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Small Biz Accounting Tips, Dec 2013
December 10, 2013
Hello small business owners!

Here we are. The last month of the year. Where has all the time gone? I hope you managed to meet the goals you set for your business at the beginning of the year. Are you ready to close the books on another year?

You should balance out your receivables (know who owes you what), your payables (know who you owe what), and your inventory (know what you have left on hand), so you can make any adjustments on your December books.

Are you thinking about taking an owner distribution out of the business at year-end? I'll go over how to post those distributions.

And then let's look back at this year, and forward to next year.

And let's talk about some more business deductions.

So let's get started!


Accounting Journal Entries

Are you going to take some money out of the business before the end of the year?

If you're a Sole Proprietor (or Single Owner S-Corporation or Single Owner LLC), money taken out of the business is considered an owner withdrawal of equity.

So you'd make a journal entry like this:

Debit: Owners Equity...$3,000
Credit: Checking Account............$3,000

You could have separate accounts for Owner's Equity-Contributions and Owner's Equity-Withdrawals if you want to.

If you own a Partnership - and each owner is taking money out at year-end, you would post to each partner's equity account like this:

Debit: Owners Equity-Johnson...$3,000
Debit: Owners Equity-Smith.....$2,500
Debit: Owners Equity-Williams..$3,200
Credit: Checking Account....................$8,700

If you own a Corporation, money taken out by the owner is considered a Distribution of Retained Earnings, and is posted like this:

Debit: Distributions....$4,000
Credit: Checking Account.............$4,000

The Distributions account has a debit balance, and follows Retained Earnings in your Chart of Accounts.

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Other Business Deductions

There are some business deductions that are a little tricky.

For example, Meals & Entertainment Expenses are usually only deductible at 50%.

What about insurance expenses?

You can deduct insurance premiums you pay related to your business like coverage for fire/theft/accidents, group medical for employees, liability, malpractice, errors & omissions, workers compensation, disability, vehicles, life, business interruption, and also, in some instances, self-employed health insurance.

Penalties for late or non-performance are deductible, but penalties paid to a government agency are not.

Political contributions are not deductible as a business expense.

You can deduct real estate taxes, and state and local income taxes, but NOT federal income taxes. You can deduct employment taxes paid by the company but NOT those paid by the employee, unemployment taxes, franchise taxes, and personal property taxes.

Make sure you take advantage of those business deductions you can claim.

Looking Forward, Looking Back.

Looking back thru the year, how has your small business accounting system worked for you? Are you using a manual system of a cash disbursements journal and a cash receipts journal? Has it been giving you the information you need to track sales and expenses each month?

Have you been using an accounting software package like QuickBooks? Is it working for you? Do you have the time to devote to it or is your business growing and demanding more of your time?

Are you keeping up with your receivables? Are you invoicing your customers on a timely basis? And receiving payments timely? Are you paying your bills on time? Is cash flowing nicely or running out on you?

Looking forward, what could work better than it is? What accounting information would help you run your business better that you aren't getting? Do you need to get invoices out faster? Would accepting online payments be beneficial?

This is a great time to make changes. You have a brand new year coming up.

Would changing your columns in your Cash Receipts Journal help you? Is it time to upgrade to a computerized system, or is it time to hire a bookkeeping service for some help?

What could you do now that would make next year work a little easier?

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One 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.

I just want to let you know how much I appreciate you, my newsletter readers, and everyone who stops by my website. I enjoy helping answer your questions and helping you understand and set up your own bookkeeping.

I also want you to know that should you need it, I do provide bookkeeping and tax return services. If your small business is growing past the point where you can do your own books, please give me a shout and I'd be glad to help. I offer services tailored to your size and your needs. With 23 years experience in small business accounting, you can be assured that you'll get the best in service. And my rates are quite affordable.

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Thank you and Happy Holidays!!

Have a question? Need some help? Click here 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.

Take care!


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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