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Small Biz Accounting Tips, Nov 2013
November 07, 2013
|Hello small business owners!
Well, Halloween is over, and we're all looking forward to Thanksgiving - parades, football, turkey, pumpkin pie...suddenly I'm hungry. Anyway, where has all the time gone? Soon it'll be Christmas and New Years.
Are you ready to close the year on your small business books? In this months newsletter we're going to talk about some issues to think about as the year draws to a close.
So let's get started!
Accounting Journal EntriesAre you thinking about having a Thanksgiving feast at the office with all your employees?
Are you going to have a potluck or have it catered?
If you're going to have it catered, you'll need to post that expense as 'Meals & Entertainment'. Remember, Meals & Entertainment Expenses are only 50% deductible on your tax return.
And you'd make a journal entry like this:
Debit: Meals & Entertainment Expense...$300
Are you going to give small gifts to your employees? Or maybe to large customers? You might buy gift baskets, or turkeys, or get gift cards.
There are a few ways to do this, but I usually post gift purchases journal entries like this:
Debit: Office Expense.....$400
If you purchase company calendars to distribute to customers at the holidays, you could post that purchase to "Advertising Expense" because the calendars have your contact info on them, and are meant to get more business, so you're really advertising.
Home Office Deduction
Do you run your business out of your home?
Even if you do your work at the customers place of business or someone's home, if you don't have an actual store or office, you can claim the home office deduction, under certain conditions.
If that's where you do your paperwork, keep files and/or inventory or equipment, if you greet customers there, if you take phone calls there, etc., you can claim a portion of your home for the home office deduction.
The IRS allows you to deduct certain expenses - a portion of rent, electric and heat, internet, phone costs - as a business expense. You take the area you use for business, if it's a whole room or part of a room or even your garage, calculate it's percentage of your total home square footage, and use that percentage of your home costs.
Starting with tax year 2013, though, there is a Simple Option you can use as well - you use a standard deduction of $5 per square foot of your home used for business - up to 300 square foot.
The IRS requires that you be able to prove that you use the space regularly for business, and that it's used as your principal place of business.
If you have any doubts on your situation, ask your tax preparer, or send me an email. I'm a tax preparer myself.
Year End Cash Flow Planning
Have you gone thru the calculations yet? Do you know if you have cash to buy employee gifts or make that equipment purchase before year end?
Go thru the process of forecasting out the last weeks of the year, and place your expected income as cash in, and list out all the bills you plan on paying as cash out.
For more details on the process of Cash Flow Analysis,
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Year end customer giftsOne way to keep your business in front of your customers, and to remind them how important they are to you - is to send out some kind of business promo item like calendars or pens.
Or another nice thing to do is to send out business Holiday Cards , which is another great way to keep the relationship going with your customers.
Is it an Asset or an Expense?
Some of you may not have a real, formal accounting system. So maybe you're not keeping track of each business purchase until the end of the year.
Certain items or services you purchase must be Capitalized, not Expensed.
What does this mean?
Capitalized means that item you purchased is treated as an Asset, and Depreciated each year it's used until it's useful life is used up.
Buildings, of course, are treated as business Assets,as are vehicles used by the business, equipment, furniture, computers, phone systems, heating systems, etc.
But so are major building improvements, improvements to a leased space, start-up costs for a new business, and major improvements to a business property, like sidewalks or parking lots.
These items all have a useful life longer than a year, and need to be posted as an Asset, and then depreciated on your tax return.
If you have any questions about any item that you've purchased for your business, feel free to send me an email.
Well, that's it for this month.
I'll be back next month with more tips and help for your small business bookkeeping.
PS: Please feel free to let your fellow small biz owners know about this newsletter! Send them to my sign up page - the last button on my navigation panel.
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