Back to Back Issues Page
Small Biz Accounting Tips, April 2014
April 11, 2014

I'm looking out my office window right now, and the sun is shining. As much yucky weather as we've had lately, seeing the sun is such a mood elevator! I think I'll have to take a walk later and enjoy it.

I hope you filed your taxes already, if not you only have a few days. Remember to file for an extension if you're not going to get them done. Save getting a penalty for late filing, if not for late payment

This month I'm going to talk about one type of Expense - Cost of Goods Sold. Then we'll take a look at .

So let's get started!

-Kathy


Accounting Journal Entries

Investments

Assets are important to every small business, whether you operate an internet business from your home office, or operate a factory in your hometown.

We often think of Assets as what we accountants call Plant Assets, which are your buildings, equipment, vehicles, and such.

But there are other types of Assets - like receivables (people owe you money), Inventory, Investments, Goodwill, and other Intangibles like Patents or Trademarks.

Today we're going to look at Investments.

Investments can be many things -

*purchasing part of another business
*purchasing Certificates of Deposit or Money Market accounts
*purchasing shares of stock or bonds on the stock market

Any Investment must be in the business name, not yours, and the proceeds - be it interest or dividends or share of a business - must also be in your business name - not yours personally.
If you invest business funds, but in your name personally, you have either a withdrawal of equity or a loan from the business to you, and then you have a personal investment transaction. Now let's look at a few accounting journal entries for Investments.


Let's say your small business has some cash on hand that you want to invest. So you go to the bank and purchase a Certificate of Deposit for 6 months at 1.5% interest.

Here's your Journal Entry for that purchase:

Certificate of Deposit (asset)...$5,000
Cash-Checking (asset)......................$5,000

Let's say we wait the 6 months, then go to the bank and get our money out with our interest earned.

Here's that Journal Entry:

Cash-Checking (asset)............$5,037.50
Interest Earned (revenue).......................$...37.50
Certificate of Deposit (asset)..................$5,000.00

But, what if we couldn't wait the 6 months and we needed our money back after 3 months?

And let's make it simple and say there's no early withdrawal penalty (the bank likes us!) so we're taking only the interest we've earned.

Cash-Checking (asset).........$5,018.75
Interest Earned (revenue)................$...18.75
Certificate of Deposit (asset)...........$5,000.00

There are other Investment types, like stocks, bonds, Money Market accounts, etc. that we could invest in as well.







The Balance Sheet



Any talk of Assets always makes me think about the Balance Sheet. This is the report that shows all your Assets, Liabilities, and Equity.

Not many small business owners look at a Balance Sheet - until they need a loan or their insurance agent asks for one - but it is a report that can help you run your business as much as your Income Statement.

The Asset section shows you how much your business owns, which can be considered collateral if you ever need a bank loan.

The Liabilities section shows you how much your business owes - to vendors or banks or owners.

The Equity section shows you how much is left, really, after the Liabilities are subtracted from the Assets. As a small business owner, this is your 'net worth' in the business.

There are also things you can tell about a business just by looking at a couple Balance Sheets.

Click here for the rest of the discussion on The Balance Sheet.



Are you thinking about setting up your books on the computer?



If you're using a manual accounting system, that's great, if it's working for you.

But if you're growing and need a little more help or want to get a little more high-tech, here's some products that I like.

Freshbooks

This cloud based software will help you invoice your customers, let them pay you online, and even help you track your expenses. It's not a full accounting system, but it can be useful for these things.

FreshBooks


QuickBooks

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.





How to Keep your Business Growing

Are you looking for ways to keep the customers coming and keep your small business growing?

There are lots of ways you can accomplish this - either thru your product line, or customer base, or advertising methods.

It just takes some time to think about what you want to accomplish, and figure out what's right for you and your small business.

For more on growing your business, click here.





Still need help?



Always remember that if you need help, I do provide remote Bookkeeping Services - including payroll. So don't hesitate to reach out if you need some help. I have over 20 years experience and I'll design a bookkeeping package that fits your needs and budget.

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!

Kathy https://www.small-business-accounting-info.com

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.

Back to Back Issues Page