When paying sales taxes, it is vital to offset the sales tax liability account as opposed to expensing your sales tax account. When your company is charging sales tax, your sales tax liability account is increased. Therefore, when the sales tax you have collected is paid, the account that needs to be used is the sales tax liability account, so it can be decreased. Failure to do this correctly will result in your company’s sales tax liability account having a balance at the end of the year when it should have a balance around zero.
When we are writing checks for automobile repairs and other automobile expenses, it is important to use the expense account instead of the asset account. Carelessness or ignorance in this subject will result in an inaccurate representation of automobile assets at end of year and will understate expenses, causing you to pay more in taxes.
If you are unsure of what general ledger account to use, don’t try to guess. The “Ask My Accountant” account is created for this purpose. If an inaccurate account is used, it is nearly impossible for the CPA or Bookkeeper to find this mistake and correct it. The Ask My Accountant account is where we go to look for transactions that need to be assigned to the correct account.
Back ups are quick and easy to do. It will save you a lot of time and money if you take the time to back up your QuickBooks files frequently. Make sure a back up of your company’s file is taken before you update or upgrade your QuickBooks software or any other software on your computer. It is important to make sure this back up is stored on a USB drive or another source that can be taken off-site that you can access in case your whole computer crashes.
This is a big no-no. At the end of the year, books are closed, and balance sheets are corrected. Any changes that the CPA makes to your company’s books are recorded as journal entries so that going forward to the next year, everything matches. That means, everything that should be changed already is. Deleting or changing prior year transactions will throw off the balance sheet. Similarly, at the end of each month, all bank accounts and credit cards are reconciled to the correct balance. Changing or deleted already reconciled transactions will affect the ending balance of your accounts and they will need to be corrected and reconciled again.
In the business world, we are all trying to save time, and concurrently save money. This leads us to taking shortcuts at times, and while some of these may work, others are going to end up taking more time and money to correct down the road. Entering “lump sum transactions” is one of those not-so-shortcuts. When it is time to reconcile the bank account or credit card, the transactions that have been entered into QuickBooks will not match the statement you are looking at. At this time, you will have to use unnecessary math and detective skills to figure out what exactly it is you did earlier. Vice versa, breaking one transaction into multiple entries in QuickBooks will end in the same result. This is often done with deposits, not as a time saving tactic, but as a lack of knowledge on how to use the deposit feature in QuickBooks.
Recording your payroll accurately is vital to ensure your company’s books match the payroll reports given to the IRS. If you are not recording liabilities correctly, your books will be off. The most common mistake when it comes to recording payroll liabilities is recording the federal and state withholding amounts as a tax expense. These are coming from your employee’s salaries and therefore should be recorded as such. The Employee’s portion is actually part of “gross payroll” and is not part of the Employer’s tax expense.
Finally, it is important to reconcile all bank accounts and credit cards to make sure we haven’t missed anything, there are no erroneous charges, and all amounts are entered correctly. It is not enough to just make sure the ending balances match. The beginning balances are the first thing to be checked. If the beginning balance of the account you are reconciling does not match what is shown on the statement, you have a reconciliation discrepancy and your first step is to locate this and correct it. If the beginning balances do match, you can go ahead and make sure each transaction in QuickBooks matches what is shown on the statement. Once, all transactions are cleared and there are no outstanding credits or debits that are erroneous, you can safely say that account has been reconciled.