Monthly Archives: November 2012

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Posted by on 18/11/2012 in Forex


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Accounting activities generally fall into one of several natural accounting processes (or cycles). Accounting personnel may be responsible for all or only a part of a cycle. In either case, it is important that they have at least a basic understanding of the complete cycle. Primary cycles include:

Sales, accounts receivable, and cash receipts.
Purchasing, accounts payable, and cash disbursements.
Inventory and cost of sales.
Fixed assets and depreciation.
General ledger and financial statements.

Each cycle is briefly discussed below.

Sales, Accounts Receivable, and Cash Receipts

This process or cycle consists of selling goods or services and receiving payment from customers. The accounting department’s role in this process generally consists of the following activities:

Data entry (invoices). Entering the sales invoices (including any debit or credit memos) into the accounting system to produce the sales journal.
General ledger posting (invoices). Posting the sales journal to the aged trial balance and the applicable general ledger accounts (debit to accounts receivable and credit to sales).
Data entry (customer remittances). Applying customer payments against applicable open sales invoices to produce the cash receipts journal.
General ledger posting (remittances). Posting the cash receipts journal to the aged trial balance and the appropriate general ledger accounts (debit cash and credit accounts receivable).
Reconciliation. Keeping the aged trial balance in balance with the ending general ledger balance.
Account maintenance. Setting up new customer accounts and credit limits and deleting/changing existing accounts.

The Accounting Procedures and Procedures Guide Chapter 3, Processing Sales and Receipts, discusses this process in more detail.

A crucial part of this process is ensuring that invoices, remittances, and any adjustments are posted accurately and on a timely basis. If the timing is delayed or transactions are posted inaccurately, the aged trial balance will become unreliable for managing receivables, customer complaints will become common place, and financial statement accuracy could diminish.

Purchasing, Accounts Payable, and Cash Disbursements

This process or cycle consists of the purchase of goods or services and the subsequent payment of those goods or services. The accounting department’s role in this process generally consists of:

Account coding. Ensuring that vendor invoices have been coded with the appropriate general ledger account numbers based on the approved chart of accounts. Proper account coding requires accounting personnel to have a strong understanding of the company’s chart of accounts.
Data entry (invoices). Entering the vendor invoice amounts (including any debit or credit memos) into the accounting system to produce the purchases journal.
General ledger posting (invoices). Posting the purchases journal to the accounts payable subsidiary ledger and the various general ledger accounts. For instance, recording a debit to the appropriate asset (inventory or fixed asset) or expense accounts and a credit to accounts payable.
Check preparation. Selecting invoices to pay and preparing checks for paying specific vendor purchases to produce the cash disbursements journal.
General ledger posting (checks). Posting the cash disbursements journal to the accounts payable subsidiary ledger and the general ledger (debit to accounts payable and credit to cash).
Reconciliation. Keeping the accounts payable subsidiary ledger in balance with the ending general ledger balance.
Account maintenance. Setting up new vendor accounts and deleting old accounts.

The Accounting Procedures and Procedures Guide Chapter 4, Processing Purchases and Payments, provides in-depth discussion of this process.

Ensuring that vendor invoices have been recorded accurately and coded with the appropriate general ledger account numbers are crucial steps in this process. Any undetected errors at this stage could affect vendor payments, financial statement accuracy, and tax return amounts. Thus, accounting personnel should exercise great care at this stage and follow established internal controls.


The payroll process consists of processing payrolls and remitting amounts due to employees, government, and others (health insurers, retirement plan trustees, etc. ). The accounting department’s role in this process generally consists of the following activities:

Time cards processing. Checking mathematical accuracy of time cards.
Data entry. Entering time distribution by employee, including hours worked, time off, and overtime hours into the accounting system to produce the payroll journal.
General ledger posting (payroll). Posting the payroll journal to the general ledger. For example, debit compensation expense and credit liability accounts for net payroll and payroll taxes.
Check preparation. Preparing and distributing employee payroll checks to produce the payroll check register.
General ledger posting. Posting the payroll check register to the general ledger. For example, debit liability accounts and credit cash.
Tax reports preparation and deposits. Preparing payroll tax reports and making required tax deposits to state and federal agencies.
Account maintenance. Setting up new employees, deleting terminated employees, changing pay rates and tax rates, revising employee withholding amounts, etc.

The Accounting Procedures and Procedures Guide Chapter 5, Processing Payrolls, covers all aspects of this process in great detail.

Preparing timely and accurate paychecks is obviously important to accounting personnel, since to do otherwise will often bring an immediate response from affected employees. Also, failing to file accurate and timely payroll tax reports subjects the company and key employees (possibly even some supervisory accounting personnel) to tax penalties.

Inventories and Cost of Sales

The inventory and cost of sales process consists of properly accounting for incoming and outgoing inventory. The extent of the accounting department’s involvement in this area varies greatly with the nature of the company’s business (retailer, wholesaler, or manufacturer) and the type of inventory accounting system. In many small businesses, CPAs (both internal and external) are heavily involved in this area because of its complexity and importance to the business’s success.

The accounting department’s role in this process generally includes:

Data entry (purchases). Entering inventory purchases is typically done as part of the purchasing process. In addition, posting the purchases journal typically updates the inventory subsidiary ledger if one is maintained.
Cost of sales. As mentioned above, the method used to record cost of sales varies greatly among small businesses. If a separate inventory subsidiary ledger is maintained, cost of sales is often automatically recorded by the accounting system (as part of the sales and accounts receivable process) when customer sales are posted. If a separate subsidiary ledger is not maintained, cost of sales is often recorded with a manual journal entry at month end by applying an estimated cost of sales percentage to sales for that month. In any event, accounting personnel should ensure that all recorded sales have a matching recorded cost in the same period.
Inventory transfers. Adjusting the detailed inventory records (if any) and the general ledger for transfers of inventory between locations or the disposal of excess, obsolete, or damaged inventory.
Reconciliation. Keeping the inventory subsidiary ledger in balance with the ending general ledger balance.
Account maintenance. Setting up new inventory parts in the system and changing part numbers of existing inventory items.

Accounting for inventories and cost of sales is a complex area that varies greatly from one company to the next.

Fixed Assets and Depreciation

The fixed assets and depreciation process consists of recording fixed asset additions and deletions and related depreciation. The accounting department’s role in this process generally includes:

Purchases. Recording fixed asset purchases in the general ledger is typically done as part of the purchasing and cash disbursement cycle. Purchases are usually posted to the general ledger by debiting the appropriate fixed asset account and crediting accounts payable.
Subsidiary fixed assets ledger. If the company’s fixed asset system is integrated with the company’s accounting system, the fixed asset subsidiary ledger is generally updated at the same time fixed asset purchases are posted to the general ledger. Otherwise, additions and retirements typically must be reentered into a separate stand-alone fixed asset/depreciation system.
Depreciation. Calculating and recording depreciation for each asset is typically done by using an automated fixed assets/depreciation system. However, companies with relatively few fixed assets sometimes use manual or automated spreadsheets to track fixed assets and related depreciation. In addition, those companies make a manual journal entry to record the depreciation provision. Companies generally must make separate depreciation calculations for tax purposes.
Retirements. Recording fixed asset retirements (sales, trade-ins, or disposals) is typically posted to the general ledger via a manual journal entry.

Accounting personnel have two primary challenges in the fixed assets and depreciation area. They must ensure that the subsidiary fixed assets ledger stays in balance with the general ledger control account and that depreciation calculations comply with financial statement rules and ever-changing tax requirements.

General Ledger and Financial Statements

The general ledger process consists of posting the period’s transactions to the general ledger and preparing financial statements. The accounting department’s role in this process generally includes the following activities:

Posting summary journal entries. Entries from summary journals (purchases, sales, cash receipts, cash disbursements, payroll, etc. ) are typically posted by the system throughout the month as batches of transactions are processed.
Preparing manual Journal entries. Preparing and posting manual journal entries varies depending on the type of entry. The entries may be either recurring journal entries that must be made each month or adjusting journal entries that are made as needed to correct any errors that are detected.
Generating the trial balance. The trial balance is simply a numerical listing of all general ledger accounts in account number order. Accounting personnel generate the general ledger trial balance to ensure total debits equal total credits.
Reconciling subsidiary ledgers and supporting workpapers. As discussed previously, comparing general ledger control accounts with subsidiary ledgers (accounts receivable, inventory, property and equipment, and accounts payable) and any supporting workpapers (bank reconciliation, investment schedule, prepaid expense schedule, etc.) is crucial to ensuring the accuracy of the general ledger. Accounting persons should investigate out-of-balance situations and prepare adjusting journal entries when needed.
Closing out. Closing out the general ledger involves making an entry to zero out all income statement accounts for the period (month or year) and posting the offsetting entry to the balance sheet’s retained earnings account. After making this entry, the balance sheet should be in balance (in other words, assets should equal liabilities plus equity).
Producing the financial statements. Producing the financial statements is done after the general ledger has been prepared and is in balance. Computer-generated financial statements typically include a balance sheet and an income statement.

The Accounting Procedures and Procedures Guide Chapter 7, Maintaining the General Ledger, and Chapter 8, Preparing Financial Reports, provide in-depth discussion of the general ledger and financial statement process.

Accounting personnel’s main concern in preparing the general ledger and financial statements is ensuring that all entries have been accurately posted. A careful review of the trial balance and preliminary general ledger and a comparison to subsidiary ledgers and supporting work papers will often reveal additional adjusting journal entries that are needed to correct errors.


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Posted by on 13/11/2012 in Bookkeeping


10 November, 2012 18:49

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Posted by on 10/11/2012 in Uncategorized


4 Steps for a Smooth Transition to 2013

Year-end is fast approaching. We have outlined 4 easy but important steps to help your clients have a smooth transition to the new year. If you are normally responsible for managing the payroll for your clients, you are also responsible for collecting and submitting the information in this message to Payroll-Xpert. These instructions are a guide for you to handle those year-end requirements.

Plan for Special Extra Payroll Runs — November 1 through December 27
Don’t Miss Your Last Payroll — By December 27
Print Your 2012 W-2s/1099s — January 2013
Review Your 2013 Schedule — January 2013

Step 1: Plan for Special Extra Payroll Runs — November 1 through December 27
This time of year, we know that your client may want to pay employees holiday/annual bonuses or additional checks before year-end.

It’s easy to run payrolls outside the normal schedule. Just click on your ‘Payroll’ tab to get to the Payroll Entry page. Then, click on the ‘Run an Extra Payroll’ link toward the top-left side of the screen, just under the ‘Check Date’ line. Online payroll will guide your client through the easy steps to run an extra payroll.

IMPORTANT: Your client’s extra payroll must be approved BEFORE the check date. A payroll cannot be processed on the actual (same day as the) check date. Any extra payrolls must have a CHECK DATE on or before 12/31/2012 to be included on an employee’s 2012 W-2/1099.

To review the ‘Approve By’ dates for each of your clients’ scheduled check dates, go to the ‘Company’ tab and click on ‘Schedule’ in the left-hand navigation.

Step 2: Don’t Miss Your Last Payroll — By December 27
Year-end is a busy time for everyone. To ensure your clients don’t miss their last 2012 payroll, please remind them to take a moment now to check their payroll schedule and make note of their final payroll’s ‘Approve By’ date and check date.

Your clients’ last 2012 payroll must be approved by December 27 and must have a check date on or before 12/31/2012. Payrolls with a check date in 2013 will be included in next year’s W-2s/1099s.

Step 3: Print Your 2012 W-2s/1099s — January 2013
Your client will receive an email notification when their employees’ W-2s/1099s are available to print through online payroll. Access the official W-2s/1099s through the ‘Reports’ tab. Your clients’ employees may access their W-2s/1099s through their online payroll employee portal. Your client must provide their employees their W-2s/1099s. Employees may print them from the online payroll employee portal, but your client must let them know they are available.

IMPORTANT: W-2s, 1099s and your W-3 will not be mailed. You or your client must print them out.

Step 4: Review The 2013 Schedule — January 2013
Please verify the accuracy of your clients’ 2013 payroll schedule and make note of upcoming bank holidays and weekends. To view the 2013 payroll schedule, click on your ‘Company’ tab and select the ‘Schedule’ link from the left-hand navigation.


Always review what the tax agencies may be sending to your client for 2013. At any time, your client may receive a Notice of Unemployment Rate Change. If the 2013 rate is different than the 2012 rate, please submit the new rate information to Payroll-Xpert by using the ‘Document Submission’ feature located in the ‘Contact Us’ link. To verify your clients’ current unemployment rate, go to the ‘Company’ tab and click on the ‘Official Information’ link on the left-hand navigation. By proactively sending us the new rate, this helps your client avoid any State or IRS fees which may come as a result of an underpayment.


The Payroll-Xpert Team

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7 Tax Tips That Can Save You Money

Taxes and death are inevitable. We can’t avoid either of them. But, do we really have to pay so much to settle our tax obligations?

One way to maximize profits is to learn how to reduce taxes effectively. Any tax deduction properly recognized is a dollar saved and a dollar saved……

Below are seven tips that small business owners can implement to save money:

1. Plan ahead

You don’t have to wait until the 11th hour to see the impact your transactions have on your tax obligations. At crunch time, the chances of missing important factors, like the effect of asset acquisitions on your tax declaration, may be forgotten.

Plan ahead so you can analyze how various financial transactions will affect the taxes you pay.

2. Entertainment Expenses

Don’t forget to keep your receipts whenever you dine out with clients. These expenses are 50 percent tax deductible.

Check with your bookkeeper or accountant for exceptions. For example, if you take your entire staff out for dinner (no one is excluded), then the deduction is 100 percent.

3. Home Office Expenses

If you operate a home-based business, you can include some expenses related to your home office for tax purposes. This may include rent, utilities, repairs, etc. The idea is not to charge the full amount but a proportionate amount in relation to the size of your home office within your house.

4. Expenses incurred for doing business

Once you incur any expenses in the course of doing business, no matter how small, be sure to record them and keep all your receipts. Many of those expenses may be tax deductible. Check with your accountant or bookkeeper. Even small tax deductions add up.

5. Pay family members’ salaries

If your teenage daughter does simple administrative tasks, or your spouse helps you manage the business, make sure you pay them a salary. You should be able touse these expenses as tax deductions.

Of course, you should pay them an amount that has a value in direct proportion to what they do. Paying them more than what is reasonable just to get away with paying bigger taxes can cause problems with the taxman.

6. Depreciation expenses

You can amortize most capital expenses by allocating depreciation amount based on the useful life of the asset.

Be sure to talk to your accountant about the best amortization method and how it could impact your income statement and balance sheet in the long run.

7. Hire a professional accountant

If you are thinking about cutting costs you may want to hire a professional accountant. The value of their expertise may far exceed the amount you pay them in the short term.

Keeping your financial statements in order is an important part of your business. Working with an accountant and following their recommendations will help you increase the profitability of your company.


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