRS describes it as:  "Business expenses are the cost of carrying on a trade or business.  These expenses are usually deductible if the business operates to make a profit."  If you spend money to operate your company it is most likely an expense.  Some examples include:  advertising expense, rent expense, wage expense, office supplies and interest expense.  You want to increase income and reduce expenses.
Picture
0 Comments

The Great Brain At The Academy

9/29/2015

0 Comments

 
When I was in elementary school I loved the Great Brain series by John D. Fitzgerald.  The books mainly focus on Tom D. Fitzgerald,  John's older brother and their childhood in Utah.  The other day I noticed "The Great Brain At The Academy" on our book shelf and could not resist the urge to pick it up and read it.  I was amazed at the business lesson's taught in the book.  Here are ten lessons I learned from the Great Brain.
  1. Identify opportunities
  2. Ask questions
  3. Watch others
  4. Risks are good
  5. Associate with the right people
  6. Take responsibility
  7. Provide solutions
  8. Be honest
  9. Willing to change
  10. Use your strengths
I recommend getting a copy of the book and reading it.  Check the children's section of your local library.  Tom was a fantastic entrepreneur with a knack for making money.   The book is still great and I came away with a new appreciation for TD and his great brain.
Picture
0 Comments

Income - Chart of Accounts

9/28/2015

0 Comments

 
Now for the fun stuff!  Everyone loves income, the more the better.  What is income?  Income is often referred to as revenues on the financial statements.  The official definition from the International Accounting Standards Board (IASB) is:  

Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity other than those relating to contributions from equity participants. 

Did you get all that?  Income for a basic small business is revenue or money received from selling your service or product.  If you priced your service or product correctly this will increase your cash in your bank account which should increase your equity in the business.  You have to love accounting!
Picture
0 Comments

Bookkeeping Happiness!

9/18/2015

0 Comments

 
Bookkeeping Happiness!
One afternoon during a busy tax season the receptionist buzzed me and told me my next appointment was here.  I walked into the lobby to greet them and had to hold my breath to keep from laughing.  You always hear about the shoe box full of receipts someone brings into the accountant to prepare their taxes.  On this day it was not a shoe box but an actual wooden dresser drawer full of receipts.

Want to have less stress and a happier life?  Good bookkeeping can go a long way toward reducing your anxiety over financial matters.  You may not always be pleased with the results, but you will be able to make decisions based on the information, and dresser drawers are difficult to carry in your pocket.

Here are five bookkeeping tips to help you get started.

  • Do it!  
This is the most important tip in bookkeeping and in life for that matter.  If we never start the process we will never realize the benefits.  Jennifer Kunst, Ph.D, wrote an interesting article on this subject:
Neville Symington puts forward the idea that a shift from the old routine to a new way of being requires what he calls an act of freedom.  This kind of freedom means having a mind of one’s own, acting in faith in oneself and one’s good objects, and taking a chance.  We must cut the ties to the old way in order to try something new.  Whether we succeed or fail in that one moment, we have succeeded in the big picture because we have invested in real change.  (A Headshrinker’s Guide to the Galaxy, 2012)



Being successful is difficult and takes courage to change.  Many people desire to be financially free but are unwilling to do the work which is required.   You must be consistent in the effort put forward and be aware what needs to be done.  Start now, do not procrastinate.
  • Be organized 
Spend some quality time and and think about your bookkeeping system.  What do you need to keep everything assessable?  Use an accounting program to track all of your business income and expenses.   There are many programs to choose from:  QuickBooks, Xero, Wave, Less Accounting and others.  Identify a place for all of your documents and be diligent in filing and saving them.
  • Use a budget
Budgets are amazing.  If used correctly your budget will help you make money.  They will help you evaluate your current spending, help you set goals for your future and help you track where your money will be spent.  At the beginning of the year complete a simple budget for each month.  Each month compare your actual results with your budget numbers.  If problems appear they say, “fix me.”  You are able to take action and correct immediately.    Each month as you adjust your spending to optimize your results with the budget you will spend less and will increase your bottom line.
  • Know your cash balance
This may seem obvious but do you know what your cash balance is?   Check your cash balance everyday and know what transactions have not cleared the bank.  Do your bank reconciliation every month.  On the first day of a job I was asked to get the bank reconciliations caught up, they had not been done for over a year.  I spent weeks working on them and in the end had to make some sizeable “adjustments” in order to balance.  This company struggled with cash flow and one of the reasons was they did not know their actual cash balance.  You must know your cash position and manage it accordingly.
  • Get help
Guess what?  Your spouse does not want to keep the books.  I know it is hard to believe. Too many spouses do it and in most cases it does not work.  Do not wait until your tax return is due and ask your tax preparer to clean up the mess.  Get someone involved on a daily, weekly or at least monthly basis.  Ask your tax preparer if they would recommend someone or ask other business owners for suggestions.  A qualified bookkeeper will make your life easier which will make everyone happy. Once you have someone helping with the books ask questions and expect answers you understand.  It is your responsibility to make sure the bookkeeping is in order.  Do not assume. If you do not know, ask.
0 Comments

Equity - Chart of Accounts

9/17/2015

2 Comments

 
Everyone wants equity in a company.  Equity is what the shareholders or owners in a business are owed after all liabilities are paid.  A simple example is your company sells $1,000 worth of items and you paid $600 for the items.  The remaining $400 would eventually end up in the equity account.  The legal structure of the business will determine which equity accounts are used.  These may include owner's capital, owner's draw for a sole proprietorship or capital stock, common stock, and preferred stock for a corporation.
Picture
2 Comments

Liabilities - Chart of Accounts

9/16/2015

0 Comments

 
Now for liabilities.  In general liabilities in a business are amounts owed to others.  These may include:  accounts payable (invoices to vendors), wages payable, payroll liabilities (payroll taxes owed to federal and state agencies), sales tax payable, customer advances, bank loans, credit card payable and notes payable.  These are just a few examples of liabilities a company may have.  If your business owes money to someone else you have a liability. 


LIABILITIES
0 Comments

Assets - Chart of Accounts

9/14/2015

0 Comments

 
Let us talk about assets.  This is typically the first section on the chart of accounts in an accounting system.   What exactly is an asset in regards to a business?  Assets are something owned by the company which can be converted into cash.  For example cash, office furniture, accounts receivable, inventory and equipment.  The more assets the better!
Picture
0 Comments

Sections of the Chart of Accounts

9/8/2015

0 Comments

 
The chart of accounts is divided into sections to help keep your books in order.  The basic sections are:  assets, liabilities, equity, income and expenses.  Each section contains similar accounts which are grouped together to help form the financial statements.  These financial statements help you make decisions concerning operating the company.
Picture
0 Comments

What is an account?  (Chart of Accounts)

9/1/2015

0 Comments

 
We all have accounts of some sort.  These may be a bank account, investment account, or an account with a vendor or customer.  We are all familiar with the term account, but do you actually know the definition?  This is straight from the Google research tool:

account;
  1. a report or description of an event or experience.: "a detailed account of what has been achieved".
  2. a record or statement of financial expenditure or receipts relating to a particular period or purpose.: "the ledger contains all the income and expense accounts" "he submitted a quarterly account".

It is basically where information is stored in order to organize your transactions in your bookkeeping system.

Account
0 Comments

    Archives

    March 2023
    May 2019
    April 2019
    December 2018
    August 2018
    March 2017
    June 2016
    February 2016
    January 2016
    October 2015
    September 2015
    August 2015
    June 2015

    Categories

    All
    Accounting Terms
    Be Happy
    Bookkeeping Basics
    Book Reviews
    Financial Ratios
    Glossary
    How To
    Poetry
    Tech Tips

    RSS Feed

Connect with us
Privacy Policy
© 2015-2023 Accounting First LLC