Bookkeeping All-In-One For Dummies. Dummies Consumer
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Название: Bookkeeping All-In-One For Dummies

Автор: Dummies Consumer

Издательство: Автор

Жанр: Зарубежная образовательная литература

Серия: For Dummies

isbn: 9781119093954

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СКАЧАТЬ Credit Cards Payable: This account tracks all credit-card accounts to which the business is liable. Most companies use credit cards as short-term debt and pay them off completely at the end of each month, but some smaller companies carry credit-card balances over a longer period of time. Because credit cards often have a much higher interest rate than most lines of credits, most companies transfer any credit-card debt they can’t pay entirely at the end of a month to a line of credit at a bank. When it comes to your Chart of Accounts, you can set up one Credit Card Payable account, but you may want to set up a separate account for each card your company holds to improve tracking credit-card usage.

      How you set up your current liabilities and how many individual accounts you establish depends on how detailed you want to track each type of liability. For example, you can set up separate current liability accounts for major vendors if you find that approach provides you with a better money management tool. For example, suppose that a small hardware retail store buys most of the tools it sells from Snap-on. To keep better control of its spending with Snap-on, the bookkeeper sets up a specific account called Accounts Payable – Snap-on, which is used only for tracking invoices and payments to that vendor. In this example, all other invoices and payments to other vendors and suppliers are tracked in the general Accounts Payable account.

       Long-term liabilities

      Long-term liabilities are debts due in more than 12 months. The number of long-term liability accounts you maintain on your Chart of Accounts depends on your debt structure. The two most common types are

      ✔ Loans Payable: This account tracks any long-term loans, such as a mortgage on your business building. Most businesses have separate loans payable accounts for each of their long-term loans. For example, you could have Loans Payable – Mortgage Bank for your building and Loans Payable – Car Bank for your vehicle loan.

      ✔ Notes Payable: Some businesses borrow money from other businesses using notes, a method of borrowing that doesn’t require the company to put up an asset, such as a mortgage on a building or a car loan, as collateral. This account tracks any notes due.

      In addition to any separate long-term debt you may want to track in its own account, you may also want to set up an account called Other Liabilities that you can use to track types of debt that are so insignificant to the business that you don’t think they need their own accounts.

Eyeing the equity

      Every business is owned by somebody. Equity accounts track owners’ contributions to the business as well as their share of ownership. For a corporation, ownership is tracked by the sale of individual shares of stock because each stockholder owns a portion of the business. In smaller companies that are owned by one person or a group of people, equity is tracked using Capital and Drawing accounts. Here are the basic equity accounts that appear in the Chart of Accounts:

      ✔ Common Stock: This account reflects the value of outstanding shares of stock sold to investors. A company calculates this value by multiplying the number of shares issued by the value of each share of stock. Only corporations need to establish this account.

      ✔ Retained Earnings: This account tracks the profits or losses accumulated since a business was opened. At the end of each year, the profit or loss calculated on the income statement is used to adjust the value of this account. For example, if a company made a $100,000 profit in the past year, the Retained Earnings account would be increased by that amount; if the company lost $100,000, then that amount would be subtracted from this account.

      ✔ Capital: This account is only necessary for small, unincorporated businesses. The Capital account reflects the amount of initial money the business owner contributed to the company as well as owner contributions made after the initial start-up. The value of this account is based on cash contributions and other assets contributed by the business owner, such as equipment, vehicles, or buildings. If a small company has several different partners, then each partner gets his or her own Capital account to track his or her contributions.

      ✔ Drawing: This account is only necessary for businesses that aren’t incorporated. It tracks any money that a business owner takes out of the business. If the business has several partners, each partner gets his or her own Drawing account to track what he or she takes out of the business.

      Tracking the Income Statement Accounts

      The income statement is made up of two types of accounts:

      ✔ Revenue: These accounts track all money coming into the business, including sales, interest earned on savings, and any other methods used to generate income.

      ✔ Expenses: These accounts track all money that a business spends in order to keep itself afloat.

      The bottom line of the income statement shows whether your business made a profit or a loss for a specified period of time. Book II Chapter 5 discusses the income statement in detail. This section examines the various accounts that make up the income statement portion of the Chart of Accounts.

Recording the money you make

      First up in the income statement portion of the Chart of Accounts are accounts that track revenue coming into the business. If you choose to offer discounts or accept returns, that activity also falls within the revenue grouping. The most common income accounts are

      ✔ Sales of Goods or Services: This account, which appears at the top of every income statement, tracks all the money that the company earns selling its products, services, or both.

      ✔ Sales Discounts: Because most businesses offer discounts to encourage sales, this account tracks any reductions to the full price of merchandise.

      ✔ Sales Returns: This account tracks transactions related to returns, when a customer returns a product because he or she is unhappy with it for some reason.

      When you examine an income statement from a company other than the one you own or are working for, you usually see the following accounts summarized as one line item called Revenue or Net Revenue. Because not all income is generated by sales of products or services, other income accounts that may appear on a Chart of Accounts include

      ✔ Other Income: If a company takes in income from a source other than its primary business activity, that income is recorded in this account. For example, a company that encourages recycling and earns income from the items recycled records that income in this account.

      ✔ Interest Income: This account tracks any income earned by collecting interest on a company’s savings accounts. If the company loans money to employees or to another company and earns interest on that money, that interest is recorded in this account as well.

      ✔ Sale of Fixed Assets: Any time a company sells a fixed asset, such as a car or furniture, any revenue from the sale is recorded in this account. A company should only record revenue remaining after subtracting the accumulated depreciation from the original cost of the asset.

Tracking the Cost of Sales

      Before you can sell a product, you must spend some money to either buy or make that product. The type of account used to track the money spent is called a Cost of Goods Sold account. The most common are

      ✔ Purchases: Tracks the purchases of all items you plan to sell.

      ✔ Purchase Discount: Tracks the discounts you may receive from vendors if you pay for СКАЧАТЬ