I have not failed. I’ve just found 10,000 ways that won’t work. – Thomas Edison Small Business Accounting TipRecording accounting journals is a process for each company. This process entails receiving income from clients and customers, recording business expenses and maintaining a business budget just to name a few. Accounting journal entries are necessary but some of those entries are expected to be reversed the next month because the actual invoice (cost) is set to be processed for payment.
Here is a summary of guidelines for reversing entries to companies of all sizes.
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Understanding the accounting language is important as a business owner. The accounting profession has many definitions and processes to reference depending on the industry of business. Below are a few vocabulary words to get you started thinking about your accounting system and establishing policies and procedures. Cost basis: Original cost of investment minus prior accumulated depreciation Goodwill: Purchase price less tangible value of physical assets purchased Net asset value: Cost basis minus accumulated depreciations (prior total depreciation) NSF: Non-sufficient funds, typically a returned check Unrealized gain & loss: Investment that has increased & decreased in value, but not yet sold A successful business owner understands their cost, asset worth and financial statements. Fontenot & Associates Solutions supports all business with establishing policies and procedures, visit our website today to learn more. Master your industry craft- Fontenot & Associates Solutions Don’t just read the easy stuff. You may be entertained by it, but you will never grow from it. – Jim Rohn The accounting for a manufacturing business deals with inventory valuation and the cost of goods sold. These concepts are uncommon in other types of entities, or are handled at a more simplified level. The concepts are expanded below just to name a few:
1. Review the company’s capitalizable costs. When setting standard costs, have all appropriately capitalizable costs been considered, such as incoming freight for procured inventories or overhead for produced inventories? For instance, freight is subject to potentially significant variations due to factors such as the carrier or the quantities being ordered. 2. Update standard costs regularly. Updating standard costs on an annual basis is a good start but is probably not frequent enough to ensure accurate inventory costing (not to mention the potential effects on the company’s income statement every time inventory is expensed inaccurately). If the cost of procuring or producing a product has changed since the standard cost was last modified, inventory will be misstated accordingly. 3. Maintain a “standard-to-actual” reserve in the balance sheet. Every time that any component of inventory is acquired or produced at a cost different than the assigned standard cost, that variance hits the income statement and inventory is misstated. If feasible, at the end of every reporting period an analysis of purchase and production costs for capitalizability should be performed. When complete, capitalizable variances should be recorded in a “standard-to-actual” reserve within inventory on the balance sheet with the remainder being appropriately expensed through the income statement. This reserve has the effect of adjusting the company’s inventory balances to “actual,” which is appropriate under GAAP. Fontenot & Associates Solutions LLC offers services in establishing policies and procedures for accounting and operational staff. Visit our website for a complete listing of our services and create the business framework of your business. Source:AccountingTools
If everything seems under control, you’re just not going fast enough. – Mario Andretti As a business owner you may start off being the sole owner whose responsible for completing task from A to Z. But as your business progresses and grows, some of the day to day accounting assignments will need to be supported by an intern or a full-time assistant. Either way, as a business owner you are giving up full control and allowing someone to step in and help you grow your business.
The accounting responsibilities are important which means educating your staff should always be a key objective for ensuring the financial statements or Excel worksheets are updated correctly. Below we provide the definition of Gross and Net and also link you up to a few examples of clarity between Gross numbers VS Net numbers in accounting. Examples which can also be used as internal self-development and education to key personnel. Gross VS Net Income: Gross: Gross income is calculated by subtracting the cost of goods sold from revenue. Net: Net income is calculated by subtracting expenses such as SG&A (selling, general and administrative expenses), interest payments and taxes from gross income. Follow the link here to educate your staff more about gross and net values. You can also visit our website and learn more about Fontenot & Associates Solutions services and how we are able to support with establishing policy and procedures in addition to training staff, which releases the stress from current staff and management.
Source: AccountingCoach
Prior to computers and software, the bookkeeping for small businesses usually began by writing entries into journals. Journals were defined as the books of original entry. In order to reduce the amount of writing in a general journal, special journals or daybooks were introduced. The special or specialized journals consisted of a sales journal, purchases journal, cash receipts journal, and cash payments journal. Bookkeeping (and accounting) today involves the recording of a company's financial transactions. The transactions will have to be identified, approved, sorted and stored in a manner so they can be retrieved and presented in the company's financial statements and other reports. Here are a few examples of some of a company's financial transactions:
The most efficient way to outline your business objectives is by establishing detail policies and procedures because whether administrative or accounting, all roles are linked to financial consequences. Motivation is what gets you started. Habit is what keeps you going. – Jim Rohn
It is always the start that requires the greatest effort. – James Cash Penney What is Sarbanes-Oxley?During the financial scandal of the early 2000s, stockholders, creditors and other investors lost billions of dollars. As a result, the U.S. Congress passed the Sarbanes-Oxley Act of 2002. This act, often referred to as Sarbanes Oxley, is one of the most important laws affecting U.S Companies in the recent history. The purpose of Sarbanes-Oxley is to maintain public confidence and trust in the financial reporting of companies. Sarbanes-Oxley applies only to companies whose stock is traded on public exchanges, referred to as publicly held companies. However, Sarbanes-Oxley highlighted the importance of assessing the financial controls and reporting of all companies. As a result, companies of all sizes have been influenced by Sarbanes-Oxley. Sarbanes-Oxley emphasizes the importance of effective internal control. Internal control is defined as the procedures and processes used by a company to:
Fontenot & Associates Solutions recommends establishing company policy and procedures to support with maintaining effective internal controls whether you are a private or publicly held business. Source: CorporateAccounting Success is how high you bounce after you hit bottom. – General George Patton
As a business owner it is important to establish your policies and procedures with key definitions to personnel understands the framework of the business. Visit us to view our services available. Source: SBA.gov
One doesn’t discover new lands without consenting to lose sight of the shore for a very long time. – Andre Gide Business Accounting TipAs you build your business it's important to understand the accounting aspect of depreciation. "Depreciation is an accounting and finance term for the method of attributing the cost of an asset across the useful life of the asset. The use of depreciation affects a company's (or an individual's) financial statements, and, in some countries, their taxes. Depreciation is an average or expected view of the decline in value of an asset. For example, an entity may depreciate its equipment by 15% per year. This rate should be reasonable in aggregate (such as when a manufacturing company is looking at all of its machinery), but there is no expectation that each individual item declines in value by the same amount." A company typically owns a variety of assets that have long lives, such as buildings, equipment, and motor vehicles. The period of service is referred to as the useful of the asset. Because a building is expected to provide service for many years, it is recorded as an asset, rather than an expense, on the date it is acquired. Companies records assets at cost, as required by the cost principle. To follow the expense recognition principle, companies allocate a portion of this cost as an expense during each period of the asset's useful life. Depreciation is the process of allocating the cost of an asset to expense over its useful life. Source: Smallbusiness.com
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