Post on 18-Jan-2015
description
The Guide to Bookkeeping
PRESENTS
Lisa M Morton
We Are Going To Explore….
Who we are / what we do
What are “books” and why do you need them
The basics of bookkeepers vs. CPA’s
Software choices available
10 differences between a good and bad P&L
5 good vs. bad things on a Balance Sheet (B/S)
Top 10 mistakes made in bookkeeping
How ABIP can help
Who ABIP Are…..
We are a Full Service Accounting firm located in
the Galleria
We have a staff of 30 full time employees
We have over 100 years of combined experience
We are experts real estate accounting
We are auditors who rank in the top 5% of audit
firms in Texas
.
What We Do…..
Tax & Regulatory Compliance
Attestation Services
Consulting & Advisory Services
Entrepreneurial Services
Fraud Services Accounting Software Consulting
Employee Benefit Plans Litigation Support Services
Bookkeeping Real Estate Accounting
Who I am….. I am Lisa Morton ------
I am the Manager of Finance and Accounting at APIB
I have been a bookkeeper for over 15 years
I have been a vendor for 5 years
I am a member and an investor
I am an expert in, and a ProAdvisor for, QuickBooks
I successfully started, grew and sold Texas
Bookkeepers
Books…..
What are they?
Why do we need them?
How do we get them?
Do YOU Need A Bookkeeper?
Your bank balance Who owes you money and how much Who you owe money to and when payment is due What part of your business is making the most
money
Do you know at all times ????
NO … Then YOU Need a Bookkeeper
What Does A Bookkeeper Do ?
The Bookkeeper is the person who :-
Records the accounts and transactions of a business
Enters daily transactions
Does monthly account reconciliations
Basic reporting
Helps prepare for tax time
Bookkeeper vs.. CPA
Enter receiptsEnter billsRecord invoicesBank ReconciliationsOrganize records for
CPA
CPA
Journal EntriesFile Federal TaxesAudits Trial BalancesFinancial Reports
Bookkeeper
The bookkeeper is a bridge to your CPA.
Where the Bookkeeper Fits In
Traditional
Computer SoftwarePaper Ledgers
Bookkeeping Systems
Modern
Software to the Rescue ?
Intuit Microsoft Peachtree Sage
So Much to Do -
ABIP use Intuit QuickBooks and are ProAdvisors
Advantages of PC Bookkeeping
Accuracy 2+2 = 4 …. every time
Check printing
Reports
C.O.A. assigns costs and income
What on earth is a C.O.A. ????
What does a P&L tell us ?
P should be bigger than L
Where does the P/+ come from ?
Where does the L/– come from ?
How does it compare with last month ?
P & L – Bad Examples 1,2 & 3
IncomeIncome
Forfeit Deposit 1,000.00 600.00 1,025.00Late Fees 523.00 988.00 473.00Rents 35,457.93 34,784.00 40,532.00Utility Reimb 542.57 210.00 175.00
Total Income 37,523.50 36,582.00 42,205.00Total Income 37,523.50 36,582.00 42,205.00
2 & 3
1
P & L - 1,2 & 3 Corrected
Income Jun Jul Aug
5000 · RESIDENT RENTAL INCOME5001 · Rental income cur. month35,457.93 34,784.00 40,532.00
Total 5000 · RESIDENT RENTAL INCOME35,457.93 34,784.00 40,532.005200 · OTHER INCOME
5230 · Forfieted deposits - rent 1,000.00 600.00 1,025.005245 · Late fees 523.00 988.00 473.005280 · Utility Billings 542.57 210.00 175.00
Total 5200 · OTHER INCOME 2,065.57 1,798.00 1,673.00Total Income 37,523.50 36,582.00 42,205.00
1
2
3
P & L – Bad Examples 4,5,6 & 7Cost of Goods Sold
Automobile Expense 74.04 0.00 0.00Communications Expense
Cable 0.00 70.91 70.91Telephone 175.42 98.67 101.30VM 34.99 34.99 34.99
Total Communications Expense 210.41 204.57 207.20Computer Expenses
DIY 97.20 97.20 97.20
Total Computer Expenses 97.20 97.20 97.20Landscaping 1,800.00 900.00 350.00Office Expense 80.97 108.91 6.48Property Expenses
Eviction Costs 101.00 0.00 0.00Insurance 1,892.08 1,892.08 1,892.08Leasing Expenses 431.92 909.30 79.02R & M
Contractors 3,997.50 1,273.80 725.26Labor 3,887.00 2,338.00 2,681.00Material 1,267.38 2,162.29 2,962.53
Total R & M 9,151.88 5,774.09 6,368.79
5
4
67
P & L – 4,5,6 & 7 CorrectedExpense
6000 · MARKETING & ADVERTISING6001 · Advertising 0.00 0.00 300.006003 · Banners, bandit signs, etc 440.00 0.00 0.006009 · Leasing giveways 0.00 64.95 0.00
Total 6000 · MARKETING & ADVERTISING 440.00 64.95 300.007000 · OFFICE ADMINISTRATION
7005 · Accounting/Bookkeeping 2,356.33 1,199.25 0.007014 · Answering service 34.99 34.99 34.997020 · Bank Service Charges 0.00 0.00 5.507032 · National Tenant Network 431.92 909.30 0.007038 · Eviction and related fees 101.00 0.00 0.007048 · HAA 0.00 0.00 79.027056 · Meals & Entertainment 0.00 0.00 0.007060 · Office Supplies 80.97 108.91 6.487061 · DYI 97.20 97.20 97.207092 · Security 92.99 102.99 102.997098 · Vehicle Cost 74.04 0.00 0.00
Total 7000 · OFFICE ADMINISTRATION 3,269.44 2,452.64 326.18
4
7
5
6 Insurance moved
P & L - Bad Examples 8 & 9Jun Jul Aug
UtilitiesElectricity 2,438.18 952.37 890.39Gas 54.92 235.74 18.75Waste Removal 1,292.25 679.07 674.17Water 2,179.58 2,568.67 269.60
Total Utilities 5,964.93 4,435.85 1,852.91
Taxes - Property 2,666.67 2,666.67 2,666.67Wages
Contract Labor 0.00 0.00 548.90Salaries
SS/Med 243.28 230.65 343.11Salaries - Other 3,180.00 3,015.00 4,485.00
Total Salaries 3,423.28 3,245.65 4,828.11
8
9
P & L – 8 & 9 CorrectedJun Jul Aug
8500 · HUMAN RESOURCE RELATEDPayroll Reimbursements 0.00 0.00 0.008502 · Salary & Wages 0.00 0.00 0.008505 · Taxes 0.00 0.00 0.008506 · Manager Salary 3,358.04 3,167.62 4,731.958507 · Maintenance Salary 2,320.00 1,120.00 2,336.008513 · Hiring Costs 125.00 0.00 0.008520 · Contract labor 15.00 350.00 573.908525 · Payroll taxes - Management 256.89 242.32 361.99
Total 8500 · HUMAN RESOURCE RELATED6,074.93 4,879.94 8,003.848800 · UTILITY EXPENSE
8820 · Electricity Common 2,438.18 952.37 890.398839 · Gas Common 54.92 83.28 18.758840 · Gas Units 0.00 152.46 0.008850 · Telephone & internet 175.42 169.58 172.218880 · Waste haulage 667.25 679.07 674.178893 · Water and Sewer 2,179.58 2,568.67 269.60
9
8
*
P & L – Bad Example 10Jun Jul Aug
ExpenseAdvertising and Promotion 0.00 300.00Bank Charges 1,273.53 0.00 5.50Business Promotion 0.00 64.95 0.00Interest Expense 0.00 6,003.84 6,268.92Meals and Entertainment 6,037.59 227.85 180.39Professional Fees
Accounting 2,356.33 1,199.25 0.00
Total Professional Fees 2,356.33 1,199.25 0.00
Security 92.99 102.99 102.99
Total Expense 9,760.44 7,598.88 6,857.80
Net Ordinary Income 1,868.68 8,748.80 16,381.84
Other Income/ExpenseOther Income
interest Income 0.00 3.12
Total Other Income 0.00 0.00 3.12
10
P & L – 10 CorrectedJun Jul Aug
8800 · UTILITY EXPENSE8820 · Electricity Common2,438.18 952.37 890.398839 · Gas Common 54.92 83.28 18.758840 · Gas Units 0.00 152.46 0.008850 · Telephone & internet175.42 169.58 172.218880 · Waste haulage 667.25 679.07 674.178893 · Water and Sewer2,179.58 2,568.67 269.60
Total 8800 · UTILITY EXPENSE5,515.35 4,605.43 2,025.12
Total Expense 26,278.63 21,744.08 20,099.96
Net Ordinary Income 11,244.87 14,837.92 22,105.04Other Income/Expense
Other Income9010 · INTEREST INCOME 0.00 0.00 3.12
Total Other Income 0.00 0.00 3.12Other Expense
9700 · INTEREST EXPENSE 6,037.59 6,003.84 6,268.929800 · NON OPERATING CHARGES
9806 · Asset Management Fee 0.00 0.00 0.00
Total 9800 · NON OPERATING CHARGES 0.00 0.00 0.009805 · Ask Lisa 0.00 0.00 0.00
Total Other Expense 6,037.59 6,003.84 6,268.92
10
What does a B/S Tell Us
Assets: Things you have How much money you have in the bank What you have / assets What your asset is worth What you have invested (skin in the game)
Liabilities: Things you owe How much you owe for taxes Your mortgage / rehab balance Tenant security deposits owed
Assets and liabilities should always BALANCE!
B/S- Organizational Costs
Fixed AssetsFurniture and Equipment 2,052.00Intangible Fixed Assets
Organization Costs 500Total Intangible Fixed Assets 500
Other Assets2700 · OTHER LONG-TERM ASSETS
2701 · Organization Costs 1,403.00 Total 2700 · OTHER LONG-TERM ASSETS 1,403.00
Total Other Assets 1,403.00
B/S – Other Assets
Other AssetsA/R - Deposits 8,250.00
Total Other Assets 8,250.00
Other Current AssetsCity of Houston Water 11,250.00 Prepaid Expenses
Insurance 7,568.29 Total Prepaid Expenses 7,568.29
Total Other Current Assets 18,818.29
B/S - Property
Property 1Capital Improvements 356,700.01 Property 1 - Other 1,700,000.00
Total Property 1 2,056,700.01
Fixed Assets2000 · Property 1
Purchase Price 1,700,000.00 Construction Draw 214,753.09
Total 2000 · Property 1 1,914,753.09
B/S – Current LiabilitiesCurrent Liabilities
Credit CardsCredit Card 1
Citi Credit Card(226.90) Credit Card 1 - Other(2,104.81)
Total Credit Card 1 (2,331.71)
LiabilitiesCurrent Liabilities
Credit Cards
3200 · Citi Credit Card (226.90) 3220 . Lowes Credit Card (2,104.81) Total 3200 ·Credit Cards (2,331.71)
Copyright ABIP LLC 2012 27
B/S – Equity -Bad Example
EquityPartners' Equity
Partner 1Contributions 1,000.00 Draws (500.00)
Total Partner 1 500.00 Partner 2
Draws (4,085.73) Total Partner 2 (4,085.73) Withdrawals (58,000.00)
Total Partners' Equity (61,585.73)
Copyright ABIP LLC 2012 28
B/S – Equity - Corrected
Equity4000 · Partners' Equity
4010 · Partner 1Draws (30,127.53)
Total 4010 · Partner 1 (30,127.53) 4020 · Partner 2
Contributions 33,513.97 Draws (33,085.73)
Total 4020 · Partner 2 428.24 Total 4000 · Partners' Equity (29,699.29)
Copyright ABIP LLC 2012 29
Top 10 Mistakes # 10
30Copyright ABIP LLC 2012
SOFTWARE
Use proper accounting software - Excel is not an accounting program there are several programs that work well Software can save time by finishing entries automatically Generate quick and useful reports Saves time over paper ledgers Extremely accurate
Top 10 Mistakes # 9
31Copyright ABIP LLC 2012
ORGANIZATION
Having all records in one place Keeping neat files per year, per property Having one place for receipts until it is time to deal with them Always get information on contractors, if you need to issue 1099’s your bookkeeper or CPA will have all the information needed Having a back up of your company information / books in a different location
Top 10 Mistakes # 8
32Copyright ABIP LLC 2012
Getting Behind
Saying, “I’ll do it tomorrow” Make a routine, set a schedule and stick to it Quickly snowballs and you become
overwhelmed Costs you more money You tend to forget the details of a particular receipt / transaction
Top 10 Mistakes # 7
33Copyright ABIP LLC 2012
CHART OF ACCOUNTS
• Not detailed enough – separate insurance into
home, life, auto…• Not understanding what the COA is for• Not setting up credit cards properly• Keeping equipment and supplies separate
Top 10 Mistakes # 6
34Copyright ABIP LLC 2012
NOT KEEPING PROPERTIES SEPARATE
Keep property expenses separate – write on receipt what property Know your insurance cost per property Know your expenses per property / rehab costs Set properties up as customers and tenants as jobs – easy reports Set up expense accounts per property Have separate files per property for mortgage info with HUD 1 doc on top
Top 10 Mistakes # 5
35Copyright ABIP LLC 2012
CREDIT CARDS
Always have at least one per company Never mix personal and business on same card Pay it off if possible to avoid finance charges Negotiate interest rates to save money if you cannot pay it off every month Reconcile your statement with receipts – banks make mistakes too
Top 10 Mistakes # 4
36Copyright ABIP LLC 2012
ACCOUNTING FOR CASH Never pay cash - paying with a check or credit card insures you have another record of the expense if the receipt gets lost Creating expense reports, with receipts, for money you want reimbursed to you Cash withdrawals – write on receipt what it was for Create a petty cash account for personal monies used in your business. At year end either take the money or convert it to owner equity account. Take discounts when you can and save money where you can
Top 10 Mistakes # 3
37Copyright ABIP LLC 2012
BANK ACCOUNTS
Not keeping a record of what the deposit was for – what tenant Not balancing monthly – banks make mistakes too Keeping separate accounts for each business Enough banks offer free checking these days – do not pay monthly fees for checking account Not writing on checks as much detail as possible
Top 10 Mistakes # 2
38Copyright ABIP LLC 2012
RECEIPTS
Not saving all receipts – even refunds and internet receipts Not writing on receipt what the expense is for Not photo copying your receipts - as they will fade and you will forget Not keeping track of reimbursable expenses Not keeping receipts on unaccepted offers – these also need to be filed properly
And the Winner Is….
39Copyright ABIP LLC 2012
NOT HIRING A PROFESSIONAL
You shouldn’t hire a relative Hiring someone gives an honest look at your books and where you stand Hiring a professional insures proper posting to the right accounts Hiring a professional allows you more time to focus on your business Hiring a professional saves time and money
Summary
Take the stress out of tax time Help the bottom line SAVE YOU TIME AND MONEY
GOOD BOOKKEEPING WILL
Copyright ABIP LLC 2012 40
For More Information Visit
– Lisa Morton at Lmorton@ABIPcpa.com• Bookkeeping
– Rene Lozano at RLozano@ABIPcpa.com• Taxation
– John Dupree at Jdupree@ABIPcpa.com• Audits and Fraud
www.ABIPcpa.comOr Email us at
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