Category
Accountant Guides
Liquidation of a Business Under Common Accounting Methods
Liquidation of a business under common accounting methods involves many arbitrary estimates, judgements and assumptions. If the business is being liquidated by a receiver, an auditor or an accountant, for instance, they must value the shares in the business at their estimated market value. But this value cannot be determined for certain until it has […]
Interview Your Accountant
Your accountant is the person most likely to know your business backward and forward. He is also the person least likely to tell you what you want to hear. The most important thing for you to do is to ask questions. You can get a long way just by asking questions. Often, you’ll want to […]
Discuss Outsourcing Vs. In-House Bookkeeping.
I think it is clear that outsourcing bookkeeping is more efficient than doing it in-house. The people who would do the accounting in-house are probably better used doing other things, and even if they weren’t, you should be able to hire competent accountants for a fraction of the cost of keeping them on staff. Accounting […]
Set Up an Easy to Use Bookkeeping System That Will Track Everything You Need
Set up a good, easy to use bookkeeping system. It will eventually pay for itself many times over, and it’s a lot easier than trying to do everything by hand. Don’t worry too much about getting your accounting perfect while you’re small; it will be a lot easier when you’re bigger. The best method I’ve […]
Why You Should Outsource Your Accounting and Administrative Work
A lot of small businesses hire people to handle their payroll and other administrative tasks. I don’t think it’s a good idea. Most companies that do this think of themselves as “buying time”. It’s cheaper than hiring extra employees, and the time they buy is mostly spent on things that someone with a business degree […]
How to Strategize an Accounting and Bookkeeping System for Your Small Business
Strategizing an accounting and bookkeeping system for your small business requires a different approach than setting up one for personal use. The complexity of the project, the limited amount of time you have to devote to it and the need to ensure that your system is comprehensive and up-to-date all require that you approach the […]
Pay Based on Performance
Pay for performance is a natural for startups because it’s hard to define people’s roles when the company is small. Some people will end up doing different jobs every week. How do you set their salaries? The conventional wisdom has been that you can’t. And it’s true that, in the short term, you can’t. You […]
The Ultimate Guide to Accounts Payable
Linking accounts payable to purchasing is a significant step in creating an accurate, reliable and efficient accounts payable process. Although the accounting journal entry to record the expense of an item is recorded in accounts payable, that journal entry is not linked to the expense until the vendor invoice is processed. With this practice, you […]
Keep the Right Information Moving in the Right Direction
An implication of the flow principle is that you are always better off moving information in the direction of your net flow, even when that means reversing the direction of your flow. As an example, suppose you are a new business with no money, sitting at home making something you can sell on eBay. If […]
Why a Credit in Journal Entry Recorded in One Account Has to Be Offset by a Debit in Another Account.
A credit in one account has to be offset by a debit in another account. A double-entry bookkeeping system is a set of rules for keeping track of debits and credits in a set of accounts. The system makes it possible to know at any moment how much money you have, and also how much […]
How Reserves Allow Firms to Avoid Drawing Down on their Own Capital
We set up our accounting system to match the way we like to think about financial capital. We like to think of capital as a big stockpile, something that firms start with and draw down during the course of their operations. But in fact it doesn’t work that way. Or at least, not all the […]
How Monthly Closing Work in Quickbooks
We have a general ledger account called “Accounts Payable.” This account holds all the money we owe to vendors who have not yet been paid. Our accountant likes to see a zero balance in our “Accounts Payable” account at the end of every month. In Quickbooks, there is a command to automatically transfer all outstanding […]