Blog

Getting Ready for End of Year Accounting

Time flies so fast- it seems like only just yesterday we were having great times enjoying our holiday vacation for the new year.  Now, we are back to reality, having to face the challenges of keeping our business transactions up to date and preparing to do the year-end procedures for accounting.  One or few of the following activities in the list may or may not apply to your business so just go through the activities that apply to your business operations:

Financial Fiscal Tax Year End on Gold Coins

  1. Go over your monthly task checklist

If you are able to make your monthly task checklist, then it is easy for you to monitor how you are going with the update of the monthly routine accounting tasks, sorting between tasks that are completed and tasks that are pending.  If you are not able to make a complete list of your monthly tasks, it is best you begin creating the checklist immediately, most preferably at the start of the new accounting year to keep you on track.

 2. Update the recording of your business transactions

 This includes making sure all December, 2015 transactions are properly and accurately recorded – customer invoices and sales, supplier deliveries, invoices and payables, recording of customer payments, disbursements for supplier payments, employees’ reimbursable expenses, petty cash fund and other fund replenishments, monthly periodic accruals and other accounts are up to date (December 31, 2015).  If you have your monthly recurring tasks checklist then go over this and see if you have missed out anything.

  1. Review your Profit and Loss statements

 If your accounting system is able to do a comparative monthly Profit and Loss statement then, this will work better.  MYOB has built-in reports that deliver this type of financial report for you.  Having to look at comparative monthly results of business operations make it easier for you to evaluate and analyze how the business is going.  It is also a useful tool to accounts erroneously posted to another as well as omissions in recording.

  1. Conduct year-end physical inventory count

If you are a trading business or engaged in buy and sell business, then it is very important to conduct an end-of-year physical count of your goods inventory.  If you are engaged in manufacturing, it is best you conduct the count from raw materials, goods in process and finished goods.  This is regardless if you are using the periodic inventory or the perpetual inventory system for inventory tracking.  In MYOB, you can compute for the inventory variance – whether shortage or overage by simply inputting your physical count result into MYOB. Inventory adjustments are automatically prepared at your option.

  1. Review your Balance Sheet

 First and foremost, watch out for negative balances on assets, liabilities or capital and equity accounts. Most often, negative balances on balance sheet accounts are caused by error in accounts used in recording transactions.

  1. Update your accounts reconciliation including bank accounts

 You would need to ensure that you have done most updated cash in bank reconciliation and that all items needing adjustments are recorded in the books.  In case of stale checks, be sure to recognize the liability accounts due to the supplier or previous payee and reverse the cash in bank account or you would need to issue new check disbursement on the new accounting period.  You also have to reconcile other cash accounts – Cash on Hand, Petty cash fund and other operating funds, Cheque on hand and other accounts.

  1. Review Accounts Receivable Aging Report

 Reviewing the accounts receivable aging is very helpful to ascertain a more realistic provision for doubtful accounts. With this, you would need to decrease or increase the previously recognized doubtful accounts expense.

  1. Review Accounts Payable Aging Report and Reconcile

 Reviewing the accounts payable aging report bring about numerous benefits as it is very useful in evaluating company performance to pay suppliers’ invoice on time. It is also a good tool to evaluate and resolve potential conflicts like unpaid accounts receivable due to the company or unresolved discount, delivery disputes.  Aside from this, you can also be able to properly schedule and allocate cash allocations for supplier payments if you have tight cash budget requirements due to capital acquisitions or substantial loan payment to make.

Take note the process above may or may not be complete according to the abundance of unique business operations. However, the above process complements each other with the effort to produce a more accurate and realistic business operation result and financial standing.

How to find long term debt accountancy

 

 

Long-term debt is debt that has been accrued by a company and must be paid off in one year or more. These amounts can be found on the company’s balance sheet in the order they will need to be repaid. This is important information analysts look for on the balance sheet when determining how much leverage the company has and how flush with debt they are. To shed some light on how long-term debt works, consider this example.

 

Let’s say that Company A had to take out a loan for $5 million and must make a $50,000 payment to the bank every month over the next 10 years. The current liability would be $600,000 (12 months x $50,000 = $600,000), which would be due in one year. The remaining $4.4 million would be considered “long-term debt” because it would be due in over one year.

 

Now that you have a better grasp on what long-term debt means, knowing why it is an important aspect for any business is the next step.

 

Why Acquire Long-Term Debt?

 

Capital will immediately be incurred by the company acquiring this debt. The reason this is an important component for any company looking to borrow money from the bank is because by having this form of debt, businesses will be able to easily receive the funds needed to operate. One example is a start-up business that is fighting to get off the ground, but is having a difficult time getting the expenses needed, including insurance, license and permit fees, as well as equipment and supplies. Especially after the economic downturn in 2008, relying too much on long-term debt could have disastrous effects. Fortunately, firmer regulations have been created to keep businesses safe from an unstable economy.

 

The Pros and Cons to Long-Term Debt

 

Incurring long-term debt can be both beneficial and harmful to a company’s thriving future. Companies of all sizes will be able to invest into the resources needed to become a more profitable business by having a manageable amount of long-term debt. This is especially helpful for start-up who do not yet have the resources needed to leverage their business for success. However, obtaining too much of this debt could give the competitors an edge over your business because they will most likely have more cash in their bank account and have less debt. However, if your company has a low debt to equity ratio, this will prove to investors that the company is thriving and does not need to rely on debt to be successful.

 

By keeping an eye on the competition to know what their debt to equity ratio is and trying to pay it off quickly will make the company a strong competitor to invest in.

 

Where Long-Term Debt Can be Found

 

The following long-term liabilities are commonly found on balance sheets:

 

Financing Liabilities

 

  • Convertible Bond: Debt that will allow bondholders to exchange their bonds for common shares.
  • Notes payable: Debt received by a single investor.
  • Bonds Payable: Debt sent to the general public or investors.

Operating Liabilities

 

  • Post-retirement benefit obligations: Retirement benefits that can be payed through the pension plan.
  • Capital lease obligations: Paying rent for the use of plants, equipment, or properties, while also holding some risk as if owning the property.
  • Other incurred expenses: Deferred income tax or contingent obligations would be included here.

 

 

Find Transactions and Transaction Journals in MYOB

MYOB allows you to Find Transactions you have entered in MYOB so that it is easy for you to review transactions when needed. This feature is found on the lower portion on any of the main command centre and click on the Find Transactions.

journals-in-MYOB-img1

Under this feature, you see the transactions that can be found as follows:

 1. Account – In this find transactions tab, you will find the transactions entered for a specific account and for a specific from and to date.  For example, you like find the transactions entered to a specific bank account.  In this search category, you need to specify the Account and you have the option to choose by clicking on the dropdown arrow to choose and click on the account and date from and to as per screenshot below:

journals-in-MYOB-img2

2.  Card – You use this tab if you want to see transactions for a specific card – to use for finding transactions for a specific supplier, customer, employee or other cards.  If you know the card you wish to find transactions, you indicate it in the field but if not, you click on the dropdown arrow on the field and when you find the card you, click on it to select.  Next is to indicate the date from and to for the period you wish to find the transactions entered for the card as per screenshot below:

journals-in-MYOB-img3

3. Item – This enables you to find transactions related to an item also for a date from and to as per screenshot below:

journals-in-MYOB-img4

4. Invoice – This feature enables you to find transactions for sales invoices issued. You just have to indicate the invoice number in the dropdown arrow with option to view according to:

4.1.) All Invoices

4.2.) Invoice #

4.3.) Customer PO #

 

Please take note that there is no date from and to in this find transactions as per screenshot below:

journals-in-MYOB-img5

5. Bill – This feature enables you to find transactions for purchases with the following search options:

5.1.) Bills

5.2.) PO No.

5.3.) Supplier Invoice #

6. Category – This feature enables you to find transactions for categories with date from and to with the following options:

6.1.)  All Categories

6.2.) Categories

7. Job – You can find transactions for jobs with date from and to with the following options:

7.1.) All Jobs

7.2.) Job No.

MYOB also allows you to review transactions entered into MYOB by the use of the Transaction Journal which is found on the following command centre:

  • Accounts
  • Banking
  • Sales
  • Time Billing
  • Purchases
  • Inventory

To review Transaction Journal, click on it under the tabs on any one of the 6 main command centre as per screenshot below:

journals-in-MYOB-img6

In the Transaction Journal window, the following screen appears with the following tabs:

  • General – This tab contains the transaction journals like the record journal entry and adjustments.
  • Disbursements – this tab contains the transactions entered for payment transactions.
  • Receipts – this tab contains the transactions entered through the Banking – Receive Money and Sales – Receive Payments
  • Sales – this tab contains all the sales transactions entered in the Sales main command centre
  • Purchases – this tab contains all the Purchases transactions entered.
  • Inventory – this tab contains all the transactions entered in the Inventory command centre.
  • All – This tab all the transaction journals which are found under the General, Disbursements, Receipts, Sales, Purchases and Inventory.

journals-in-MYOB-img7

In the Transaction Journal tab, indicate the start date which is the field Dated From and the end date of transaction journal in the field To.

Article – Assets and Current Assets

assets-current-assets-img

In Accounting, Assets are those economic resources of an enterprise and which the business have ownership.  The assets can have physical existence (tangible assets) and can have no physical existence, which is called intangible assets – example of which is goodwill.

Assets are balance sheet accounts and are presented in the order of liquidity.  These assets are presented according to the duration of time in order for the assets to be realized or converted into cash, in case of non-cash assets.  Cash on hand and cash in bank rank as the most liquid of all the assets and rank first in the listing for current assets if it is unrestricted and not aside for other purpose.   You have to make sure the cash is not restricted to be able to classify it as a current asset. For example, cash in bank as time deposit for more than one year is not a current asset and is not expected to be utilized within the current year of operations.  Assets are classified as current or non-current assets.

Current Assets – are physical or tangible assets or resources of the company that are expected to be utilized, used, sold in the normal operations of the business within the current year.  As the description for current assets, it is a very effective measure to determine if assets are current, if the assets are immediately available or expected to be available within the normal operations of the company within the year.  Normal operating cycle is usually for a duration of twelve months or one year. Otherwise, if the asset is not expected to be used, utilized, or immediately available within the normal business operations, it have to be classified as a non-current asset. Current assets are enumerated below in the order of liquidity as follows:

  • Cash  also includes money in local or foreign currency as long as the bank accept for deposit at face value including bills and coins, bank deposits and drafts, checks as well as money orders.
  • Cash Equivalents or marketable securities are in the form of short term and highly realizable investments, like short term time deposit at the bank.
  • Notes Receivable follows after the cash and cash equivalents. This is a written note or instrument for which the customer promises to pay specific amount of money at a specific date.  This is also referred to as promissory note.
  • Accounts Receivable are receivables due from customers and is different from the notes receivable as this is not documented with a customer pledge to make specific monetary payment at a specific date. However, it must be noted that even if there are no written pledge from the customer to make a specific payment, these receivables are supported by proper accounting documents.  This is if the company observe strong internal control over its stock issuances with regards to customer sales.  This includes properly acknowledged delivery receipts or packing slips, sales or charge invoices as well as statements of account.
  • Inventories are goods or merchandise which are available for the business. Inventories of the business do not necessarily mean its physical existence at its premises like warehouse or showroom.    These could also be not in the company premises, like inventories held by another company for consignment purposes.
  • Prepaid Expenses are expenses paid for in advance by the company and is expected to benefit the future months or next accounting year.

 

Computerized Accounting Software Vs. Manual Accounting

 

Proper account management is vital for the success of any business or company. There are two systems in which companies can choose to manage their accounts- that is manual and computerized software accounting. Manual accounting entails the use of manual labor to compute and record company or business transactions to the worksheet, general ledger, and general journal. Computerized software accounting, on the other hand, refers to the use of a software program that updates the accounts once business transactions are fed.

 

There are several major differences between manual and computerized software accounting. Businesses can choose to use either one of them to managing their commercial transactions. For the businesses who intend to use computerized software accounting, MYOB can be a very helpful software to start with when it comes to accounting. Of course, the software requires a bit of understanding and familiarising with the interface. So companies can consider taking up an MYOB course in Singapore to further maximise the capabilities of the software.

 

The major differences between manual and computerized accounting systems include:

 

Provision of financial statements: In manual accounting, company accountants require trial balance to prepare the periodical financial statement. For computerized software accounting however, financial statements are easily generated by the software system itself so that business owners and accountants do not need to have trial balance in advance.

 

Recording of the financial statements: Recording process requires computing mathematical functions manually and putting them down in paper copy as well as posting them on ledger or books of original entry. Computerized software accounting performs the mathematical functions through internal data computation process as long as the right data information was fed into the software.

 

Rate of accounting computation: Computing the transactions in manual accounting is slower since it requires a stage by stage calculation by use of human mind and hand. Computerized software accounting is much faster in computing the transactions since the software automatically processes the data once it is fed, or the software is commanded.

 

Backup retrieval: For manual accounting retrieving financial records might be tedious and tiresome since it might involve looking for various paper documents for reference. Computerized software accounting easily retrieves the backup information since accountants or business owners only have to click on the saved financial records to get the ones they need.

 

Ease of classifying accounting statements: for manual accounting, prior to ledger accounts preparations, the transactions have to be recorded in the books of original entries. In computerized accounting software, the software classifies different financial statements automatically, and business owners or accountants can easily classify financial statements they require at any moment.

 

Financial Records Accuracy: For Manual accounting records to be accurate, accountants and business owners have to be very careful and highly competent to compile the financial report accurately. With computerized software accounting, as long as you have the correct data and software commanded to perform, accurate financial statements will be produced.

 

Manual accounting financial records can be used easily for review. The corrections and adjustments can also be easily made. In computerized software accounting, the review of financial statements is quick, and the understanding of its computation can be achieved by carefully examining the financial formula.

 

Manual and computerized software accounting can both produce accurate financial data as long as the correct procedures are followed. Programs such as MYOB can be very effective to business owners who choose computerized software accounting to timely and accurately compile financial data.

 

How to Determine Profitability of a Job

MYOB have the functionality to determine and analyze the profitability of a job by using the Jobs Profit and Loss Report.  This is very useful when your company wants to know if doing projects for a specific customer or doing more than one project for one customer is profitable or not.  However, you must bear in mind that the key to successful determination of job profitability is to enter correctly the specific job number during the income and expense recording by seeing to it that the job number is filled in during sales, bills or expense payment entry in MYOB. As a reminder, in order to ensure that all jobs have assigned with its job tracking numbers, you must be able to setup in the Preferences – System tab to:

Warn if Jobs Are Not Assigned to All Transactions (System-wide)

This is to be able to warn MYOB user that a job is not assigned before the MYOB entry for sales, bills or expenses can be recorded.

In order to generate a report on the job’s profitability, go to the Reports menu and click on the Accounts tab as per screenshot below:

How_To_Determine_img1

Under the Accounts tab, you are directed to the Accounts sub –heading as per screenshot below, scroll down to find the Jobs sub heading.

How_To_Determine_img2

Under the Jobs sub-heading, click on Profit & Loss as per screenshot above. The following screen appears which require you to indicate filters:

  • Jobs – in this field you indicate whether to generate report for All jobs or for a specific job.  For illustration purposes, All Jobs is chosen.
  • Dated From/To – in this field indicate the start date and end date for the report period. For example, one month from July 1 to 31, 2015.

Financial Year – indicate in this field the financial year for the report generation.

How_To_Determine_img3

When you click on Display, the Profit & Loss Report appears as per screenshot below:

How_To_Determine_img4

You have the option to Print the report or Send To:

  • Excel file – if you wish to save the report into an Excel format
  • Email
  • Fax
  • PDF – if you wish to save the report as PDF file
  • HTML
  • Tab-Delimited Text File
  • Comma-Separated Text File
  • Simple Text File

Basic Accounts and Basic Accounting Equation

As discussed in our previous accounting topic, Accounting is always associated with the term “Debit” and “Credit”.   Accounting is always known to deal with “balancing” the account debits and credits.  This mean that the total debits should always equal to the total credits.  Because of this, Accounting in modern times means the use of double-entry system which means that the debit and credit effect of the transaction is recorded and accounted for.  But what is actually a debit and what is a credit?  A debit is actually the left-hand side entry of an account while the credit is the right-hand side entry of an account. In order for us to gain full understanding, we have to discuss about the Accounts which is grouped into the 2 main account grouping per financial statement accounts:

Balance Sheet Accounts – composed of 3 main accounts with brief description below.  Also in order for you to understand fully the accounting equation, the following financial information is given for Sample Company:

Total Assets    = S$500,000.00

Total Liabilities = S$150,000.00

Total Equity       = S$350,000.00

Equity equation

  • Assets – are resources which are owned by the business entity. Take note that in order for it to be an asset, the business entity should have ownership to the resources.  If the company have no ownership to it, then it is not considered as an asset to the entity. This holds true even if the company keeps the asset. This includes cash, cash equivalents, inventories for items held for sale, accounts and notes receivable, prepaid expenses, property and equipment, office furniture and equipment, investments and other assets. Assets are best expressed in the accounting equation:  Assets = Capital plus Liabilities

                     A = L + C

                    S$500,000.00 of Assets = S$150.000 Liabilities plus S$350,000.00 Equity

                    S$500,000.00 = S$500,000.00

  • Liabilities – are payables or financial obligations of the business entity to other business entity in exchange for resources which could be in the form of assets or rendering services. Liabilities are expressed in the accounting equation:  Liabilities = Assets minus Equity

 

                         L = A – C

 

                       S$150,000.00 = S$500,000.00 Assets Minus S$350,000.00 Equity

                       S$150,000.00 = S150,000.00

 

  • Equity – in a new business that is just setup, equity could mean the amount invested by the owner or owners in starting up the business. However, as the business continue its operations, equity is the residual interest in the entity’s assets after deducting all its liabilities.    Equity is expressed in the accounting equation:  Equity = Assets minus Liabilities

 

                       E = A – L

                      S$350,000.00 = S$500,000.00 Assets minus S$150,000 Liabilities

                     S$350,000.00 = S$350,000.00

Income Statement Accounts – composed of the following:

  • Income – which is also referred to as revenue means increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities. These increases in turn have the effect of increasing the equity. However, you must remember that contributions or additional contributions from owners for equity do not quality as an income.

 

  • Expenses – are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity. However, you must remember that withdrawals or distributions of equity among owners does not mean expenses to the business entity.

 The next topics will discuss these accounts in more detail with simplified explanation keep yourself posted on the upcoming topics.

Page 10 of 17« First...89101112...Last »