Posted by admin on July 19th, 2017

Chart of Accounts for a Service Business – Accounting

A well-designed chart of accounts for a service business limited liability corporation, or LLC, allows for easy reporting and income tax preparation. The chart of accounts is a catalog of all accounts to be used by a business during the year. It’s organized to provide a centralized place to accumulate financial information. The accounts are generally identified by numbers and a brief description, such as 1010 Cash – Bank of America, 2010 Accounts Payable and 5020 Insurance Expense.

Verify what reports you need.

A proper chart of accounts for a business service LLC should provide information for reporting internally and to external parties. You first identify what you need for tax returns and then set up the chart of accounts around this need. Then, check out other government reports, such as sales tax or equipment reports and be sure the chart of accounts can help you in these processes. If management or investors need a specific financial report, be sure that the accounts setup in the chart can be compiled to create such a report. You may need to separate sales by type or to provide more granular information, such as sales by locations, or sales by type and you will need to create separate accounts to accumulate data in this fashion.

Assets, liabilities and equity accounts

Set up balance sheet accounts in your chart of accounts, such as assets, liabilities and retained earnings. Identify ranges for assets, such as from 1000 to 1999. Liabilities could run from 2000 to 2999 and retained earnings would run within the 3000 to 3999 range. As you create accounts, use these ranges to keep the accounts straight. Within the assets, you should have at least one cash account, which could be a 1001 Cash – Bank Alliance. Don’t set up a liability account using the range for assets, or you will end up with a mess. If you’re not clear about what accounts to create, search for a balance sheet template online to get ideas.You can also review your tax return for balance sheet accounts.

Income and expense accounts

Create income statement accounts in your chart of accounts. These are revenues and expenses related to the service business. You decide on an account range for your revenues, such as 4000 to 4999 and set up these accounts within this range. For example, a service revenue account would be 4001 Consulting Revenue account. Expenses would have a range of 5000 to 7999 and are created to track expenses separately. For example, if you pay for rent, office supplies and insurance, these transactions are recognized in three different accounts, such as 5010 Rent Expense, 5003 Office Supplies Expense and 5010 Insurance Expense. Don’t use the same account number on more than one account. If you’d like to know what accounts belong to the income statement, take a look at your own business tax return or at the Internal Revenue Service Form C, filed with a 1040.

Note that commas are not used with account numbers.

Creating a chart of accounts can be a challenge, but doing it on a systematically way will help you get the results you need. You could test your chart of accounts by running reports and making sure information is placed in the right spots. You could also have an accounting professional review your chart of accounts before you start using it.

~~~~~

Sheila Shanker CPA, MBA, based in Southern California, is a consultant with over fifteen years of solid experience in many industries, including nonprofit organizations. Her latest book, “Nonprofit Finance: A Practical Guide” was published in 2015. Sheila writes online self study CPE courses, and her articles have been published online and in national magazines, such as “Journal of Accountancy”, “Nonprofit World”, and “Architecture Business and Economics”. You can contact her at her website www.webshanker.com.

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Posted by admin on June 27th, 2017

Are You Ready, WILLING, And Able, To Be A True Leader?

Why is it, many appear to want to attain a position of leadership, yet, so few, are ready, willing or able, to do, what’s necessary? Nominating committees, today, often face the task, of identifying, and qualifying, those fit to serve, but, rather than maintaining the highest ideals, standards and expectations, end up, settling for someone, who may be Not ready for prime time! There is no such thing as a born – leader, and, therefore, like most acquired assets and/ or skills, requires a commitment, to undergo extensive training, learn from what they are trained to do, gain relevant experience, and transform it to quality expertise. Let’s briefly examine, using the mnemonic approach, what goes into being WILLING, to serve, to the best of one’s abilities and potential.

1. What; when; Do you know what you need to do, and/ or what your group needs? How will you make that determination and decision? Will you procrastinate, or when will you begin to consider, the best, most viable course of action to take, and to do so, in a timely, well – considered manner?

2. Intentions; integrity; ideas; ideology: Examine your true intentions, objectively! Will you maintain the highest standards of absolute integrity, and proceed, with these ethics, even when tempted to take an easier, more expedient path? How carefully will you consider the best course of action, and will you consider a variety of options and alternatives, with an open – mind, and introduce quality ideas, which make a significant difference, for the better? Is your course of action, in sync with the ideology of your organization?

3. Listening: Are you so focused on making your point, or will you carefully listen, to what your constituents say, perceive, need, are concerned about, and consider a priority?

3. Learning: It is a fatal flaw, to believe you know – it – all, and feel, you need no further learning! Will you commit to transforming your training, education and experiences, to effective, meaningful learning?

4. Ingenious: Will you only proceed, with the same – old, same – old, approaches and philosophies, or proceed, in an ingenious, relevant, open – minded manner?

5. Needs: Focus on the needs, concerns and priorities, of those you serve, rather than your personal, self – interest, and/ or agenda!

6. Generate goodwill; growth: True leaders realize, unless their group is constantly growing, and remaining relevant, it will fail to be sustainable. A real leader, therefore, must prioritize generating goodwill, and seeking sustainable growth!

Are you ready, WILLING, and able, to serve, as a meaningful, true leader? Why do you believe you’re up to the task?

Richard has owned businesses, been a COO, CEO, Director of Development, consultant, professionally run events, consulted to thousands of leaders, and conducted personal development seminars, for 4 decades. Rich has written three books and thousands of articles. His company, PLAN2LEAD, LLC has an informative website: http://plan2lead.net and LIKE the Facebook page for leadership: http://facebook.com/Plan2lead

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Posted by admin on June 24th, 2017

Six Areas of Specialization For Managerial Accountants

Unlike a financial accountant, an accountant working with management has various areas of specializations. These areas are above and beyond those one would normally find a financial accountant performing. Some of the duties and responsibilities a financial account may perform are as follows: records, sorts, and files accounting information. The maintaining of one’s specialty in performing services covering cash management, payroll, accounts receivable, accounts payable, inventory, or purchasing transactions. Finally, the financial accountant may also be involved in a small portion of the total accounting responsibility for a firm as in relation to an accountant working with management who has a broader view of the operation and greater responsibilities.

The following are six areas of specializations one would expect a management accountant to be able to perform in an effective and efficient manner in compliance with Generally Accepted Accounting Principles (GAAP):

  1. Accounting Information System. Management accountant in this area designs and implements manual and computerized accounting systems to gather managerial information for better management practices.
  2. Financial Accounting. Based on the accounting data prepared by the financial accountant, management accountant prepares various reports and financial statements, and helps in analyzing, operating, investing, and financial decision making for management effectiveness and efficiency.
  3. Cost Accounting. The cost of producing or providing services must be measured. Further analysis is also done by an accountant working with management to determine whether the products and services are being produced in the most cost-effective manner.
  4. Budgeting. In the budgeting process, a managerial accountant helps management develops a financial plan which positively impacts profitability and improves cash flow.
  5. Tax Accounting. Instead of hiring a public accountant, a company may use its own managerial accountant. For example, one may focus on tax planning, preparation of tax returns, and dealing with the Internal Revenue Service and other governmental agencies.
  6. Internal Auditing. Internal auditors review the operating and accounting control procedures adopted by management to make sure controls are adequate and are being followed. Managerial accountant may also monitor the accuracy and timeliness of the reports provided to management and to external parties for accuracy and compliance with rules and regulations in accordance with GAAP.

© Joseph S. Spence, Sr., 9/7/09

© All Rights Reserved

Submitted by “Epulaeryu Master.”

Joseph S. Spence, Sr., is the author of “The Awakened One Poetics” (2009), which is published in seven different languages. He also co-authored two poetry books, “A Trilogy of Poetry, Prose and Thoughts for the Mind, Body and Soul” (2005), and “Trilogy Moments for the Mind, Body and Soul,” (2006), winner of the 2009 Best Christian Poetry Award from ChristianStoryTeller.com. He invented the Epulaeryu poetry form, which focuses on succulent cuisines and drinks. He is published in various forums, including the World Haiku Association; Milwaukee Area Technical College, Phoenix Magazine; and Taj Mahal Review. Joseph is a Goodwill Ambassador for the state of Arkansas, USA, and is an adjunct faculty at Milwaukee Area Technical College. He has completed over twenty years of service with the U.S. Army.

[http://www.trilogypoetry.com/]

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Posted by admin on June 13th, 2017

Limitations of Financial Ratio Analysis

I am a big fan of ratio analysis for small business owners. I don’t have to inspire large company CFOs and Controllers to perform ratio analysis, because it is their daily bread, but I find that many small business owners have not yet gained an appreciation of what financial ratios can do for them.

But as much as ratio analysis can help you, it can also mislead, so I thought it would be good to delve into the limitations of financial ratio analysis today.

Ratio analysis can be only as good as the underlying data

Ratios are absolutely wonderful. They boil down a complex set of numbers and relationships to a simple, 1 or 2 digit number which tells you volumes! But beware… What if those complex, underlying data are not accurate? Many important decisions are made because a ratio has changed by 1 or 2 percentage points. Given that, your accountant better make really sure that the calculations can be relied upon.

In the small business environment things like reconciled trial balance (yes, not only the bank accounts!) and monthly, reviewed financial statements cannot be taken for granted. Many small businesses do not have adequate accounting systems in place nor do they all have competent accounting personnel making sure the monthly financial results are not only available, but actually accurate.

Calculating any ratios based on questionable data and an unreconciled set of books can be very dangerous. So, before any analysis is even attempted, the accounting records must be brought up to par.

Ratio comparisons can be meaningful only, if data is truly comparable

It’s a challenge to achieve comparability among different firms, even in the same industry. Different depreciation methods, different inventory valuation methods used, different policy regarding capitalization of certain expenditures make it very hard to arrive at financial statements which can be compared meaningfully.

But even comparisons of different periods within the same company can get tricky. I have seen many small businesses with a high turnover of the bookkeeping/accounting position and my review of the general ledger revealed often that there was no consistency in the way many transactions were posted by those different people. This would make comparisons less valuable than they could otherwise be. This brings us back to our first point – accounting records need to be not only accurate but also consistent.

Ratio analysis reflects only what is in the financial statements

Obviously, financial ratios will reflect only what is contained in the financial reports of the company. And as valuable as that can be, it does not capture many factors which can have a profound impact on the business and yet cannot be quantified or expressed in accounting terms.

I remember acting as a part-time controller for an insurance firm which has just been purchased by an international player. The President was given a certain ratio as a target for his accounting department salary costs. Based on this ratio, he couldn’t add a single person to his accounting staff. On the contrary, to meet the target, he would have to let some people go first.

But that didn’t take into consideration the particular situation this company was in. Due to historical reasons, the staff had very low qualifications, systems were old and the only way out was to bring a strong full-time controller or CFO to reorganize the department. The target ratio wouldn’t allow for that. But it was the best thing to do in those circumstances. Intelligent leadership will recognize such limitations of ratios and make the right business decisions anyway.

Other factors not contained in the financial statements can be technological developments, competitor’s actions, government actions, etc. All elements with potential impact on the business need to be evaluated when making important decisions, not only financial ratios.

Still, financial ratio analysis is a key component of those decisions and I would venture to say that a company which doesn’t avail itself of this information is at a disadvantage.

Lucy Rudnicka is a former Corporate Controller. She now owns her own Accounting Services firm – FINANCIALS for You – and specializes in small business bookkeeping as well as part-time Controller services.

She believes that every business, no matter how small, needs accurate and timely financial statements. Start using financial ratios by downloading a profit and loss template with ratios [http://www.financialsforyou.com/profit-and-loss-template.php].

Get your FREE Small Business tips [http://www.financialsforyou.com/small-business-articles.php]

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Posted by admin on June 12th, 2017

The Importance of Accounting For Small Businesses

When starting your own small business one of the most important aspects to think about is the accounting process and how you choose to account all of your financial information. It is important to understand that the accounting of your business’s financial information needs to be accurate or else your business may not be as successful as intended. Even if you don’t like accounting or numbers, there is no way to avoid accounting for a business. The purpose of accounting for a business is to have a record of the receipts and expenditures of it’s daily activities. Also, accounting makes it available for the business owners to assess and analyze the business’s performance. This will help the owner to decide what improvements they need to make, or what practices to keep doing in order to keep the company at it’s successful place.

In order to file for tax returns, apply for a loan to expand your business, or for certain legal purposes, accounting is necessary. Accounting for your small business is also important so you are able to assess your financial performance. The financial statements such as the balance sheet and cash flow statement show financial information that is important in the success of your business. The balance sheet shows how much your business is worth and what your assets are. The cash flow statement shows where the future cash needs of your business are. Without any of these financial statements your business would not be able to account for the revenues and profits made from day to day, which results in mistakes and inaccurate records.

In the tough economic times we are facing today, having accurate accounting is necessary. There are so many firms that can assist you in accounting for your small business. So many small business owners believe that they need to be able to do their own finances and take the accounting in their own manners. However, that surely is not the case. It is much better to hire a firm that is respectable and can help assist your company in the accounting department. That way, while the firm is handling your accounting necessities, you can be improving your business by putting your name out there to draw in more clients, keep a strong relationship with existing clients, and encourage your employees constantly so that they, too, are putting their best efforts towards your company. This will definitely improve your business and help you as the small business owner to feel more confident and less stressed, knowing that your finances are safe with a trusted accounting firm. There are too many instances where small business owners have tried to take accounting into their own hands, and unfortunately have not succeeded in the process. If you want to have a successful business, you have to learn to keep the accounting out of your job task. In addition to hiring an accountant, as the business owner it is important to purchase accounting software, such as QuickBooks. This type of program is where you will be able to keep track of receipts and expenditures and will help make the financial reports for you as well.

If there is one certain fact about small businesses and accounting it is that the staggering failure rate for new businesses, has more to do with bad financial management than almost any other problem. Whether it means the company does not have a successful business plan, their expectations are impracticable, there is no limits on spending, or just bad decisions made in the financial department overall, businesses such as these need to realize the importance of accounting and what a difference it can make for their company. There are a few options small businesses have for improving some of these mistakes. Small business owners need to be aware of how accounting systems work so that they can realize when their finances are successful or in danger, as well as understanding how to make and read a chart of accounts that makes sense to them.

One of the major problems with small business owners and failing to do the accounting for their business is that the businesses grow so fast to the point where the owners do not have time to worry about the accounting part of the business. They get caught up in trying to perfect their customer service, that they do not see the significance in getting the financial aspect of the business up to par. Hopefully, small business owners will begin to realize how important accounting is for the business, and we will see more successful businesses and less failed businesses in the future.

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Posted by admin on May 13th, 2017

Effective Management Skills – Investment Evaluation Criteria

Three steps are involved in the evaluation of an investment:

• Estimation of cash flows

• Estimation of the required rate of return (the cast of capital)

• Application of a decision rule for decision rule for making the choice

Investment decision rule

The investment decision rules may be referred to as capital budgeting techniques, or investment criteria. A sound appraisal technique should be used to measure the economic worth of an investment project. The essential property of a sound technique is that is should maximize the shareholders wealth. The following other characteristics should also be possessed by a sound investment evaluation criterion:

• It should consider all cash flows to determine the true profitability of then project.

• It should provide for an objective and unambiguous way of separate good projects from bad projects.

• It should help ranking of projects according to their true profitability.

• It should recognize the fact that bigger cash flows are preferable to smaller ones and early cash flows are preferable to later ones.

• It should help to choose among mutually exclusive projects that project which maximizes the shareholders wealth.

• It should be a criterion which is applicable to any conceivable investment project independent of others.

These conditions will be clarified as we discuss the features of various investment criteria in the following posts.

Investment Appraisal Criteria

A number of investment appraisal criteria or capital budgeting techniques are in use of practice. They may be grouped in the following two categories:

1. Discounted cash flow criteria

• Net present value

• Internal rate of return

• Profitability index (PI)

2. Not discounted cash flow criteria

• Payback period

• Accounting rate of return

• Discounted payback period

Discounted payback is a variation of the payback method. It involves discounted method, but it is not a true measure of investment profitability. We will show in our following posts the net present value criterion is the most valid technique of evaluating an investment project. It is consistent with the objective of maximizing the shareholders wealth.

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Posted by admin on May 11th, 2017

Red Flags, Taxes: Your “Bill of Rights”

 

Did you know that you have a bill of rights? Probably, but not a “bill of rights” for taxes.
Well, there is a “bill of rights” for taxes and as a tax payer, you should be aware of them.

 

There is an article on the wires today that talks about red flags and why not to do something. If you have read the taxpayers bill of rights “you have the right to pay the correct amount of taxes”. Having the right and knowing how to exercise that right are two different things.

Red flags exist because historically the deduction is not taken properly which is with documentation ergo be prepared. The first of the CNN red flags was charitable contributions, for most of us this is not an issue, but for the 300K or higher earners and business owners this is the number one best deduction you can have to lower you AGI. Through conservation easements and historical building easements you can lower your AGI by 50% when approved by congress this year. It is a savvy tool, you will need help but that brings us back to the other tax payer right, the right to representation.

Home office- Red flag, don’t take no for an answer, we teach you how to document this for a proper deduction, the IRS was having such a hard time they put in an option to take the home office for $5 a sq. ft. this year to make it easy. If you take the later you probably will leave money on the table.

Bizarre deductions – is also noted, again there may be a good reason for such things. There are many things under health care that are allowed and may be bizarre, like a swimming pool. For some, this is a quality of life thing as it is a form of rehabilitation with a prescription from a doctor. Tax Saving Professionals is not in the business to justify all deductions, but all of us have a way to get a Private letter ruling which is an approval before taking a deduction from the IRS if you think it is bizarre. What we do is consult and provide the best possible interpretation of the tax code to your benefit as it is 73,954 pages long.

If all of this is new or news to you, then you might be overpaying your taxes. We service high net worth clients in excess of $300K per year and business owners with revenues of $1M and above.

by Ray Phair, COO, Tax Saving Professionals

 

 

CNN Money : IRS Red Flags

 

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Posted by admin on November 25th, 2016

Taxact.com – Where is Magic Money? – Working Capital Video Definition



Taxact.com – Bookkeeping Services, Payroll And CA Income Tax Services |A&C



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Posted by admin on November 17th, 2016

HRblock.com – What Is Magic Big Tax Break for Thousands & Billionaires?



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Posted by admin on September 9th, 2016

Want To Know All You Need to know about QuickBooks Inventory?


This video shows you full information for your Inventory’s knowledge.


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