Frequently Asked Questions

Bookkeeping Questions

Bookkeeping is a key process of business. It involves recording and organizing the business transactions that have occurred in the course of the business. Bookkeeping is the foundational part of accounting and largely focuses on classification of transactions.

Yes, business owners can perform their own bookkeeping. There are many reasons for someone to hire a bookkeeper including accuracy, scalability, free up time in their own day. Many software programs make doing your own bookkeeping easier.

Bookkeeping includes the classification and recording of financial transactions occurring within a business. Bookkeeping may also include reconciliations for banking accounts, accounts payable, and accounts receivable. The purpose of these reconciliations is to ensure accuracy but also to provide proper information to the business. With proper bookkeeping, companies are able to track all information on its books to make key operating, investing, and financing decisions.

A bookkeeper needs only an understanding of what bookkeeping is to perform their job. When looking for a bookkeeper, some people will look for years of experience, professional license from bookkeeping software services, and education. A bachelors degree in accountancy is often used to help qualify a bookkeeper. Bookkeepers typically work with CPAs and are usually more cost effective if they do not have a CPA.

Blue Heron Bookkeeping uses Quickbooks Online software. Quickbooks is widely used within accounting and provides in-depth functionality to your business needs.

A bookkeeper is allowed to prepare some of the tax forms required by IRS, such as 1099s for your contractors. Bookkeepers cannot prepare tax returns but having books up-to-date can bring significant savings. Tax Returns can be prepared by a CPA or a Certified Tax Preparer.

Complete and accurate financial record keeping is crucial to your business success through efficient operations. Accurate and complete records enable you to identify both the strong and weak phases of your business operations. Efficient operations is performed through effective uses of accounts receivable, accounts payable, and management of ratios to maximize your profit.

Accurate records are essential for the preparation of current financial statements, such as the income statement (profit and loss) and cash-flow projection. Having these records accessible can save you money on getting your tax return done. Good records help you avoid underpaying or overpaying your taxes and provide better banking relations. Having accurate and accessible records also help with Internal Revenue Service audits, if you hope to answer questions accurately and to the satisfaction of the IRS to avoid penalties.

An accountant helps monitor your business for financial issues. Accountants can help provide analysis for hiring, expansion of product lines, or buying additional buildings. Accountants typically review the expense and revenue detail such as wages, employee taxes, property tax, utility costs and so on.  The primary goal of hiring an accountant is to give you extra time to look at the bigger picture as your business grows and provide an extra set of eyes making sure you are financially stable.

An accountant is essentially an insurance policy that helps protect you from financial and tax issues. Accountants give you time back in your day and allow you to focus on your product or services and provide financial oversight to your money. You may also wish to hire an accountant if you have a complicated tax situation.

Make sure you fully utilize your accountant. They can provide strategic advice and may know clever ways to reduce expenses or boost revenue. They could also evaluate your processes to remove or automate administrative tasks that distract you from your core business. An accountant works with many businesses and sees many different strategies through them, consult your accountant prior to making large business changes.

Accountants are not financial planners. Accountants focus on business financials rather than personal financials. Typically accountants duties include auditing work, financial forecasting, and putting together financial statements, while financial planners help individuals with wealth management and retirement planning.

GAAP stands for Generally Accepted Accounting Principles. They provide the standard rules of accounting which are also accepted as the format required for public companies per the SEC. These rules include definitions of concepts, principles, as well as industry-specific rules. The purpose of GAAP is to set a structure for accounting and provide similarities and comparisons between financial statements of different companies.

Accrual accounting keeps track of when things are owed and when people owe you. This is done by recording expenses and revenue when the liability or receivable is recognized. Cash basis accounting only focuses on when cash changes hand such as a payment being made.

Think of a credit card. When you swipe the card, accrual accounting would recognize the transaction as an expense if the product was delivered. When you pay the credit card statement, cash basis accounting would then record the expense.

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