A doubtful account is an account that you expect will never be paid off. You can use aging to estimate what your allowance for doubtful accounts will be. There is one more point about the use of the contra account,Allowance for Doubtful Accounts. In this example, the $85,200 totalis the net realizable value, or the amount of accounts anticipatedto be collected. Benefits of accounts receivable aging The second reason is so that the company can calculate the number of accounts for which it does not expect to receive payment. Using the allowance method, the company uses these estimates to include expected losses in its financial statement. Accounts receivable aging sorts the list of open accounts in order of their payment status. There are separate buckets for accounts that are current, those that are past due less than 30 days, 60 days, and so on. For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. Either way, the past due intervals show you how much is overdue, how long it has been an outstanding balance, and which accounts need immediate attention (e.g., contact the customer for […]

Going Concern Concept – states that companies need to be treated as if they are going to continue to exist. This means that we must assume the company isn’t going to be dissolved or declare bankruptcy unless we have evidence to the contrary. Thus, we should assume that there will be another accounting period in the future. What is your current financial priority? Ed’s capitalizes these licenses and amortizes them in the years he doesn’t need a deduction and he expenses them in the years that he needs a tax deduction. This violates the consistency principle because Ed uses different accounting treatments for the same or similar transactions over time. For example, if the performance is based on Net Sales, management might not recognize revenues by using the same accounting policies. Learn At Your Own Pace With Our Free Courses In the last few years, Bob’s has become quite profitable and Bob’s accountant suggests that Bob switch to the LIFO inventory system to minimize taxable income. Companies are allowed to switch accounting methods if the company can demonstrate why the new method is better than the old method. The four basic principles of GAAP include the Revenue Recognition Principle, Matching […]

Under federal law, to calculate a nonexempt employee’s regular rate of pay, divide the weekly salary by the total number of hours worked. Multiply all overtime hours worked by the overtime pay rate. Under federal law, the total pay would be (regular pay rate x 40) + (extra hours x regular pay rate x 1.5). What is a payroll register and how to use one? Other exemptions exist, such as those for farmworkers and certain seasonal or recreational businesses. The FLSA narrowly defines exemptions, so employers should refer to the DOL for more specific guidelines. Our state payroll guides break down all laws and regulations that you’ll need to consider on a state-by-state basis, from minimum wage and overtime regulations to vacation accrual payouts. Check out our state payroll directory and click on your state for more information. Some employees may have different pay scales for different duties, such as sales vs back room. Are part-time employees entitled to overtime pay? The Department of Labor(DOL) requires most private employers to pay overtime instead of giving compensatory time. Even if your boss doesn’t approve the extra hours, they still must pay you for overtime. While it’s common in government jobs and […]

Once you have a handle on the day-to-day use of QuickBooks Online, try adding a few more tips and tricks to help you get the most out of the experience. For these tasks, you can download the “QuickBooks Accounting” app from the what is a special journal definition meaning example App Store, or the “QuickBooks Online Accounting” app from the Google Play store. Once you’ve logged in, you just need to hit the “+” symbol at the bottom center of the homepage, and you’ll pull up the main menu, which you can scroll through until you find the task you need. As you accept payment for any item in the inventory, the right expense account is updated and reflected automatically in taxable income. Tracking inventory as you sell them, entering the details in the right expense account and calculating taxable income at the end of the financial year can be very cumbersome manually. You can then share the invoice with clients through the mail or take a printout and send a hard copy. It allows you to run and view reports easily like the number of outstanding invoices, total amount due from clients and details of each invoice (paid or […]

Payment processing tools, payroll service, and other accounting software add-ons can simplify the process of accepting invoice payments online and paying your employees. Some accounting software like Freshbooks will save you time on invoicing and accounts receivable tasks by equipping you with automatic recurring invoices and late payment reminders. One of the easier cloud accounting interfaces to navigate, ZipBooks allows you to create records for contacts and items, send invoices, track time, projects, and tasks. FreshBooks is an affordable accounting solution that will help you wow your clients with stunning invoices, and the mobile app allows you to stay connected with your team and regulate the cash balance sheet quiz and test flow from anywhere. With cloud accounting and the QuickBooks mobile app, you can snap and save photos of your receipts wherever you are. Then you realize that this report is outdated and missing several important pieces of data, meaning it isn’t at all accurate. Cassie is a former deputy editor who collaborated with teams around the world while living in the beautiful hills of Kentucky. Focusing on bringing growth to small businesses, she is passionate about economic development and has held positions on the boards of directors of […]

Some assets are truly worthless when they’re no longer of use to your business. If there’s no resale market for your asset, it likely has a zero salvage value. The Financial Accounting Standards Board (FASB) recommends using “level one” inputs to find the fair value of an asset. In other words, the best place to find an asset’s market value is where similar goods are sold, or where you can get the best price for it. When you’re using straight-line depreciation, you can set up a recurring journal entry in your accounting software so you don’t have to go in and manually prepare one every time. You know you’ve correctly calculated annual straight-line depreciation when the asset’s ending value is the salvage value. It spreads the decrease evenly over the asset’s useful life until it reaches its salvage value. Sometimes, salvage value is just what the company believes it can get by selling broken or old parts of something that’s not working anymore. Salvage value is the monetary value obtained for a fixed or long-term asset at the end of its useful life, minus depreciation. If you choose, however, amounts spent for the use of listed property during a tax […]

Some accounting software comes with invoicing features, like automated payment reminders, or you may opt for separate invoicing software. Double-entry accounting enters every transaction twice as both a debit and a credit. Your business’s books are balanced when all of the debits equal (or cancel out) all of the credits. And since it takes equity, assets and liabilities https://www.bookstime.com/ — on top of expenses and income — into account, it typically gives you a more accurate financial snapshot of your business. Single-entry accounting records all of your transactions once, either as an expense or as income. This method is straightforward and suitable for smaller businesses that don’t have significant inventory or equipment involved in their finances. Compile a Chart of Accounts It’s important to note that some errors may exist despite the debits equaling credits, such as errors caused by double posting or due to the omission of entries. You record transactions as you pay bills and make deposits into your company account. She will share her tips for understanding bookkeeping best practices, basic tax tips, as well as, helping you make sense of your financial reports. An exit strategy also allows you to get the most value out of […]

If you’re opening an in-home daycare, you may be eligible for certain tax reductions based on the fact that you’re using your residence for business purposes. This can be the case even if your daycare space serves as a family room after hours. Ideally, you’ll need to find a location that’s centrally located, easily accessible and child-friendly. Consider what children and their parents will be looking for in a child care center. How to Ensure Staff and Customers Understand Your Business Mission and Vision You might not find the perfect option, but you can make it work with a little TLC. Many recreational centers, churches, local businesses and even schools have space available to host a daycare, typically for a monthly fee. Search online, in your local newspaper and within your network to find options in your area. Tools Menu FreshBooks makes it quick and easy for your customers to pay you straight from the invoice. In just a few simple clicks your customers can pay with their credit card so that they don’t have to remember the checkbook every time. FreshBooks Payments protects your customers’ financial information and the fee structure is straightforward as well. Talk with a friendly […]

61% of freelancers today say their biggest problem is landing clients, so streamlining their process can clear room in their schedule to pursue their next gig. QuickBooks Online pricing offers five main plans, plus a host of add-ons for an extra monthly charge. Since you don’t have the additional cost of file hosting and servers, cloud-based software can actually be cheaper overall than desktop-based bookkeeping software. A Live bookkeeper cannot begin cleaning up your past books until they receive the required supporting documentation, which your bookkeeper will request from you after your first meeting. QuickBooks Setup Fee On the other hand, QuickBooks is easier to learn, has strong mobile apps, and has tax support. QBO has everything you’d expect from accounting or bookkeeping software, including expense tracking, bank reconciliation, journal entries, class tracking, what is interest expense and how is it calculated and more. You can create invoices, estimates, purchase orders, and sales receipts. While the software is easier to use than its locally-installed counterparts, you may face occasional navigational difficulties. Pricing increases throughout the years also make QuickBooks Online an expensive choice for some businesses. QuickBooks Online Advanced Plan But what QuickBooks Pro Plus sacrifices in mobility, it more […]

The answers to these questions should help you determine which plan is best for your business. QuickBooks Online is almost always offering a discount on its website, so be sure to check for any promotions before buying. QuickBooks Online has over 750 integrations to choose from, including common software programs, such as Shopify, Gusto, and Mailchimp. Small business owners get more deductions with AI-powered expense tracking and receipt matching. Banking services provided by our partner, Green Dot Bank, Member FDIC. Simple Start is for one user, but you can invite up to two accounting firms to review your books at no additional cost. These hours can be added by the manager manually, though the employee in question can also be given permission to add their hours themselves. This plan is designed for freelancers who file a Schedule C IRS form to report their income as sole proprietor. As with the Silver plan, this number can vary significantly from business to business. If you want cloud hosting, QuickBooks Enterprise also has each of its plans available with cloud access. Tax Forms & Support Pay bills on time with recurring payments and tracked due dates. If you’d like additional help, there are […]