Starting a small business from home, offering products or services such as business consulting, photography, web selling, or MLM? Now you’re faced with keeping track of all your business expenses and income, and you certainly don’t have the money to hire a bookkeeper or accountant yet. If your business is a sole proprietor, whether you are a Canadian owner or a US-based owner, you do not need an accountant to submit your business finances (books) to the IRS (US) or Revenue Canada ). Income and losses from your business are reported as part of your annual personal income tax. For this small business start-up, you won’t need to buy fancy accounting software like Quick Books or AccPac to keep track of your business.
Only as part of the incorporation of Bizfare Enterprise Inc in 2005 was it a requirement to hire an accountant. My accountant insisted on using Quick Books software for my business accounting. Until then, using a simple spreadsheet template served my business accounting needs for over ten years. This simple spreadsheet stood the test of multiple audits by Revenue Canada (CRA and Revenue Canada Goods and Services Tax. Revenue Canada accepted both the printed column pad and an electronic spreadsheet version of my financial books. (BTW) , the audits revealed more ways to claim additional taxes for the previous three years! That’s my kind of audit!)
In your new start-up company, you probably generate between 10 and 30 accounting transactions per month. These transactions would be items such as expenses, income (sales), liability-type transactions (loan), and sales tax collections/deductions (federal + state/provincial). These transactions are broken down into various trading accounts. All the accounts you set up for your company are called chart of accounts. Recording your business financial transactions (Journal Entries) can be executed with pen and ink on an accounting pad or electronically with your computer using a spreadsheet program (MS Excel, Open Office, Star Office) .
Whether you use electronic or print media, you should develop a simple journal template to create your Synoptic Business Journal. East synoptic journal The format has the advantage of allowing you a complete view of all your individual journal entry transactions against all your trading accounts. Creating this Synoptic Journal is easier than you think and requires no prior knowledge of accounting or bookkeeping.
TIP #1: You can further reduce accounting items (journal entries) by consolidating similar items such as ‘all Sales of the month’ Y ‘all parking receipts for the month’ in a total order line for the month.
Where do you start to identify the various Business Accounts needed for your Synoptic Journal?
If you currently work for a company or government, get one of their employee expense forms. Look at each of the areas identified as expenses: meals, mileage, hotel accommodations, taxi, car rental, telephone and cell phone, airfare, office supplies, etc. This is a great place to identify the various businesses expense accounts you need to set up your company’s accounting books. To complete your business chart of accounts, include a business bank account, sales, COGS (cost of goods sold), sales tax collection, marketing expenses, and others as needed. Each of these Accounts will appear as a title at the top of each column in your Synoptic Journal. Each row (line item) will be the individual journal transactions entered by you. Journal transactions are grouped and summarized for each business month; usually from January to December.
So your synoptic journal would look something like this sample synoptic journal at http://picasaweb.google.com/carl.chesal/BookkeepingTemplate.
Column headers can be in this order (from left to right):
DATE | DESCRIPTION | BANK DEPOSITS | BANK WITHDRAWALS | SALES INCOME | COGS | SALES TAX COLLECTED AND REMITTED | OFFICE SUPPLY EXPENSES | EXPENSE #2 | EXPENSE #3 | ETC
TIP #2: Unless your company is a limited company or an LLC, you do not need to pay the cost of opening a business account with your bank. Business accounts typically charge a higher monthly fee, charge for printing checks (checks), and offer no interest on your monthly account balance. Instead, open a separate personal bank account (perhaps savings). This will show the ‘tax collector’ that you are keeping the business separate from your personal banking. Remember that you are a sole proprietor and all income (and losses) from your business must be applied directly to your personal income tax return (according to the IRS and CRA).
To save you time and make it super simple, I’ve already created a simple spreadsheet synoptic journal template that does all the calculations for each month and rolls up all 12 business months so it can be easily included in your annual income tax preparation. personal income. This synoptic journal template has debit/credit checks and balances, tracks sales tax, mileage, and totals for each account for the entire fiscal year. If you want this FREE accounting template, you can get it from Communicate Innovate. With a few keystrokes to help you identify, I’ll be happy to send you this FREE synoptic journal template and any future small business tips as well.
TIP #3: An Accounting Rule is that every time you post a journal entry (line item that applies the transaction to the appropriate business accounts), the Debits and Credits MUST REMAIN THE SAME at ALL Times. This debit equals credit calculator is built right into this FREE accounting template. When you have finished entering a line item (journal transaction), verify that the amount in the Debit cell is equal to the amount in the Credit cell. If they are not the same, you have not entered the amounts correctly in your journal transaction. Correct the problem before entering your next journal entry.
You are now equipped to capture the financial books of your business with simple accounting software. Happy accounting! And happy selling!