Accounting & Bookkeeping Tips

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Here are a few Accounting & Bookkeeping tips to improve the accuracy, appearance and structure of your financial statements.

(A)  Method to Address Vendor Purchase Returns

  1. If the return was made for cash:  create an asset (Bank) clearing account, I use Cash on Hand.  If the return was made for credit, assuming the credit card account is already “connected” to the business, no additional account is needed.
  2. Debit Cash on Hand or the account you created and credit the original expense account for the vendor purchase using a Journal Entry.  Debit the credit card that was used and the original expense for a return against a credit card purchase.

(B)  Issues with Undeposited Funds (Determining which Transactions were not Deposited)

  1. Pull up the Balance Sheet for the desired period and locate the Undeposited Funds Account.
  2. Click on the balance of the Undeposited Funds balance.  This will create a list of transactions involving Undeposited Funds for the period.  QuickBook actions “Receive Payment” and “Bank Deposit” both impact Undeposited Funds.  Make sure the field called Reconciliation Status is selected under the gear icon just above the list.
  3. Export the QBO list of transaction to an excel spreadsheet.
  4. Apply a filter to the spreadsheet and locate the column labeled Reconciliation Status and deselect or unselect the box labeled Deposited.
  5. The transactions listed represent money that was received but unmatched to a bank deposit amount.

(C)  More Accounting and Bookkeeping Tips – Clean Up the Equity Section of Your Balance Sheet

  1. For all Pass-Through Entities (Schedule C, Partnerships and S-Corporations), Retained Earnings should NOT be part of the Equity section of the Balance Sheet.  Reason:  Pass-Through Entities do not retain earnings, C-Corporations do.
  2. Create an equity account and label it something like “Balance” as of the fiscal period end of the company or partnership for each member or partner.
  3. Journalize each member or partner’s respective contribution/investment and distribution/pay to this newly created Balance account for each member or partner as of the period ending date.
  4. Journalize each member or partner’s share of Retained Earnings to this newly created Balance account as of the day following the fiscal period end.  QuickBooks automatically moves the Net Income figure to Retained Earnings one day following the fiscal period end date.
  5. Now the company/partnership can track current period contributions/investments and distributions/pay separate and distinct from the prior period.  The net equity figure for each member or partner contains the prior period balance and current activity.  I think that’s slick.

A short mention concerning item B…a balance in Undeposited Funds more than likely represents a distribution to the owner(s) or partner(s).  I had a client that had in excess of $60,000 in their UF Account that had grown substantially over several years.  If your client is depositing less than the amounts they’re receiving, it’s more than likely a distribution.  Having strong internal controls can reduce the temptation, finger pointing or grief, particularly in partnerships or multi-member organizations.

For Item C…Concise and well structured financial statements can be just as important as accuracy and reliability!  Presentation means a lot.  When you’re marketing your company or partnership to a lender or creditor, unorganized, or poorly structured statements can spell the difference between getting credit and getting denied.  Your organization’s data is a reflection on you, as owners/partners.  Make it count, by making it neat.

That’s all for now. Questions? Contact us HERE.

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