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Small Biz Accounting Tips, July 2014
July 01, 2014
Welcome to your July newsletter on Small Biz Accounting Tips!
Well, it's summer. Happy Independence Day!
After that terrible winter we had, and we just couldn't wait for it to end, it seems unbelievable that the year is half over already!
Hope you're taking a little time away from your small biz to enjoy the warmth and blue skies this summer.
This month we're going to talk about disbursements - payments made for business purposes either by cash - check - or credit.
So let's get started!
Cash DisbursementsCash disbursements for my purposes here includes any business transaction that you use cash for. This includes petty cash as well as your checking account.
What is considered a business transaction?
--purchase of materials or supplies
What is NOT a business transaction?
--paying for lunch for yourself, unless there is a client with you and you discuss business
Well, you get the idea.
Cash disbursements should be entered in a Journal (a book of original entry). A Journal can be on paper or on the computer, and should track each disbursement of cash (or check) for your business.
A good Cash Disbursements Journal will also keep track of the business purpose of each transaction. You should also keep receipts for each transaction, either scan them into a folder on your computer or keep a paper file of the bills and store receipts for documentation.
If you have a business lunch, write on the receipt who you met with and what business you discussed right on the receipt. If it's a cash register receipt, make a copy of it. The original may fade with time until at one point it'll be unreadable.
For more on the discussion of building a Cash Disbursements Journal,
Journal Entries for Cash Disbursements
What kind of Journal Entries would you make for these kinds of costs?
Some basic disbursement entries would be for your usual business expenses paid by check, right?
Here’s some sample Journal Entries:
Let’s say you pay the rent (or phone bill or gas bill etc.) with a check.
But what if you pay for purchases on your credit card?
You can do that one of two ways.
You can wait til the end of the month, when you get your credit card statement, and make one journal entry to record all the months expenses.
Meals & Entertainment......$80
You can enter each credit card purchase as you go along. But you may miss a transaction if you don't sit right down and make an entry. I think it's easier to wait for the statement. But it's up to you.
What about keeping Petty Cash on hand?Most businesses keep some cash on hand.
We accountants call it Petty Cash. Not that it's really 'petty', just that it's small.
You may keep $50 or $500, depending on the size of your business and your need to have cash on hand.
Keep your cash in a locking cash box, make note of each transaction, and count the cash regularly. You don't want to forget to write something down, and you don't want someone 'borrowing' $20 without you knowing about it.
For more about setting up a petty cash fund, and how to account for it, click here.
Is your checkbook your accounting system?If your business is part time, or just in the beginning stages, you may just be using your checkbook as an accounting system.
If you are, you may want to consider using a system I’ve created. It uses a simple Cash Receipts Journal and Cash Disbursements Journal to record your business activity each month.
These journals can be created on paper or in Microsoft Excel (or the free version), whatever works best for you. They need not be complicated or fussy.
But you can pack a lot of info into these journals, and get a lot more information that just a checkbook entry. And, from these journals it’s an easy couple of steps to an Income Statement.
For more info on this system, click here. manual acctg system
QuickBooks is having a sale.
QuickBooks is a full accounting software system, and it's the #1 small business accounting software package on the market. I use it, so I know it has a lot of great qualities. You can invoice customers, pay bills, pay your employees, track your jobs or projects, and prepare all manner of reports. So if your business has outgrown your manual system, check it out.
Have any questions?
Feel free to send me an email. Use the link below.
Well, that's it for this months newsletter.
I'll be back next month with more news and tips to help you with 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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