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Business Accounting
How to
approach accounting for your business?
We recommend that you
start with your CPA first and discuss the ways that will work for you:
1. CPA advice is
crucial-when starting your own business talk to your CPA first to discuss
methods of organizing and processing transactions.
2. Even if you have
bookkeeping experience consult your CPA-even if you plan on purchasing a
software package and processing the transactions yourself, you should
discuss matters with your CPA, such as: loans vs leases, depreciation,
cash vs accrual, invoicing, payroll, receivables, payables, cutoff dates,
reporting formats, nondeductible expenses, owner out of pocket expenses,
salary and deductible taxes and nondeductible taxes.
3. Your CPA can help
you become successful:-They provide up to date regulation and requirement
information, business contacts with other clients, insight in tax
matters, experience in many businesses and industries, advantageous
business structure, and how to best organize expenses for tax return
preparation. Saving thousands of dollars in taxes and penalties.
We specialize in small
businesses and have setup and maintained reporting for thousands of them.
So how to get
started:
Organization is key:
The basic tool in all accounting is organizing. Gathering invoices, check
registers, bank statements, sales transaction logs (sales slips, customer
invoices, purchase requests or vendor invoices) and credit card
statements.
Maintaining reference
to support: Always prepare accounting reports with the expectation that
you will be audited and will have to explain the amounts in your
financial statements with substantiating support. Substantiation is third
party prepared other than what you prepare such as: canceled checks from
the bank, bank statements, invoices from vendors and credit card
statements under the company name.
Knowing the rules:
Even if you know bookkeeping, you will have to gain more information that
affects the final presentation of your reports: meals must be separated
from travel expenses because they are only 50% deductible for tax
purposes, depreciation must follow specific calculated amounts based on
IRS guidelines, loan payments must be split between interest and
principal since only interest is deductible. So you need an amortization
table for your loans, certain items need to be capitalized and expensing
is available up to a limit with exceptions.
Problems that may
occur?
Audits by the IRS:
When the IRS contacts you and asks to have a look at your books and
records they will want the following:
Your tax return and
year end financial statements: they will want to go line by line and to
reassure themselves that the cash in the bank account agrees to the cash
presented on your financial statement and those two balances seldom
match, so you must show how the two amounts are reconciled with a bank
reconciliation. This should be done each month of the calendar (or
fiscal) year.
They will want to see
depreciation schedules of assets and associated expense calculations,
loan agreements and yearend statements to support interest deductions,
payroll registers of every payroll and the employee verification forms
(W-4, I-9, W-2, 941, 940 forms). You get the idea!
We specialize in small
businesses and have represented our clients in IRS audits. We recommend a
CPA be involved in your accounting!
One last thing:
The cost of preparing
a tax return can be reduced considerably if you follow the previously
mentioned due diligence, because tax preparers are faced with substantial
penalties when they sign a tax return that has gross inaccuracies, Tax
preparers are now required to answer a due diligence verification
questionnaire with every tax return swearing that they did many of the
supporting verifications and satisfied themselves to the accuracy of the
returns they prepare.
Get in Touch
Visit our website:
https://www.rreinert.net/
Prepared by: Robert Reinert, CPA
43221 La Scala Way, Indio,
CA, USA
760-342-0913
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