Bookkeeper Business Blueprint

Transcription

1 Welcome! Bookkeeper Business Blueprint Bookkeeping Knowledge - Module 5 Introduction, Recap & Preview

2 Knowledge Module 4 Review Accrual v. Cash Basis of Accounting Bookkeeping / Accounting Principles Fixed Assets & Goodwill (not the thrift store) Depreciation & Amortization Other Assets Adjusting Journal Entries (AJEs) Discuss Module 4.5 (Application)

3 Knowledge Module 5 Preview Accounts Payable / Bill Pay Sales & Use Tax Payroll Liabilities Deferred / Unearned Revenue Loans Other Liabilities

4 Advice that makes $ and/or saves time Cover Modules 9-10 & Bonus Training Financial Analysis & Interpretation Cover thru M8 & Bonus Training Financial Statements Routine Bookkeeping & Accounting Transactions

5 Bookkeeper Business Blueprint Bookkeeping Knowledge - Module 5 Lesson 1: Accounts Payable / Bill Pay

6 Accounts Payable Receiving of goods and services prior to paying for them on account or credit Current liability on the balance sheet Normal credit balance

7 Accounts Payable (2) Major aspect of accrual basis financial statements Recall that A/P is not reflected on cash basis financial statements Accounts payable management is critical to the success of your client Requires strict attention to detail and someone with an eagle eye

8 Accounts Payable (3) Transaction credits accounts payable / debits the expense / cost When it s paid A/P is debited and cash is credited Your client s A/P = another business s A/R Like A/R there is a subsidiary ledger showing details that make up the entire balance

9 Accounts Payable (4) Strong internal controls are needed to manage One of the major ways fraud is perpetuated within a business Fraudulent / Inaccurate invoices Paying an invoice twice Not accounting for the invoice properly

10 Accounts Payable (5) Separate duties: ordering, receiving, recording and paying Your client is the ONLY person who should authorize payment Credit terms: due on receipt, 2/10 net 30, 10/15/30 days

11 Accounts Payable / Bill Pay most likely service to provide in addition to core service offering requires additional work and, therefore, additional fees from you easy in theory; however, internal controls, systems and client communication are key

12 Accounts Payable / Bill Pay (2) managed by: a) handwritten checks :(, b) online bill pay through your client s bank and c) bill.com bill.com preferred because it integrates seamlessly with Xero / QBO and is a real bookkeeping solution some banks systems are catching up to bill.com but they are the exception

13 Accounts Payable / Bill Pay (3) analogy: your bill pile bookkeeping: recording occurrence, and payment bill pay: getting bills paid on time, manage cash-flow efficient and effective

14 XERO Accounts Payable ( Bill ) Application

15 bill.com

16 Bookkeeper Business Blueprint Bookkeeping Knowledge - Module 5 Lesson 2: Sales & Use Tax

17 Sales Tax Current liability on the balance sheet Typical credit balance Most states charge sales tax (DE, NH MT & OR notable exceptions...some places in AK) Customers pay it; clients remit to the govt

18 Sales Tax Most likely, you will be the point person for reporting Laws vary by state, county and local municipalities Sales taxes are collected, held in reserve, then paid by your client to the state (typical) government

19 Sales Tax Reporting is typically done on a monthly basis Need to ensure that you set up sales tax rates in the client s accounting records (Xero / QBO) If you need more sophisticated reporting, Xero / QBO might not be the best solution

20 Use Tax Use tax is on purchases your client makes from out-of-state vendors Even though the supplier / vendor does NOT charge, it doesn t mean your client will not owe States are clamping down on use taxes as revenues decline and compliance is sporadic Usually reported along with sales tax

21 Bookkeeper Business Blueprint Bookkeeping Knowledge - Module 5 Lesson 3: Payroll Liabilities

22 Payroll Liabilities It s not just about salaries and wages Payroll taxes: FICA, Medicare, State Unemployment, Federal Unemployment, Federal Tax Withholding, State Tax Withholding, Local Tax Withholding, Workman s Compensation, Employment Law, Overtime, Direct Deposit, Employees. Getting worn out yet?

23 Payroll Liabilities Like most transactions, payroll affects the balance sheet and income statement Employer (your client) acts like a trustee of employees monies for a period of days or weeks Employers must match certain payroll taxes: FICA, Medicare Employers must pay 100% of certain payroll taxes: State Unemployment, Federal Unemployment, W/C

24 Sample Employee Payroll: Gross Payroll $1, Deductions: Social Security Withholding $ (62.00) Medicare Withholding $ (14.50) Federal Withholding $ (150.00) State Withholding $ (60.00) Total Deductions $ (286.50) Net Payroll $

25 Employer Cost: Gross Payroll $1, Payroll Taxes (expense): Social Security Taxes $ Medicare Taxes $ Federal Unemployment Tax $ 8.00 State Unemployment Tax $ Total Payroll Tax Expense $ Total Payroll Cost (b4 benefits) $1,113.50

26 Payroll Liabilities: Federal Tax Withheld (only-no ER expense) $ State Tax Withheld (only-no ER expense) $ Social Security (withheld + taxes) $ Medicare (withheld + taxes) $ Federal Unemployment Tax (only-no EE) $ 8.00 State Unemployment Tax (only-no EE) $ Total Payroll Liabilities (current liability) $

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28 Bookkeeper Business Blueprint Bookkeeping Knowledge - Module 5 Lesson 4: Deferred / Unearned Revenue

29 Deferred / Unearned Revenue Revenue yet to be earned Payment received but services / goods not yet provided to customers / clients Current liability on the balance sheet Normal credit balance

30 Unearned Revenue Example Subscriber pays $600 for 6-month membership which can be cancelled with full refund $600 paid / 6 months = $100 per month When $600 paid: recognize $100 of revenue and $500 of unearned revenue Each month, AJE to record $100 of revenue and offset $100 of unearned revenue

31 Unearned Revenue AJE: Debit Credit Revenue (Income Stmt) $100 Deferred Revenue (Balance) $100

32 Bookkeeper Business Blueprint Bookkeeping Knowledge - Module 5 Lesson 5: Loans

33 Loans Loans have principal balance and interest due When recording payments, we must separate principal and interest This process is called loan amortization You need to maintain loan amortization schedules and keep them in the accounting application as attachment Loan amortization template in resources library

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35 Bookkeeper Business Blueprint Bookkeeping Knowledge - Module 5 Lesson 6: Other Liabilities