Accounting for Bad Debts

One of the unfortunate issues that companies need to deal with at year-end is accounting for bad debts. Bad debts are not an issue for a company that operates on a cash basis; if you haven’t collected the money, then it isn’t included in your income. For companies that keep their books on an accrual basis, however, it is an important part of their year-end process, since you book your revenue as it occurs or is billed out, not when you receive payment. Read More »

Tags: Accounting For Bad Debts, Accounts Receivable Aging Report, Accrual Basis, Allowance Account, Attempts, Bad Debt, Bad Debts Expense, Balance Sheet, Cash Basis, Documentation, Expense Account, Income Statement, Invoices, Irs, Money, Net Income, Receivables, True Expectations, Year End

Costs of Goods Sold vs. Inventory: Where Does it fit?

The term cost of goods sold can mean a lot of different things, depending on what type of business you are in. If you are in a retail business, the definition is fairly clear cut. The cost of goods sold equals  your purchase costs on the items you have sold during a given period. If you sold ten candles at $10 each, then your revenue from sales is $100. If those 10 candles cost you $4 a piece when you purchased them, then your cost of goods sold is $40 for those 10 candles.

However, you probably purchased those 10 candles several months before they were sold. Where do you record that $40 purchase initially? Your purchases of goods for sale should initially be debited to your inventory account, which is an asset account on your balance sheet. You have simply exchanged one asset (cash ) for another asset (inventory).
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Tags: Accounts Receivable, Accrual Basis, Asset Account, Asset Inventory, Balance Sheet, Candles, Cash Basis, Crediting, Different Things, Fit, Gross Profit, Income Statement, Inventory Account, Inventory Count, Lot, Material Purchases, Physical Inventory, Retail Business, Service Business, Year End

Sales Tax (Again): Cash vs. Accrual

Since we just finished up our series on Sales and Use Tax Audits, I thought we might as well hit one more item that relates to sales tax:  the effect of cash versus accrual accounting methods on your sales tax filings.

Just as a refresher, when your accounting is done on an accrual basis, revenue is recognized when the billing goes out to the client. On a cash basis, revenue is recognized when the client actually pays the bill, and you have deposited the funds. The same is true on the payables end. In an accrual system, expenses are recognized when your vendors bill you. In a cash system, the expenses are recognized on the books until you actually pay those bills.
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Tags: Accounting Methods, Accrual Accounting, Accrual Basis, Cash Basis, Cash Vs Accrual, Company B, Payables, Sales And Use Tax, Sales And Use Tax Audits, Sales Tax, Sales Tax Rate, State Tax, Tax Filings, Tax Period, Tax Return, Wit

Making FreshBooks work with QuickBooks and vice versa – Part 2

Part 1: Dealing with Income – Continued (Part 2)

QuickBooks is an accounting application and FreshBooks is an invoicing application. They are two different things, but in the end to have your data matching in both, there could be a ton of double entry resulting in valuable time consumed and strenuous effort.

You can have your data accurate in both, while not matching in both. Matching and accuracy are two different things. For all of the numbers to match up, it is a matter of accuracy. To have all of the details such as sales items etc. it would be a matter of matching.

In this blog post, I will begin to show you ways to get accurate data from FreshBooks into QuickBooks.

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Tags: Accounts Receivable, Accuracy, Accurate Data, Amp, Blog, Cash Basis, Cash Revenue, Freshbooks, Getting Money, Ideal, Invoicing, Quickbooks Accounting, Strenuous Effort, Two Different Things, Vice Versa