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Accounting Practice: Adjusting Entries Accurately

Most corporate accounting services in Singapore are well equipped to handle all their client’s accounting requirements on a regular basis. However, as an added measure, clients are also encouraged to understand the basics of accounting so as to ensure that everything is properly tended to with no mistakes.  For those seeking to understand accounting, a good accounting practice, to begin with, would be to learn about adjusting entries. Here’s what to know:

Adjusting entries usually involve adjusting the journal entries containing information that converts the corporation’s accounting records into the accrual basis of accounting. The adjustment process is typically performed before corporate financial statements are issued. This accounting practice is usually performed in situations where accounting records for expenses/revenues have nothing entered despite having occurred or something has been entered but the amount requires further division between multiple accounting periods. Factors that adjusting entries usually affect are the income statement accounts and balance sheet accounts, since it ensures that both accounts are up to date.

Begin reviewing the balance/amount displayed in the balance sheet accounts and take note of the asset account- make sure the preliminary balance amount located in the general ledger agrees with the bank reconciliation. Check the bank statement to see if there are additional charges included, these additional charges should be entered into the cash account if they have not been done so. Next, check your list of customers for those who have unpaid invoices in the accounts receivable section. As a standard accounting practice, balance sheets must come with reports of all amounts the corporation has the right to receive- including the unpaid amounts, and not just the ones that have already been billed. Income statements should also be reporting all revenues earned- not just the ones that have already been billed.

Entry adjustments are also typically sorted by accruals and deferrals. Accruals are typically the adjustment type for entries where nothing is recorded into expense despite the corporation having incurred expense during the accounting period, as well as when the corporation has a liability/obligation for the unpaid interest up to the accounting period end. Deferrals are the type of adjusting entries that are performed when both expense and revenues have already been entered but require further division between accounting periods.

Another recommended accounting practices to minimise the need for adjusting entries would be for accountants to ensure that the expenses for each accounting period are paid in the period from when they occur. For example, arranging for expenses and other interest payments to be charged to the account at the end of every month, using the current month’s interest- this way, accountants can ensure that they will only have to record interest payment.  

5 Basic Accounting Principles and Guidelines To Understand

Accountants are highly encouraged to regularly study, practise and understand accounting principles as well as guidelines before offering bookkeeping and accounting services in Singapore. For beginner accountants, there are 5 basic accounting principles to first familiarise oneself with:

  1. Entity Assumption

As a basic accounting principle, accountants are advised to keep business transactions of sole proprietorships separate from personal transactions of the business owners. While the sole proprietorship business, as well as the business owner, are technically considered one entity, they are kept as two separate entities when it comes to accounting.

  1. Time Period

Time period assumption is one of the most crucial basic accounting principles to keep in mind- the shorter the time intervals are, the likelier it is that the accountant will be required to perform estimate amounts that are relevant to the indicated time period. A good bookkeeping and accounting practice would be to display clearly the period of time (time interval) in each income statement’s heading, as well as the stockholders’ equity statement and cash flow statement.

  1. Full Disclosure

Out of all basic accounting principles, the requirement for full disclosure is one accountant should take care not to miss. Information that is considered important to investors and lenders should be fully disclosed within the financial statements, or at least attached to them in the form of footnotes. Accountants should also monitor the going concern accounting principle while at it, since this principle would assume that corporations will continue existing long without the possibility of liquidating in the near future. If the accountant believes the corporation may not continue on, the accountant should disclose the assessment.

  1. Matching Principle

To follow this principle, corporations would be required to use an accrual basis when it comes to accounting so that expenses are matched with revenues. For corporations who decide to use services that are difficult to measure when it comes to future economic benefits- like advertising, for example, the accountant may experience trouble when attempting to match such expenses with future revenues. What can be done, is for the amount to be charged to the expense in the time period where the corporation is using the service.

  1. Cost Principle

Costs are typically defined when the amount of cash (or equivalent) is spent on products/items that are originally obtained- regardless of when the purchase happened. These purchase amounts are usually displayed on financial statements as historical cost. As a result, the asset amounts will not be adjusted upwards to reflect any increase (inflation).

Break even point

5 Accounting Equation Rules Suited For Sole Proprietorships

 

Accounting procedures for sole proprietorships contain certain differences compared to accounting catered to other corporations. Most corporate accounting services in Singapore are well versed enough to conduct accounting procedures for sole proprietorships. However, as a method of safeguarding and minimising potential errors, business owners are encouraged to remember these 5 accounting equation rules:

  1. Basic

The basic accounting equation for sole proprietorships are calculated with Assets being a sum of Liabilities as well as the Owner’s Equity (Assets = Owner’s Equity + Liabilities). Business transactions for sole proprietorships are recorded into specific accounts that are contained in the corporation’s general ledger. Some of the accounts that users have to pay attention to would be the Temp service expense account, Advertising account, Service revenues, Notes payable, Accounts Payable, Equipment purchase, Accounts receivable, Cash, the Owner’s Equity account and Contra Owner’s Equity account.

  1. Draws

Draws are termed for withdrawal of corporate assets by the owner of the sole proprietorship for personal use. These withdrawal of assets are not considered expenses, and therefore the transactions are not typically reported in the income statements. In the event that withdrawals were made, the accounting equation of the sole proprietorship would reflect the decrease in both assets as well as owner’s equity, thereby making the equation in balance.

  1. Loans

Another factor that affects the accounting equation would be loans from banks. Should the business owner borrow currency, there will be an increase in the sole proprietorship’s assets as well as liabilities. This transaction should be recorded in both the Cash section of the asset account, as well as Notes Payable in the liability account. Do take note that the bank loan is not considered as earned revenue, therefore there will be no effect from this transaction in the income statement. One can however, interpret two sources for the sole proprietorship assets- the owner of the company’s provisions, as well as the creditors (bank).

  1. Earned Revenue

As per standard billing procedures where payment due dates are usually after 30 days, the revenue transaction is not recorded into the capital account just yet despite the fact that both assets and owner’s equity displays an increase based on the payment amount. The amount earned should be recorded under the Service revenues section of the revenue account so that the revenues can be reported into the income statement at any given time and transferred to the owner’s capital account after the year end.

  1. Missing Amount

In the event that there are missing amounts, the accountant may rely on the statement of changes recorded in the owner’s equity to determine the components that are unknown. For example, relying on the draw amount at the beginning as well as end balances of the owner’s equity to calculate and derive the net income value.

5 Accounting Equation Methods Catered For Corporations

With the ever thriving plethora of corporate accounting services in Singapore, it is not uncommon for companies to consider the option to outsource accounting to professional accounting firms. While that may be so, business owners are still highly encouraged to familiarise themselves with the basics of accounting so as to double-check and minimise the occurrence of subtle errors. For starters, here are 5 basic accounting equation examples catered for corporations:

  1. Basic

As a general practice, the basic accounting equation for corporations is denoted with assets being the sum of liabilities as well as Stockholders’ equity (Assets = Stockholders’ Equity + Liabilities). Different transactions will affect the corporation’s accounting equation, balance sheet and income statement in differing ways. Pay attention to the cash amount, accounts receivable, equipment, common stock, notes payable, retained earnings, treasury, service revenues, advertising expense, accounts payable and temp service expense amongst other factors.

  1. Stock

When stocks contain no par value and no stated value, the assets of the corporation as well as stockholders’ equity would increase in an equivalent amount, thereby balancing out the accounting equation. This accounting equation reveals that the source of the corporation assets are from the stockholders. Stocks that have been purchased from the stockholders by the corporation would be stored in the Treasury stock. In situations where corporations purchase their own stock for cash, the corporation’s total assets as well as stockholders’ equity decreases equivalently.

  1. Equipment

Another factor that affects the way the accounting equation is applied would be the purchase of equipment. Equipment purchasing is typically not treated as an immediate expense- the purchase only serves to become a form of depreciation expense only when the equipment has been placed into service. Pay attention to the date where the equipment is placed into service. If it hasn’t been done so, then there would be no expenses in the particular transaction, or earlier transactions when reported in the corporation’s income statement.

  1. Service Revenues (Earned Revenues)

Payment and billing methods differ from case to case. However, most corporations choose to bill their clients and offer a 30 day leeway before the payment amount is due. Once the corporation has performed and completed the service for their clients, this automatically means that the corporation has earned revenues, and reserves the right to receive the agreed upon amount from their clients. In situations like these, the stockholders’ equity in the accounting equation will increase. However, one must take care to note that the revenue transaction is instead recorded in the Service revenues section instead of directly into the Stockholders’ Equity account.

This is usually to provide corporations with the opportunity to report the revenues account through it’s income statement at any given time. The amount located in the revenues accounts will only be transferred into the retained earnings account after the year end.

  1. Temporary Service Expense

If corporations outsource work to temporary help services, the invoice can be recorded immediately while the amount is paid only after a certain amount of days. The accounting equation will then be amended to reveal that the corporation’s liabilities increase whereas the stockholders’ equity decreases by the amount of payment that is owed to the temporary help services. The liabilities incurred should be recorded under the Accounts Payable section whereas expenses should be recorded in Temporary Service Expenses.

Beginner’s Guide to: Editing Transactions In MYOB

Transactions are a part of the essential information you need recorded accurately in MYOB. You will rely on this data to keep everything on track, so it’s imperative that you know just exactly how to enter and edit them in your MYOB software. If you are new to MYOB, here is a little guide to help you gain your bearings with transactions:

Set Up

In order to create more flexibility for transaction editing ( like reversing transactions), you will first have to make sure that your MYOB software can accommodate it by tweaking your preferences. Under your MYOB set up menu, look for preferences and the security tab. Untick the Transaction can’t be changed, must be reversed option so that you will be able to directly edit them.

Find Transactions

Before you even begin editing transactions, you are required to find them. This can easily be done through the Find Transactions option or your Bank Register option in your MYOB software. Refine your search accordingly until you are able to locate the right transaction record and edit by clicking on them.

Non Editable Fields

While you are able to make changes to transactions, there are certain elements that cannot be changed. For example: Cash receipt payments. Your next best alternative is to access your Receive payment window and choose to delete receipts before re-entering by selecting the edit menu and locating the delete payment option. You can enter details by using the Sales Command Centre and re-typing in your transaction.  

Modifying Customer name

If your invoice has no transaction applied just yet but require a change in customer, choose the recorded invoice through the sales register and open the customer field. You will then need to delete the wrong invoice and manually record again with the right customer field selected. Make sure to print a hardcopy before deletion so you can re-enter accurate details. Make sure to use the Delete sale option and remove the invoice through the edit menu after you have done so.

If there are transactions applied to the invoice and you have to modify customer names, locate your transactions and display the invoice you need. Look for your edit menu and choose delete sale after you are done deleting the applied cash receipts before performing the steps above for modification with no transactions applied.

Keep these steps and tips in mind so that you can apply them to your own financial practises. By consistently making sure to perform these steps, you will be able to better your data accuracy, thereby eliminating the risks of miscalculation as well as being able to make better informed decisions based on reliable data.

5 Step Beginner Guide to MYOB Purchase Orders- What You Need to Know

MYOB purchase orders are important to get right as they contribute to data accuracy and workflow. If you are a beginner, there are certain functions you have to know in order to fully utilise and benefit from using MYOB. Here’s a 5 step beginner guide to MYOB purchase orders to get you started:

  1. Recording Purchase Orders

In order to start recording the purchase orders you have received, open up your Purchases command centre and look for the enter purchases option. Look for the top left corner and choose the arrow next to the field so that you can choose ORDER instead if it has not been chosen by default. You will then be prompted to fill in information so make sure to do that as concisely as you are able, according to the information you have currently at hand. Choose the supplier you need, the area it is shipped to, make sure the terms are correct and tweak the purchase number if you are required. Confirm data accuracy before clicking on record.  

  1. Credit Purchase Conversion

Convert your purchase order into credit purchases by looking for the Purchases Register in your MYOB software. Select the Orders tab so that you can view the purchase orders list you have created and choose the suppliers you want to display. Select the supplier you want and look for the specific purchase order you need from the supplier. After which, select it and choose the change to bill option so that it can be converted. You can then record according to what you need and make sure the information input is right.

  1. Accounts Payable Settlement

For accounts payable, look under the purchases command centre again and choose the Pay Bills option. This will allow you to record supplier payment- choose the account you want your payment to be recorded on. If it is a direct payment from your bank account (payment through credit cards or cheques), you can choose the pay from account option. If you want your payment to be grouped with a group of electronic payments, look for the Prepare electronic payment option under the Banking Command centre instead.

  1. Create Supplier Note

When it comes to purchase returns, you will first have to create a supplier note/debit note. To begin doing so, look for your Purchases Command Centre on your MYOB software. Choose enter purchases and look for the BILL field option. Make sure to enter the details of your purchase return and indicate negative amounts under the Bill section of the window that pops up for you. Once you are done with it, check to make sure everything is in order and record it.

  1. Apply Supplier Note

After creating your purchase return supplier note, you will now have to apply it to a purchase invoice that is still outstanding.  Look under the Purchases Command Centre and choose Purchases Register. Choose the tab that states returns and debits so that you can access your supplier note and choose the relevant supplier. You can then be able to locate the supplier you want to use and look for the PO# that you want to apply. Choose it and click apply to purchase so that you can apply it. You will then have to finalise it by choosing record.

These are some of the most crucial things to know about MYOB purchase orders. Make sure to practise and get acquainted with the procedures so that you can easily maintain data accuracy in your everyday projects!

5 Benefits Of Purchasing Through MYOB Resellers

The purchase of MYOB softwares through MYOB resellers have become a common practise today, for good reason too. If you are considering purchasing MYOB softwares for yourself, here are 5 reasons why you should consider purchasing it from an officially recognised MYOB reseller instead:

  1. Access

Depending on the region your corporation resides in, it can sometimes be a challenge when you require access to certain MYOB products or software. By buying through resellers, you can resolve the problem of access and enjoy an ease of convenience when procuring important resources. You can also gain advice and recommendations in real time when communicating with MYOB resellers and enjoy fast response rates without timezones getting in the way.

  1. Product Demonstration

It can be awfully daunting when you are unable to visualise how the MYOB software works and do not have the luxury of time to experiment for yourself though the free trial versions. By making arrangements with your nearest MYOB reseller, you can head down to their physical location for product demonstrations conducted by an experienced reseller so that you can better gauge how user friendly the MYOB software of your choice could be. You can also take the opportunity to scout out MYOB softwares that are better fitting when it comes to your requirements.

  1. Expenses

When purchasing MYOB softwares for corporate purposes, you may find yourself shelling out some big amounts to do so. When you buy through MYOB resellers, they could either offer discounts to encourage SMEs in understanding and using MYOB software or provide you advice on how you can actually save up. For example, the claiming of PIC for meeting certain criterias and other important tips that you can benefit from.

  1. Network

MYOB resellers are usually connected to a wide variety of like-minded individuals like certified MYOB partners, MYOB training agencies, MYOB professional networking groups and more. With their advice and help, you can begin touching bases with other professionals who are also making use of MYOB for assistance.

  1. Training

Some MYOB Resellers also go a step and beyond by not only providing MYOB softwares for sale, but by also conducting MYOB training courses that are catered for professionals to attend. If you know an MYOB reseller, chances are that they are also certified MYOB specialists that can arrange and conduct training sessions with you, or that they know and are capable of recommending training course sources to you. This can greatly help since certain training agencies can provide discounts if you are liaising with them through a certified MYOB reseller, and you won’t have to worry about finding a reputable training agency by yourself without knowing what to expect.

These are just some of the benefits purchasing MYOB softwares from MYOB resellers can bring. Depending on your region and depending on the MYOB reseller, there can be additional advantages that are granted to customers who choose to buy from them so make sure to enquire before you confirm your MYOB purchase.

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