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Track Transactions With Accounting Code Guide Basics
If you plan on starting a business, a basic knowledge of the accounting code guide is necessary in order to keep track of your transactions. Even if you are not a bookkeeper and you decide to hire a professional, the basic accounting knowledge is always a plus in the success of your business.
Accounting information is organized within the financial system of your company through the Chart of Accounts (COA). A list of all account names and numbers (cost elements) that appear in the company's General Ledger is included in this document.
The COA is used to classify transactions as income, expenditure, assets, liabilities and equity. All financial transactions must be coded against an internal order (indicating ownership) and cost element (what the transaction represents), which provide the basis for budgeting, monitoring and reporting. The elements of the COA are:
FUND
This is a 6 character code which basically describes to source of funding in a transaction. Generally, the first 5 digits represent the office of the president fund number, while the final digit is used to establish sub-funds for further breakdown.
ORGANIZATION
It is also a 6 digit code, which represents the department of a company.
ACCOUNT
It is a six character code which represents the basic accounts classification. There are 7 different account types, and these are: assets, liability, system control, fund balance, revenue, expenditure and transfer.
PROGRAM
Yet another six character code, it represents the functions of the respective company.
ACTIVITY
This is designed for future use.
LOCATION
It is a six character code, and it is used for identifying assets from transactions.
INDEX
This one is a seven character code and it represents FOPAL (fund, organization, program, activity and location). The first three characters of the index are letters and they represent the name of the organization. The last four identify the FOPAL combinations.
This is a simple and basic walkthrough in the world of the accounting code guide. A professional bookkeeper is much more than that though, and if you consider an accounting career, you should know that it's a work that requires a lot of patience, but it can pay off in the end.
You should also consider purchasing accounting software (although you can also get it for free) if you are serious about your company. The choice is yours, and it really depends on the size of your organization also. Most of the business owners leave the accounting stuff to specialized people, who are able to process all the information correctly, people who have a good knowledge of the accounting code guide.
Essential accounting code guide
Accounting code guide. http://www.accountingcodeguide.com
Great accounting software resource
Accounting software. http://www.accountingsoftwarefaq.com
Accounting Processes - Bookkeeping To Final Statements
The most important lesson that every aspiring accountant learns right through his education and training is that of recording the transactions accurately and in the proper format. For there can be nothing more damaging to the credibility of the accounting process, if one could not rely on the figures thrown up.
Bookkeeping is an important aspect of an accountant's job. Although it might seem quite mechanical, practically it is not so. In a large organization, despite standardized or mechanical data capture facilities book-keeping is the best way to exercise control.
Accountants record transactions on the basis of vouchers. A voucher is a concise slip that shows the appropriate item to be debited or credited along with full details of the supporting documents. Usually, cash and check payments are recorded through vouchers. Assume, the firm paid in cash for buying office stationery. The debit voucher shows the account to be debited as Printing and Stationery or any equivalent term, the amount paid in figures and words and the details of the bill from the supplier.
For the sales and purchases transactions, entries are made in a book called the sales journal and purchases journal. The credit sales and purchases are recorded with complete details about bill number, party name, quantity and total amount. The daily totals from the journals are posted into the respective ledger accounts. Cash sales and purchases are posted directly from the cash book.
The books of prime entry are the Cash book (with columns for bank transactions), Sales journal, Purchases Journal and General Journal. The General Ledger is the book of secondary entry. Recording of transactions is complete only when they have been posted into the appropriate accounts in the General ledger. On a monthly interval, all the accounts in the ledger are totaled. Then a statement called the trial balance is extracted that lists all accounts with their respective balances. If the trial balance tallies, that is the debit balances equal credit balances, the numerical accuracy of the accounting system is established. Otherwise, we could conclude that the double entry principle has not been adopted properly.
Other statements that the book-keeper maintains are the bank reconciliation, creditors' ledger, debtors' ledger and fixed assets register.
From the trial balance, the statement of income and the balance sheet can be prepared. During the course of finalizing these statements, one would come across errors. The rectification entries for correcting them are passed through the General Journal. The ledger postings are made so that the correct balance can be arrived at. Sam Kern has also recently published an article on Delinquent Tax Returns.
Your Home Business Tax Deductions
If you operate your own home business, then you are probably aware that there a few drawbacks to being self-employed, just as there are a few drawbacks to any major decision you do in your life.
Being an entrepreneur and self employed often means that you lose some workplace benefits, such as group insurance, sick leave, paid vacations, etc. However, the government does provide solace balance to those who have an entrepreneurial spirit, and this solace comes in the form of tax breaks, because you the home worker small business owner, are the largest source of employment in America.
There are many possible tax deductions for home businesses; you simply have to be well-informed about them to make use of them.
There are good reasons for you to go through the trouble! Because you’ll earn more money that way. By knowing all the possible tax deductions, and more, that you can take, you’ll come away with more of the benefits that your business generates, instead of getting cleaned out by the government. When it comes to taxes, make no mistake about it – knowledge is power. The government needs you to have this power to keep it working also so they will help you when they can.
If you run a home business, some of the possible tax deductions for you are:
Home office costs, such as those that involve office repairs and maintenance. Expenses racked up through janitorial services, for example, when shown to be needed by the business, are deductible, as are waste management and garbage disposal services. Business furniture and equipment may also qualify for deductions in their year of purchase, as long as the amount does not exceed a certain limit.
Utility costs, such as electricity and water. The deduction applies to those areas that are used regularly and exclusively for business.
Telephone costs. This only applies if you have a separate line for use in business. A single line that is used for both business and personal calls does not qualify. However, if you make long distance calls and/or incur fax transmission fees, those expenses are deductible no matter which type of phone you use. You need to make honest percentage estimates of how much is used and keep good records based on your bills.
Rent or lease payments. A percentage of your rent, lease, or mortgage interest payments can be deductible provided that you are using the property regularly for business purposes.
Employee wages and employee benefits. If you are an employer of labor, you can deduct a portion of your salary and benefit expenses. Employee education and training costs are also deductible.
Education costs necessary in your line of work. This applies especially to professionals. Those who need continuing education to maintain their expertise may deduct the cost of this education from their tax returns.
Real estate taxes on business property. A portion of real estate taxes are considered deductible by the IRS.
Personal expenses. Some personal expenses, when conducted in conjunction with business affairs, are deductible. A portion of your automobile expenses, meal allocations, and travel and entertainment cots may qualify for deduction, as log as they are related to your business.
A final reminder: Try to maintain as accurate records as is possible. Document your deposits, income, expenses and deductions. This way, you will have proof validating your tax deductions. Because tax laws are complex and often changed, it is often advisable to consult a professional. This will allow you to claim as many possible tax deductions for home businesses as you can. Keep a stenographers notebook with separate pages for every deduction you feel you might have coming. Even if you don't know if it is a deduction, for now, record it.
The above is very powerful. If you think something might be a deduction, write it in your notebook.
Have a CPA do your taxes for you. They cost more but you will get more back and have less trouble with the irs.They will find deductions you did not know you have coming from your possible list of deductions and they will also take off deductions you do not have coming. Some things they will be able to carry over for years in the future.
Your CPA will give you tips that will save you time and money and make your business better. They have software that will make your tax work far more efficient. If you get called in for an audit your CPA will do all the talking and you say nothing. I let the IRS call my CPA, regarding my taxes, if they have any questions.
You are less likely to get audited directly by the IRS because your CPA has a reputation to keep up and will keep your taxes straight. You will even save the IRS some money because they know your CPA will do better tax work than you.
Overseas tax services cannot go to an audit with you. This is a very important benefit of a CPA for you. Even though their charges are less they cannot know your business as well as your CPA to help you with many problems and questions. Buy Americans when it comes to taxes.
If you are going to be an entrepreneur the CPA will serve you better than an automatic tax software program and yes the software programs will result in mistakes. By the way, I am not a CPA or trying to sell you any tax services.
References: IRS, CPA and 40 years of tax record business experience James M. Lowe writes original articles about home business opportunities.
Understanding Bank Reconciliation
Bookkeeping is fundamental in running your business in an informed way. It is important that you have an organized, transparent and updated bookkeeping system in place. One of the ways to keep track of your company's books is bank reconciliation.
What is bank reconciliation?
The procedure of comparing the account balance given by the bank with that of the company's book of accounts and explaining any discrepancy is bank reconciliation. The discrepancy in the balances may be due to the different timing of registering the data in the bank's books and in your company's books. This discrepancy is normal and is rectified automatically within small time. However, sometimes the discrepancy is due to an error, which has to be rectified manually and to catch this error you need bank reconciliation. Companies generally do bank reconciliation at the end of each month.
Reasons for maintaining bank reconciliation
Regular monthly bank reconciliation keeps your company's financial records clear and updated. You never build up an erroneous backlog. Also, you can understand your accounting status all the time. It is important that you have a prompt and reliable communication system with the bank so that you keep your records accurate.
Bank Reconciliation Statement
It is better to prepare a bank reconciliation statement by yourself so that you are able to figure out the causes of discrepancy.
Structure: The statement is divided into two sections. The right section reflects your bookkeeping for bank transactions and the left side reflects the bank's records for your account with them.
Heading: The heading of the statement will have the bank's complete name with the date of reconciliation.
Items: The first item of the statement is your opening balance just before the reconciliation. Check each item of the statement further for the following. If the transaction is missing from you our company's account and it is on the bank's record then you need to enter it in your books. If the bank section has missed it then enter it under their section. If the missing transaction belongs to the bank such as any fees deductions or interest credits, then it is an error at the bank's end and it will rectify the error.
Adjustments: Once the reasons for the discrepancy have been figured out then you should include the missing information in journal entries.
Items of Bank's Statement
Credit: Banks may credit some interest periodically into your account as applicable on the account balance.
Debit: These will be any of the bank charges on your account as applicable.
Erroneous credit: Any incorrectly placed credit in your account is booked under this head. Sometimes, the bank makes a deposit in the wrong account.
Items on Your Account Books
Unpresented check: Your Company's books should record any checks issue immediately at the time of issue. The bank will, however, record it when the check is presented to it.
Software for bank reconciliation
There is a lot of bank reconciliation software readily available in the market. This software is compatible with all the latest accounting packages. The data is automatically imported, checked and reported through the software making your job easier. David Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com
Understanding Account Reconciliation
When you confirm that the balance in your checkbook is in sync with your corresponding bank statement, it is known as account reconciliation.
Any record that you keep regarding your financial transactions with banks, credit card companies, or retail stores is known as an account. It is an arrangement between buyers and sellers in which payments are to be made in the future. The different forms of payment are checks, bills of exchange, and promissory notes. These are transferable, signed documents, which guarantee to pay the bearer a sum of money at a later date.
Purposes of Account Reconciliation
Account reconciliation makes available a suitable method for reconciling the accounts to the monthly financial reports produced by the Financial Records System (FRS). Account reconciliation helps you evaluate departmental account records in regards to the reports, which have been generated by the FRS. This helps you to better verify the accuracy of each account statement. The person in charge of each account should verify the account every month. Account reconciliation helps ensure accurate reports on the account. It helps to identify errors and inconsistencies in your accounting.
In order to perform the reconciliation most efficiently, you should be certain that the person in charge of an account maintains full and accurate records. It is your choice to maintain the records in a manual filing system or on a computer program. You can develop your own filing and record keeping system. It should be capable of providing an effective means of reconciling your accounts on a monthly basis. You can make use of the following files to make the reconciliation process easier.
Open Transaction Files: These files hold all source documents that you may have started for the account, but have not yet processed. Some common types of source documents are Distribution of Deposit forms (for cash receipts), Check Requests, Purchase Orders, Prepaid Purchase Orders, Interdepartmental Billing Forms, Merchandise Orders, and Travel Authorizations.
Pending Files: These files hold source documents that had some activities posted on the FRS report, but await further activities before they can be completed. These include Purchase Orders, Inter-departmental Billing Forms, Travel Authorizations and Travel Expense Reports.
Closed Transaction Files: These files hold the source documents that are fully processed in the FRS. You can always refer to the Records Retention Policy to establish how long documents must be maintained on file.
Monthly Reports: You receive these after the end of each month. The accounts must be reconciled to the monthly reports. The FBM090, Account Statement, and the FBM091 and Report of Transactions can be handed over to the person handling each account. You then compare the open transaction and pending files to the FBM091 and the Report of Transactions, which has a detailed list of transactions posted in a particular month. Make a comparison of the source documents with the report to find out if the encumbrance was properly established, adjusted, or canceled in the correct account and the correct object code.
