ABIP's Guide to Bookkeeping

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)


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)


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


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


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


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


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


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


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


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


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….


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


For More Information Visit

– Lisa Morton at [email protected]• Bookkeeping

– Rene Lozano at [email protected]• Taxation

– John Dupree at [email protected]• Audits and Fraud

www.ABIPcpa.comOr Email us at

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ABIP's Guide to Bookkeeping

Economy & Finance

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