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Balance-Sheet-–-Quickly-identifying-Questionable-Accounts

Balance Sheet – Quickly identifying Questionable Accounts

If you are a business owner without any idea or working knowledge on the balance sheet reports, what reports to ask your accountant or bookkeeper for details and when is the time to raise your eyebrows on seeing the accounts and the amounts on balance sheet report.

First and foremost, you have to know what are asset, liability and equity accounts are.  One of the best ways to do this is to take up basic accounting lessons so that you will not be left at the mercy of your bookkeeper or accountant.  What’s more, you can also discuss and get to work together with your bookkeeper or accountant about the balance sheet and be able to recognize account items that need resolution. This way, you would have a good idea and understand the accounting terminology and the usage of accounts. A1 Business Pte Ltd sees the need to educate non-accounting business owners and managers to the basic accounting and complement your efforts to growing the business.

Outlined below is a sample Balance Sheet report.

Balance Sheet
Premium Company
As of December 31, 2015
Assets
   Bank
   ABC Bank SGD 151.75
   XYZ Bank Checking Account SGD 1,625.00
   CBA Savings Account SGD 8,788.25
   Total Bank SGD 10,565.00
   Current Assets
   Dummy Suspense Account SGD 835.50
   Owner Loan A/C -SGD 5,000.00
   Petty Cash Fund SGD 500.00
   Inventory SGD 13,319.00
   Accounts Receivable SGD 21,335.63
   Undeposited Funds Account SGD 4,970.56
   Total Current Assets SGD 35,960.69
   Fixed Assets
   Office Equipment SGD 4,300.00
   Accumulated Depreciation – Office Equipment -SGD 4,526.00
   Total Fixed Assets -SGD 226.00
Total Assets SGD 35,734.69
Liabilities
   Current Liabilities
   Accounts Payable SGD 9,862.50
   Sales Tax SGD 1,237.90
   Wages Payable – Payroll -SGD 1,278.00
   Accrued Expenses SGD 2,189.00
   Total Current Liabilities SGD 12,011.40
   Non-Current Liabilities
   Loans Payable SGD 5,000.00
   Total Non-Current Liabilities SGD 5,000.00
Total Liabilities SGD 17,011.40
Equity
Capital SGD 5,000.00
Net Income for the period SGD 13,723.29
Total Equity SGD 18,723.29
Total Liabilities and Equity SGD 35,734.69

 

 

Based on the above details, a quick look of the accounts contained in the Balance should would call for you to ask more details or detailed report on the following accounts:

  • Current Assets – Dummy Suspense account of SGD835.50

Any dummy or suspense account should be closed or reconciled at the end of the month, especially in the end-of-year reports.  Suspense accounts are just temporary accounts that could be a real or profit and loss account.  This account is used as a last-recourse entry when the source of nature of the account is not yet identified.

  • Current Assets – Owner Loan A/C negative balance of SGD5,000.00

A receivable account has a normal debit balance side.  So, if this receivable account is negative, this could mean an overpayment from the owner for advances made or this could be an amount owed from the owner and is a company liability.  In this case, the account should be a current liability and not an asset presented as a negative account.

  • Current Assets – Undeposited Funds Account of SGD4,970.56

Watch out for the use of this undeposited funds account which could also mean undeposited checks or undeposited cash on hand.  Make sure that this amount accounts for the total deposits made on the very next banking day.

  • Fixed Assets – Office Equipment negative account of SGD226.00

Most often, a negative balance on any of the fixed assets account could mean over recording of depreciation.  In worse cases, the asset acquisition could have been unrecorded especially if the bank statements are not updated as to reconciliation.

  • Current Liabilities – Wages Payable negative amount of SGD1,278.00

A payable or liability account should always be a positive balance which is its normal balance side.  A negative liability account could mean an overpayment made to the account or if there is no overpayment, a result of misposting of account or erroneous account used.

MYOB Sales – Item Reports

Want to get sales report showing the items sold? MYOB have built-in Item Sales reports that that enable you to analyze a wide range of items sales transactions. You can generate these reports through the Reports – Sales – Item feature:

myob-sales-item-reports-img1

In the Reports window, go to the Sales and select Item per screenshot below:

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The Sales – Item reports in MYOB are as follows:

  1. Sales Summary
  2. Sales Detail
  3. Analyse Sales
  4. Analyse Sales (FY Comparison)
  5. Analyse Sales (Spreadsheet)

Sales Summary

The Sales (Item Summary) shows the total sales per item on a summary format on a specified date range. In this report, filters from Categories, Referrals, Ship Via, Amount, Customer PO, and by Sales Status. Sales status filter also provide option to indicate sales status as follows per screenshot:

myob-sales-item-reports-img3

Sales Detail

The Item Sales Detail report shows the sales detail per items on date range specified showing the customer buying the items, date of invoice, quantity and the amount of sales, invoice status if still open or already paid and the promised date. Report filters are also available for Categories, Referrals, Customer PO Number and the sales status for open, closed, on order, quote, credit or all sales invoice status.  A sample screenshot for this report is attached below:

myob-sales-item-reports-img4

Analyse Sales (Item)

The item Analyse Sales report shows complete sales item numbers sold for a specified period.  Aside from the Item Number, also included in this report are the item name, amount of sales, the cost of sales amount for the items sold and the total number of units sold for the period specified.   Of course, the resulting gross profit is shown in the report and the computed margin percentage and the Average cost of the products sold.  Attached is a screenshot of a sample Analyse Sales (Item) report:

myob-sales-item-reports-img5

Analyse Sales (FY Comparison)

The Analyse Sales (FY Comparison) is like the Analyse Sales report only that it compares the previous year data in analyzing the sales.  This type of report will enable you to have a quick look if the current year sales have increased or have decreased compared to sales from the past year.  This report enable you to save time and effort in comparing and analyzing previous year sales compared to the current year.  MYOB have put much thought on this so you can instead focus on growing the business or make the best business judgment on increasing the sales.

Analyse Sales (Item Spreadsheet)

The Analyse Sales (Item Spreadsheet) shows the total sales for each item number, item name and the total amount per the period covered in the date you indicate in the filter display.  This type of report enable you to have a quick look on what items are selling and how much.

The above sales-item reports are generated with your choice of generating the report in Excel, PDF, Tab-Delimited text file, CSV, simple text file and other options by pressing on the Send To option in generating the report.  Of course, the default report output is always on the screen display unless you have otherwise indicated in the report option. You can see with the built-in item sales reports how committed is MYOB to complement your effort to growing your business.

cost-of-good-sales

Profit and Loss – Determining Cost of Goods Sold

One of the most challenging tasks in accounting for retail business is to determine the cost of goods sold or the cost of the products sold.  In simple retail setting, the cost to purchase the products for sale is usually the cost of the product sold.  Of course, you should not include the purchase tax when buying the product as cost of your product. You should be costing your product net of the tax imposed by your supplier as you will be claiming input tax for these goods applied against your sales tax.  Even if the inclusion of the tax in your products’ costs is unintentional error, this result to inaccurate product cost.  Failure to recognize the input tax will result to erroneous higher cost of your inventory and product and, well, if you have recorded higher product costs, you might end up adjusting your products’ selling price and most often, will result to uncompetitive pricing in the tight-raced market.  Then, you add the fact that you have erroneously overstated your cost resulting to higher cost and lower recognized gross profit from products sold.  Imagine the financial misinformation that surely result to misinformed judgment that affect market competitiveness by just a blink-of-the-eye error. This plain error is more commonly found for businesses using manual system and could also happen to those using software system if you are not able to set default tax codes for supplier purchases as well as standard item cost.

If you further package the products or further process these to be able to put these items on sale, and you incur further costs for another products or services, then you have to recognize these costs as part of the cost of the products because these are direct product costs. In MYOB, as long as you have setup the items and costs related to building a new product, you can do so by using the Auto-Build feature.  Of course, you have to first set up the inventory items that are going to be used to be able to do this.

If you are importing your products from other countries, cost of goods for these products includes the purchase cost from your import supplier, payment for freight, transportation expenses, import duties and related processing fee from your local logistics company.  Of course, you don’t include the corresponding tax imposed on the services because this is again claimed as input tax against your sales tax.  Most often, these import-related cost are allocated to the total products imported to be able to arrive at the unit product cost of the items.

There are other expenses that are directly related to selling the products but cannot be considered as product cost.  These include marketing and advertising expenses which are classified as operating or selling and marketing expenses in the profit and loss reports. Of course, we take into consideration that there are products call for unique costing process and require another treatment to compute for product costs.

MYOB Sales – Customer Reports

MYOB have built-in Sales reports that enable you to analyze customer sales transactions. If you want to generate customer-related sales reports, you can do this through the Reports feature of MYOB per the screenshot below:

myob-sales–customer-reports-img1

In the Reports window, go to the Sales and select Customer report header as per the screenshot below:myob-sales–customer-reports-img2

The Customer – Sales reports in MYOB are as follows:

  1. Sales Summary
  2. Sales Detail
  3. Sales History (OfficeLink)
  4. Analyse Sales
  5. Analyse Sales (FY Comparison)
  6. Analyse Sales (Comparison)
  7. Analyse Sales (Spreadsheet)
  8. Payments (Closed Invoices)
  9. Reimbursable Expenses
  10. Customer Ledger

Sales Summary

The Sales (Customer Summary) shows the total sales per customer on an indicated period by indicating date on “Dated From” and “To”.  In this report, you can apply many filters from Categories, Referrals, Ship Via, Amount, Customer PO, Identifiers and by Sales Status.

Sales status filter is also available to be able you to indicate the customer’s sales status as follows per screenshot:myob-sales–customer-reports-img3

Customer Sales summary report is displayed per screenshot below showing Sales status filter is also available to be able you to indicate the customer’s sales status as follows per screenshot below:

myob-sales–customer-reports-img4

Sales Detail

The Sales Customer Detail report contains the sales detail including the items sold, tax rate for the account code, items sold as well as the sales status.

Sales History

Customer Sales History shows the total sales transactions for every customer in a given month range per total.

Analyse Sales

The customer Analyse Sales report shows the customer sales per total and the percentage contribution of each customer in relation to the total sales.

Analyse Sales (FY Comparison)

The Customer Analyse Sales (FY Comparison) is the same as that of the Analyse Sales Report but with comparative previous year comparison sales.

Payments (Closed Invoices)

The Payments (Closed Invoices) report shows the closed customer invoices on a given time.  So when you want to generate customer report showing which invoices which are already closed, then this report is the answer to this requirement.

Reimbursable Expenses

The Customer Reimbursable Expenses report shows the expenses which are due to be reimbursed by your customers on a given period.

Customer Ledger

The Customer Ledger report shows the customers sales, payment and sales credits adjustments for a particular period.  This report is very useful when you are reconciling customer statements and you wish to know which invoices are paid and the payments that were applied against the invoices.  This is very applicable and very useful when you don’t know the dates the customer made the payments and to check which sales credits are issued and applied against the invoices.  Also, if in the course of account reconciliation, the customer said there are payments they have made which are not reflected in the statement or ledger and is able to provide you with proof of payments, all you have to do is review the customer ledger if you are missing out on these payments.  If there really are missed recording of payments, all you have to do is record the payment.  Take note that in this specific example, if you are updated in making bank reconciliations, missed out or unrecorded customer payments will be avoided or minimized.  In most cases, updated bank reconciliation always give way for more accurate customer payments recording.

Conducting-periodic-Inventry

Conducting Periodic Inventory Count

One of the most challenging tasks in accounting for retail or manufacturing business is the conduct of periodic inventory count. This is especially true for those who are assigned to do this task but don’t have the hands-on experience. The questions that come into mind includes on how to conduct the count and ensure that the activities are properly carried out. This article aims to give you an idea of how to get ready for a periodic physical inventory count and the steps involved to have a successful inventory count.
There are types of business that require more focus and attention to physical inventories, especially those engaged in trading or buy and sell, those that store inventories in bulk, be it raw materials, in process goods as well as office supplies, store supplies and other inventory items. The following are some of the steps involved in conducting physical inventory count:
1) Always have the pro-forma Count Sheet ready and properly planned so that the warehouse or inventory custodian use this form. A column for the custodian’s count and another column for the actual count should always be included in this form as well as portion for the custodian’s signature especially in case of count discrepancies.

2) Reach an agreement with related departments on when the count is to be conducted and the start time and expected time to finish the inventory count. Proper planning of the day or days the count is to be conducted will not hamper operational and store operations if the establishment company is on the retail side, like the case of stores located in commercial malls.

3) Agree on the cut-off date and time for which transactions need to be entered for count purposes. For example, you will be conducting count of office supplies at the main supplies room, you have to designate the date and time to receive supplies requisition.

4) Coordinate with the inventory or warehouse custodian to ensure that the items to be counted are systematically organized and sorted for the count purposes. For example, the supplies are in boxes containing 50 units each, these should be indicated in their count sheet and the loose quantities indicated too.

5) During the count, safety and security measures shall be observed whenever possible. For example, for store locations, the finance or audit personnel verifying the count should place their personal belongings on the designated secure lockers. While this may be considered as excessive measure, the advantages of this usually pay off for the mutual benefit of the parties involved in the count.
6) Any count discrepancies should always be noted by the warehouse or inventory custodian. It could be there is no discrepancy between the count and further count on the unreconciled items counted will prove some count mistake. Otherwise, if there is a discrepancy, it should be signed noted by the responsible custodian.
7) To ensure that all areas and items are counted, the duplicate count sheet should be placed on the items being counted to avoid mix-up of counts. The printed name and signature of the one verifying the count should be indicated in the Count Sheet form.
8) Sign-off by the count verification team should be properly noted by the warehouse or inventory custodian as well as the security team.

9) All inventory counts results should be immediately posted to the accounting or inventory system and official count results released to the involved parties.
10) Most often, conducting the count can also be a reliable avenue to introduce process improvements on how the items are kept in the storage area as well as the surroundings of the items location to identify possible and probable risks that may involve the safety of the stored items as well as the people involved.

The above are just some of the general steps involved in the conduct of the count and will apply according to the company’s type of business.

MYOB Receivables Reports

MYOB have built-in Receivables report to make accounts receivable management easy and quick for you.  To access this report, go to the Reports window which is below the main command centres as per screenshot below:

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In the Reports window, go to the Sales tab as per the screenshot below:

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Like the Payables reports in MYOB, the Receivables reports in MYOB are as follows:

  1. Ageing Summary
  2. Ageing Detail
  3. Reconciliation Summary
  4. Reconciliation Detail
  5. Summary With Tax

Ageing Summary

You are able to get the total amounts your customers owe you per aging category using the Receivables Ageing Summary.  Like the payables ageing summary, this report shows all the customer aged receivables per total amount in categories of 0-30, 31 to 60 days, 61 to 90 days and more than 90 days aging brackets.  Just fill in the specific dates for which you run the aging report in the Ageing Date.

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This Ageing Summary report won’t give you the details of each invoice and amount owed by your customers, as this only the total amount due per aging days bracket. You would need to run the Receivables Ageing Detail.

Ageing Detail

The receivables ageing report shows the details of each invoice due by your customers per aging bracket.  Thus, this is ageing report shows the details of the invoices and the dates of each invoice based on 0-30 days, 31 to 60 days, 61 to 90 days and over 90 days bracket.  An example of Receivables Ageing Detail is attached below:

MYOB-Receivables-Reports-img4

Reconciliation Summary

The Receivables Reconciliation Summary shows the Out-of-Balance or variance in the receivables report in total amount summary.  The reconciliation summary below does not have any out-of-balance account.  The attached screen shot below shows a zero out-of-balance amount.

MYOB-Receivables-Reports-img5

Receivables Reconciliation (Detail)

The Receivables Reconciliation Detail is almost the same as Reconciliation Summary only that it is more detailed the out-of-balance accounts in your receivables report.

Summary With Tax

The Receivables Summary With Tax shows the total receivables per and the corresponding outstanding tax in the next column. This built-in report will enable you to check if you have applied correct tax codes to your customers in entering the sales invoices. For example, A customer has default zero-rated tax code and you see in this Summary With Tax Report that a 10% tax is applied. This result to understatement of sales by the 10% tax and of course, overstatement of the sales tax corresponding to the tax amount shown in the report.
In these Receivables built-in reports, you will know that accounts receivable management become very easy with MYOB, complementing one of your most challenging objectives to make your receivables account reconciled, easier to manage and enable you to focus more on increasing receivables collection efficiency.

Reconciling Customer Invoices and Statements

Reconciling Customer Invoices and Statements

In the previous article, we have discussed about reconciling supplier bills and statements.  In this article, we will discuss about reconciling customer payments.  Like vendor reconciliation, reconciling customer accounts by sending statements to customers on a periodic basis to ensure that the amount in the Balance Sheet date is accurate.

Depending on your agreement with your customers, it is idea to send monthly periodic statements.  If you are using MYOB, this process can be very easy and you can send email statements to your customer anytime or even after posting customer payments with just one or two clicks and you have linked MYOB to a Microsoft Outlook or email account.  As long as you have indicated in your Customer Card your customers’ email addresses, sending customers statements is quick and easy anytime you want without the need to print the statements and mail these, which have become redundant and time consuming.

If you are using the a manual accounting system using spreadsheets, preparing a pro-forma spreadsheet for which you can summarize the customer accounts reconciliation would greatly make this activity more efficient.  Taking note of the cut-off date of the statement with note that certain payments after the cut-off date are not included in the statement would spare you the inconvenience of customer complaining that some of their payments are not taken up in the statement.

It is very important to follow an established business process in handling customer invoices, payments, returns, discounts and sales credits granted to customers.  There should be established business processes to ensure that all customer invoices sent and received by the customers.  In case of merchandise returns, the returned items must be adjusted in the warehouse inventory if these items are still good for resale.  In case of damaged items, they must be properly accounted for with the proper documentation and issuance of sales credit so that the customer account is decreased by the returned items.  In case of understated discounts, the corresponding sales credit should also be issued and adjusted from the customer’s outstanding accounts.

One of the common items in reconciling customer accounts is duplication of invoice issued to customers. This is not a problem if you are using MYOB and have enabled the system preferences to make warning in case of duplicate invoices, this kind of error can be avoided or minimized. It is very useful to enter exact details of the source document like PO number, or Delivery number. Having an established way of entering source documents is also equally important in entering transactions in MYOB.

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