Business Books

by Selina
(Co. Louth, Ireland)

What are the main reasons a business needs to keep books?

One of the main reasons a busines needs to keep books is so that it has an accurate record of income and expenses for the year for the reporting of annual income taxes.

Also, for helping to determine where the company may be able to cut back on expenditures in order to increase cash flow.

Or, for bank reconciliations and knowing how much money the business has at any given time in order to be able to stay current on accounts payable.



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Business Credit Cards

When you make a purchase by business credit card how does this get recorded in the ledger accounts?

I understand that when paying the card off you credit the cash account and debit the card account.

Is it the opposite way round when making purchases, and if so what about the interest on the card account? Does this get recorded as well?


Hello,

Thank you for your question regarding business credit cards.

When making a purchase by business credit card you will credit the card account and debit the expense account for whatever purchase you are making, including interest.

For example, let's say you purchased $100 in gas, $250 in materials, $30 in meals and incurred $25 in interest. It would be recorded as follows:

CREDIT $405.00 to Card Account

DEBIT $100.00 to Gas Expense

DEBIT $250.00 to COGS - Materials Expense

DEBIT $30.00 to Meals & Entertainment Expense

DEBIT $25.00 to Interest Expense



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Expense Carpeting For a Business

by Sue

Which account do I expense carpet under?

Hello Sue,

Thank you for your question.

Carpet would typically be expensed under repairs and maintenance on the profit and loss if under $500, or as a capital improvement on the balance sheet if over $500.



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How to Separate Business and Personal on Quickbooks?

by Al
(San Diego)

Thanks for this great service. I operate a single entity LLC out of my home. As such, I have home office expenses which I am allowed, as well as partial use of the car, etc.

I wish to keep personal and business books completely separate, but in my sort of situation, this seems impossible. I pay for the car and home office split expenses out of my personal bank/credit card accounts and currently report them on Quicken and leave them out of my business Quickbooks.

Does anyone have a Quickbooks methodology for handling split expense accounts such as home office and auto?

Thank you in advance for your assistance.


Hi Al,

Thank you for your contribution. You are doing things the right way by maintaining separate business and checking accounts in Quickbooks and Quicken.

What typically would happen is, you will provide your home office and auto information to your tax provider for these additional business deductions. Then an adjusting entry would be made at the end of the year to add the additional expenses to Quickbooks through the Equity Account.

I hope that helps to clarify.




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New business in 2010 w/2009 expenses

by Steve H
(Anchorage, Alaska, USA)

Hello

I'm trying to help a family member out with some simple(?) bookkeeping. They set up a new contracting business (sole proprietorship) in 2010 but incurred some expenses in 2009.

License and bonding expenses, tools purchased, and some building supplies for an upcoming job were all purchased in 2009.

I keep thinking there's some imaginary line that can't be crossed because the business began in 2010 and the expenses from 2009 can't be included.

How do I account for the 2009 expenses in the journal entries, etc? The software (quickbooks) shows the business start date as 1/1/2010.

Do the 2009 expenses end up on the 2009 taxes or next years taxes?

Thanks for the help, Steve


Hi Steve,

I appreciate your contribution. You can do one of two things:

1) Enter all 2009 expenses incurred into the year 2009 and include these in the 2009 tax return for a first year loss. Or,

2) Enter all 2009 expenses incurred into the year 2009 and carryover the expenses as Start-up costs for 2010. Of which $5,000 can be expensed and the rest would have to be capitalized.

Regards!



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Recording Business Transactions Paid From Personal Checking and Credit Card Accounts.

by Alisa
(Alabama)

I've recently started a single member LLC.

I am in the process of setting up the books for my online business. The official start of the business was 9/4/2009 when I formed the LLC.

Prior to getting a business checking account, I used my personal checking account to pay for my LLC and business licenses. I used my personal credit card to pay for some marketing, website creation in June, website hosting after 9/4.

On the credit card, I plan to pay this card off completely shortly after the first of the year with some personal income that I will borrow from my husband. Also, when I opened my business checking account, I deposited a small amount of money ($300) from a personal account.

So, how do I pass all of this through my business and pay my personal accounts back for the moneys I've spent and interest that's been accrued on the credit card? I also want to make sure I'm covered as far as tax write-offs, since all of these items are tax deductions.

I'm keeping all this information (transfers from personal accounts, credit card charges, calculated interest, checks written from personal accts) on an excel spreadsheet titled "Expense Reimbursements". I plan to print this off, sign it, and put it in my files, along with receipts and other documentation, once I get the money to pay the credit card off. Is there anything else I need to do with this form? Should I be printing this form out monthly instead of waiting until I've paid the credit card off?

Finally, can you tell me how to properly record all of this in my accounting software? I'm currently using QuickBooks Simple Start 2009 free version, but plan to upgrade to QuickBooks Pro when money allows.

I'm confused about whether this should be run through Owner's Equity or as a libility where I actually make a loan from my personal money to the business, or some of both. I want to do what is to the best advantage tax wise. I want to get this all set up right. I took a couple of accounting courses back in college, but that's been more than 30 years ago.

Thanks,
Alisa

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Start up Business - No Transactions Recorded.

by Mai
(Clinton, AR)

A small business (LLC) in remodeling and home improvement has started sometime in September 2009 but not opened to the public yet. The owner has hired 6 salaried employees and 6 hourly employees. I came in mid of Jan 2010. No transactions were recorded. The owner has paid his employees through a simple payroll software she made. As of this date, it has no sale yet and spent more on expenses and invested more on capital to open the business. The owner expects to open in March 2010. My questions are:

1. How should I organize the recording of transaction?

2. Should I make a big journal entry to record all transactions that transferred in 2009 and make it a starting transaction for January 1, 2010? Debiting all expenses, assets like vehicles, computer hardware & software, cash in bank and other assets, and credit to Credit Card Payable and Owner's Equity?

3. How would it affect the 2009 tax filing?

4. She has Quickbooks Pro software, this is my first time to use it. How should I address the 2009 transactions?

I hope you would help me on this. I am still playing with quickbooks and learning the software. Thanks


Hi Mai,

Thanks for your question. Basically, all transactions should be entered as of the date of the transaction. Therefore, all 2009 transactions should be entered in 2009 and the tax return will show a loss for the first year of 2009.


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Where To Start With Bookkeeping

by Candice
(Cape Town)

I did 2 bookkeeping courses: Bookkeeping to trial balance & Payroll to statutory returns when I go in a company where do start, or what must I do first? Will I record all supplier & customer invoices on Quickbooks? I work with petty cash & record cheques & send everything to our bookkeeper with bank statements but I want to know where do I start?

Hi Candice,

Thank you for your question.

A good place to start is by setting up your chart of accounts and entering any current balances to asset accounts. (Such as bank accounts)
Then go ahead and start entering all outstanding invoices and accounts receivable. Next enter all long term liabilities and equity contributions or withdrawals.


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