Financial Ratios

Financial Ratios Activity Ratios are used to measure how efficiently a company utilizes its assets. These ratios provide an idea of the overall operational performance of a company. Asset Turnover – measures how efficiently a company uses its total assets to generate revenues. The formula to calculate this ratio is simply net revenues divided by […]

Accounting Principles & Guidelines

There are general rules and concepts that govern the field of accounting which form the groundwork on which more detailed, complicated, and legalistic accounting rules are based. The phrase “generally accepted accounting principles” (GAAP) consists of three sets of rules: (1) the basic accounting principles and guidelines, (2) the detailed rules and standards issued by […]

Bookkeeper vs CPA

What is the difference between a Bookkeeper and a CPA? These individuals support your business in different stages of the financial cycle. Bookkeeping records financial data by creating invoices, entering bill information, completing payroll, and making sure all banking transactions are entered. Many bookkeepers also make adjusting entries as needed and prepare the financial statements. […]

The Importance of Monthly Bank Reconciliations

Proper reconciliation of bank statements is vital for any business. Almost all of your business transactions go through your bank account; every bill you pay, every bit of revenue you receive. The reasons for completing this very important step are: Identify errors – the potential exists for human error. If companies fail to reconcile their bank […]

Debits and Credits

Over 500 years ago an Italian monk created double-entry bookkeeping which is used by all accounting professionals today. The words, debit and credit, are very similar to the words that monk used. In accounting, debit means left and credit means right; referring to the different sides of an account. Every transaction has a debit side […]

Manual vs Computer Accounting

Back in ancient history when I started my accounting career, everything was done manually. There were paper ledgers, paper subsidiary ledgers, and a pegboard payroll system. Every check was hand-written, after adding up the open invoices so we would know the proper check amount. The 10-key became my best friend. Just about every piece of […]

Do You Really Need To Keep All Those Receipts?

Which Receipts Should You Keep? Some business owners keep every receipt they are given, others don’t keep any. Hopefully, you are somewhere in the middle. A basic rule of thumb is to keep proof of anything that can be deducted on your taxes. However, per IRS Publication 463, if the expense is less than $75 you […]

Proper Procedures for Petty Cash

Many businesses keep a small amount of cash in the office for incidental expenses. If you, the owner, is away and there is a small expense that has to be paid, it would be appropriate to do so out of Petty Cash. You don’t want to leave the money laying around unattended, though, not even […]

Dependent Children as Employees

If your dependent children are working in your business, it is possible that the IRS will deny the wage expense; even if the children report the income on their personal taxes. This is an area that is very closely scrutinized by the IRS. Basically, IRS holds that the employer (parent) is making support payments disguised […]

Jigsaw Chart of Accounts Puzzle

A Chart of Accounts is very much like a jigsaw puzzle; they come in different sizes with different levels of detail. A 50-piece or 100-piece jigsaw puzzle is pretty easy and can be completed quickly. For most adults, however, there is very little challenge or satisfaction. A 1,000-piece jigsaw puzzle is much more difficult and […]