Bookkeepers' Boot Camp

Angie Mohr

Description

“You can't know how your business is doing until you
record it.”
Bookkeepers’ Boot Camp is the first book in the Numbers 101
for Small Business series. It shows small business owners the
essentials of record keeping, and why it's crucial to a business’s
success to track financial data. The book gives business owners a
greater understanding of the purpose and process of record keeping
and a deeper understanding of their businesses.
Mohr has helped hundreds of small business owners who didn't
understand the importance of record keeping and always put it off
until “later.” These business owners were almost literally buried
under a pile of papers, overwhelmed by the immensity of the task at
hand. Mohr shows business owners how to sort through the masses
of information and paperwork, record what is important, and how
to use that information to grow a business for success!
Eighty percent of all small businesses started this year will be gone
in 5 years. As Mohr says, starting a small business can be “like
driving a car in a foreign country where you don't know what the
road signs are telling you.”
Numbers 101 for Small Business is a new series of easy-tounderstand
guides for small business owners, covering such topics as
bookkeeping, analyzing and tracking financial information, starting
a business, growing a business, and exiting a business. Using real
life examples, Mohr teaches small business owners how to beat the
odds and turn their ideas into successful, growing companies.
PART I: THE BASICS 1
1 Getting Started 3
The Numbers 101 for Small Business Series 4
Bookkeepers’ Boot Camp 5
How to Use This Book 5
2 A Brief Look at the Origins of Bookkeeping 7
Double-Entry Bookkeeping 8
3 Important Concepts 9
Generally Accepted Accounting Principles (GAAP) 9
Stewardship 10
Accrual Accounting 10
Debits and Credits 11
Accountants versus Bookkeepers 11
Bookkeeper 11
Accountant 11
Accounting Jargon 12
The Use of Estimates 12
The Importance of Bookkeeping 12
4 Setting up the Record Keeping System 14
What Kinds of Paper Do I Need to Keep? 14
Invoices 14
Statements of account 15
Deposit slips 15
Supplier invoices 15
Check stubs or copies 16
Purchase orders 16
Bank statements 16
Contents
101for
SMALL BUSINESS
numbers
vi Bookkeepers’ boot camp: Get a grip on accounting basics
Canceled checks 16
How Do I Account for My Source Documents? 16
Where Do I Record This Information? 17
Journals and ledgers 17
What Kind of Bookkeeping System Should I Get? 18
Manual journal and ledger 18
Computerized bookkeeping systems 20
5 The Balance Sheet 23
The Purpose of the Balance Sheet 23
The Components of the Balance Sheet 24
Assets 24
Capital assets 27
Other assets 27
Liabilities 28
Current liabilities 28
Long-term liabilities 30
Equity 30
Capital stock 30
Capital contributions 31
Retained earnings 31
Dividends 31
6 The Income Statement 34
The Purpose of the Income Statement 34
What’s on My Income Statement? 37
Interpreting the Income Statement 38
The Statement of Retained Earnings: A Tag-Along 40
7 The Cash Flow Statement 42
Categorizing Cash Flows 42
Back to the Balance Sheet: The Basis of the Cash Flow Statement 43
Putting It All Together 47
What Is the Cash Flow Statement Telling Me? 47
PART 2: INTERMEDIATE TOPICS 51
8 Recording the Sales Cycle 53
What Makes up the Sales Cycle? 53
Contents vii
Recording Cash Sales 54
Real life 54
Accounting world 55
Recording Credit Sales 56
Real life 56
Accounting world 56
Sales Discounts 56
Recording Cash Receipts 57
Real life 57
Accounting world 57
Partial payments 57
Preparing Invoices 58
Preparing Statements of Account 58
Bad Debts: Analyzing Them and Writing Them off 59
Screen your customers 59
Set credit limits 60
Make your credit terms clear 60
Follow up with monthly statements 60
Call your customers when they are overdue 60
Get professional help 60
Pursue the debt in small claims court 61
Writing off the debt 61
9 Recording the Purchases Cycle 62
Purchasing Inventory 62
Purchasing Supplies 64
Common Cost of Goods Sold Categories 64
Common Expense Categories 65
Setting up the Accounts Payable Sub-ledger 67
Cash Payments 68
Real life 68
Accounting world 68
10 Inventory 69
Inventory Tracking Systems 69
Types of Inventory 69
Inventory in a Manufacturing Environment 70
viii Bookkeepers’ boot camp: Get a grip on accounting basics
Inventory Costing Methods 71
Specifi c identifi cation method 72
First-in, fi rst-out (FIFO) 72
Last-in, fi rst-out (LIFO) 72
Weighted average cost 72
Year-End Valuation 73
Setting up the Inventory Count 73
11 Capital Assets 77
What’s in the Cost of My Capital Assets? 77
Satellite costs 78
Trade-ins 78
Depreciation: An Overview 79
Land 79
Buildings 79
Equipment 79
Tools 79
Offi ce equipment 79
Signage 79
Computer hardware 79
Computer software 79
Vehicles 80
Concepts Involved in Depreciation 80
Useful life 80
Salvage value 80
Methods of Depreciation 80
Straight-line 80
Declining balance 80
Sum-of-the-years-digits (SYD) 81
Accounting for Depreciation 81
Accounting for Sales of Capital Assets 82
12 Leases and Loans 84
Lease Transactions: An Overview 84
Accounting for Operating Leases 85
Accounting for Capital Leases 86
Contents ix
Accounting for Loans 87
Reconciling the Loan Balance 88
13 Transactions between the Company and Its Owners 89
Shareholder Loans 89
You Pay for a Business Expense out of Your Own Pocket 91
The Company Pays for a Personal Expense 91
What Happens If I Run My Business out of My House? 91
Step 1: How much space? 92
Step 2: Calculating the expenses 92
Capital improvements 93
Repairs that affect the whole house 93
Repairs that affect only the personal square footage 93
Repairs that affect only the business square footage 93
Hey, the Business Uses My Car Too! 94
Business mileage 94
What about Other Personal Assets Used for Business? 95
Caveat 95
Setting up the Management Bonus 96
Dividends 97
14 Remittances to the Government 98
What Are Government Remittances? 99
US Remittances to the Government 99
Employment taxes 99
State sales tax 100
Other remittances to the government 100
Canadian Remittances to the Government 100
Payroll taxes 100
Goods and Services Tax (GST) 101
Other remittances to the government 102
Reconciling the Remittance Accounts 102
15 Maintaining a Petty Cash System 104
Setting up the Petty Cash Fund 104
Using Your Petty Cash 105
Reconciling the Petty Cash Fund 105
Replenishing the Petty Cash Fund 107
x Bookkeepers’ boot camp: Get a grip on accounting basics
16 Reconciling the Bank 109
The Bank Statement Arrives 109
Outstanding checks 109
Outstanding deposits 110
Bank charges 110
Automatic monthly payments 110
Bank errors 110
The Reconciliation Process 111
Items on the bank statement that are not in the ledger 112
Items in your ledger that are not on your bank statement 112
What Happens If I Still Can’t Reconcile? 112
Example of the Bank Reconciliation Process 113
17 When the Damn Thing Just Won’t Balance 115
The Process of Reconciliation 115
Backward Posting 116
Transposition Error 116
Addition Error 117
18 When Your Books Are Already a Mess 119
Introduction 119
Step 1: Organize the Mess 120
Step 2: Inventory the Documents 120
Step 3: Gather Missing Documents 121
Step 4: Enter the Accounting Transactions 121
Step 5: Reconcile to the Bank Statements 122
Step 6: Create a Monthly Financial Statement Package 122
Step 7: Organize your Bookkeeping for the Future 123
PART 3: ADVANCED ISSUES 125
19 The Role of the External Accountant 127
Choosing an Accountant 127
The Role of the Accountant 128
Starting your business 129
Year end 129
Employee evaluation and compensation 129
Internal controls 129
Contents xi
Management operating plan 129
What the Accountant Needs from You at Year End 130
The Process of Creating Financial Statements 130
Corporate Income Tax Returns 131
Posting the Adjusting Journal Entries 132
Rolling Forward the Year 132
How Do You Know When You’re Outgrowing
Your Accountant? 133
20 Budgeting: Planning for the Future 134
But How Do I Know What’s Going to Happen in the Future? 134
Setting up the 12-Month Budget 135
Aren’t I Just Making up Fake Numbers? 136
Changes to the Company’s Operations 136
Rolling, Rolling, Rolling, Keep That Budget Rolling 138
21 Monitoring Cash Flow: How Not to Run out of Money 139
What Is Cash Flow? 139
What’s the Difference between Cash Flow and Net Income? 139
How Do I Know When My Business Is Going to Run
out of Money? 140
Building Your Company’s War Chest 140
How Can I Stretch My Company’s Cash Further? 141
Barter: A Small-Business Owner’s Secret Weapon 142
Accounting for barter transactions 143
The Future: How to Avoid the Cash Crunch before It Hits 144
22 A Brief Look at Foreign Currency 145
Occasional Foreign Currency Transactions 145
The Foreign Currency Bank Account 146
Revaluation at Year End 147
Reconciling the Foreign Currency Bank Account 147
Foreign Currency Risk 147
23 Tax Planning 149
Minimizing Tax versus Avoiding Tax 149
What Is Tax Integration? 150
Why You Need to Understand Tax Brackets 150
xii Bookkeepers’ boot camp: Get a grip on accounting basics
Deferring Tax Owing versus Getting Rid of It Altogether 151
Owner/Manager Remuneration: Getting Money
out of Your Business 152
24 Graduation 153
Boot Camp Test 154
Boot Camp Test Answers 166
Appendix A — Glossary 175
Appendix B — Resources for the Growing Business 183
Figure
1 The Operating Cycle 54
Samples
1 General Journal 18
2 General Ledger 19
3 Balance Sheet 25
4 Partnership Equity Statement 33
5 Statement of Income 36
6 Statement of Retained Earnings 40
7 Comparative Balance Sheet 44
8 Balance Sheet with Difference 46
9 Cash Flow Statement 48
10 Statement of Account 59
11 Accounts Payable Report 67
12 Inventory Count Sheet 74
13 Bank Reconciliation 112
Worksheets
1 Inventory Count Sheet 76
2 Petty Cash Control Sheet 106
3 Budget Template 137

Sujets

• Commercial law
• Small business

Informations

• Publié par: Self-Counsel Press
• Date de parution: 15 mai 2016
• Nombre de lectures: 3
• EAN13: 9781770408760
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

BOOKKEEPERS’ BOOT CAMP
Get a Grip on Accounting Basics
Angie Mohr, CA, CMA
Self-Counsel Press (a division of) International Self-Counsel Press Ltd. USA Canada

Copyright © 2016

International Self-Counsel Press All rights reserved.
Contents

Cover

Title Page

PART 1: THE BASICS

Chapter 1: Getting Started

The Numbers 101 for Small Business Series

Bookkeepers’ Boot Camp

How to Use This Book

Chapter 2: A Brief Look at the Origins of Bookkeeping

Double-Entry Bookkeeping

Chapter 3: Important Concepts

Generally Accepted Accounting Principles (GAAP)

Stewardship

Accrual Accounting

Debits and Credits

Accountants versus Bookkeepers

Accounting Jargon

The Use of Estimates

The Importance of Bookkeeping

Chapter 4: Setting up the Record Keeping System

What Kinds of Paper Do I Need to Keep?

How Do I Account for My Source Documents?

Where Do I Record This Information?

Sample 1: General Journal

Sample 2: General Ledger

What Kind of Bookkeeping System Should I Get?

Chapter 5: Making Bookkeeping Easier with Technology

Receipt Scanners

Smartphone Apps

The Cloud

Remote Bookkeeping

Technology Is Not Substitute for Financial Acumen

Chapter 6: The Balance Sheet

The Purpose of the Balance Sheet

Sample 3: Balance Sheet

The Components of the Balance Sheet

Liabilities

Equity

Sample 4: Partnership Equity Statement

Chapter 7: The Income Statement

The Purpose of the Income Statement

Sample 5: Statement of Income

What’s on My Income Statement?

Interpreting the Income Statement

The Statement of Retained Earnings: A Tag-Along

Sample 6: Statement of Retained Earnings

Chapter 8: The Cash Flow Statement

Categorizing Cash Flows

Back to the Balance Sheet: The Basis of the Cash Flow Statement

Sample 7: Comparative Balance Sheet

Sample 8: Balance Sheet with Difference

Putting It All Together

Sample 9: Cash Flow Statement

What Is the Cash Flow Statement Telling Me?

PART 2: INTERMEDIATE TOPICS

Chapter 9: Recording the Sales Cycle

Figure 1: The Operating Cycle

What Makes up the Sales Cycle?

Recording Cash Sales

Recording Credit Sales

Sales Discounts

Recording Cash Receipts

Preparing Invoices

Preparing Statements of Account

Sample 10: Statement of Account

Bad Debts: Analyzing Them and Writing Them Off

Chapter 10: Recording the Purchase Cycle

Purchasing Inventory

Purchasing Supplies

Common Cost of Goods Sold Categories

Common Expense Categories

Setting up the Accounts Payable Sub-ledger

Sample 11: Accounts Payable Report

Cash Payments

Chapter 11: Inventory

Inventory Tracking Systems

Types of Inventory

Inventory in a Manufacturing Environment

Inventory Costing Methods

Year-End Valuation

Setting up the Inventory Count

Sample 12: Inventory Count Sheet

Worksheet 1: Inventory Count Sheet

Chapter 12: Capital Assets

What’s in the Cost of My Capital Assets?

Depreciation: An Overview

Concepts Involved in Depreciation

Methods of Depreciation

Accounting for Depreciation

Accounting for Sales of Capital Assets

Chapter 13: Leases and Loans

Lease Transactions: An Overview

Accounting for Operating Leases

Accounting for Capital Leases

Accounting for Loans

Reconciling the Loan Balance

Chapter 14: Transactions between the Company and Its Owners

Shareholder Loans

You Pay for a Business Expense out of Your Own Pocket

The Company Pays for a Personal Expense

What Happens If I Run My Business out of My House?

Hey, The Business Uses My Car Too!

What About Other Personal Assets Used for Business?

Setting Up the Management Bonus

Dividends

Chapter 15: Remittances to the Government

What Are Government Remittances?

US Remittances to the Government

Canadian Remittances to the Government

Reconciling the Remittance Accounts

Chapter 16: Maintaining a Petty Cash System

Setting up the Petty Cash Fund

Using Your Petty Cash

Worksheet 2: Petty Cash Control Sheet

Reconciling the Petty Cash Fund

Replenishing the Petty Cash Fund

Chapter 17: Reconciling the Bank

The Bank Statement Arrives

The Reconciliation Process

Sample 13: Bank Reconciliation

What Happens If I Still Can’t Reconcile?

Example of the Bank Reconciliation Process

Chapter 18: When the Damn Thing Just Won’t Balance

The Process of Reconciliation

Backward Posting

Transposition Error

Addition Error

Chapter 19: When Your Books Are Already a Mess

Introduction

Step 1: Organize the Mess

Step 2: Inventory the Documents

Step 3: Gather Missing Documents

Step 4: Enter the Accounting Transactions

Step 5: Reconcile to the Bank Statements

Step 6: Create a Monthly Financial Statement Package

Step 7: Organize Your Bookkeeping for the Future

PART 3: ADVANCED ISSUES

Chapter 20: The Role of the External Accountant

Choosing an Accountant

The Role of the Accountant

What the Accountant Needs from You at Year-End

The Process of Creating Financial Statements

Corporate Income Tax Returns

Posting the Adjusting Journal Entries

Rolling Forward the Year

How Do You Know When You’re Outgrowing Your Accountant?

Chapter 21: Budgeting: Planning for the Future

But How Do I Know What’s Going to Happen in the Future?

Setting up the 12-Month Budget

Worksheet 3: Budget Template

Aren’t I Just Making up Fake Numbers?

Changes to the Company’s Operations

Rolling, Rolling, Rolling, Keep That Budget Rolling

Chapter 22: Monitoring Cash Flow: How Not to Run out of Money

What Is Cash Flow?

What’s the Difference between Cash Flow and Net Income?

How Do I Know When My Business Is Going to Run out of Money?

Building Your Company’s War Chest

How Can I Stretch My Company’s Cash Further?

Barter: A Small-Business Owner’s Secret Weapon

The Future: How to Avoid the Cash Crunch before It Hits

Chapter 23: A Brief Look at Foreign Currency

Occasional Foreign Currency Transactions

The Foreign Currency Bank Account

Revaluation at Year End

Reconciling the Foreign Currency Bank Account

Foreign Currency Risk

Chapter 24: Tax Planning

Minimizing Tax versus Avoiding Tax

What Is Tax Integration?

Why You Need to Understand Tax Brackets

Deferring Tax Owing versus Getting Rid of It Altogether

Owner/Manager Remuneration: Getting Money out of Your Business

Chapter 25: Graduation

Boot Camp Test

Boot Camp Test Answers

Appendix A: Glossary

Appendix B: Resources for the Growing Business

Acknowledgments

About the Author

Notice to Readers

Self-Counsel Press thanks you for purchasing this ebook.
Part 1
THE BASICS
Chapter 1
Getting Started

The statistics are mind numbing. In North America, 80 percent of all small businesses started this year will be gone in five years. Of the lucky 20 percent to have survived, another 80 percent will be gone in ten years. That’s a whopping 96 percent failure rate over ten years.
Would you start a small business if you were told that you have a 96 percent chance of failure? Not many people would. But every day, hundreds of people think they will beat the odds. They may be former employees, students, housewives, or others who have never had any business training but are sure that their product or service is so fantastic, so completely unique, that they are destined to succeed.
These are the people who walk through the doors of my accounting and consulting practice every day. They want to know how to make a lot of money, how to leverage their businesses, how to go public. I begin to talk to them about their plans for bookkeeping for the business (“Oh, my wife will sort all that out”), what is in thei