The 12th Month of the Tax Year
Is the 12th month of the year like the 12th hour on the clock? December is the holiday month. We just had Thanksgiving, coming up is Christmas and then New Year’s. What must you do before the clock strikes midnight? Individuals need to know about their numbers. Anyone who has a business needs to know about keeping track of their income and expenses. What is the key to tracking your income and expenses? Do not let this word scare you, it is really just a simple activity. This word is one of only three words in the English language that have three double letters in a row. This word is bookkeeping. It just means keeping the books, keeping the numbers. Your Statement of Income is keeping the numbers for your money in. Your Statement of Expenses is keeping the numbers for your money out. Businesses combines the income and expenses statements into one Profit and Loss Statement. There is a very popular software program that many business owners use to help them – QuickBooks. The personal version is more of a checkbook tool called Quicken. Some of my clients use QuickBooks and many of my colleagues use QuickBooks Pro. The danger with any software is that it is just a tool. Do you know how to best use this tool? My friend, Joe DiChiara, a CPA in New York, says that QuickBooks is a pretty good tool. He believes it has more features than most of us need to use. My friend, Barbara Starley, a CPA in Arizona, is a QuickBooks Pro Advisor. She helps people untangle their bookkeeping software missteps. For years, I used a professional accounting software to help my clients with their accounting needs. The software company was sold to another company whose professional cost priced me out of providing accounting services. That was when I began using Excel spreadsheets to track my income and expenses. The spreadsheet method might be just fine for you, but it does not create the balance sheet we need. What does the balance sheet show? What does it balance? The balance sheet is like a teeter totter. On one side you list your assets, what you own, and their values. On the other side you list your liabilities, the money you owe, and your equities, the value you hold as an owner of your company. Double entry means for every entry you have on the left side of your ledger, you have an equal entry on the right side of your ledger. When they are equal, or when they match, they balance. And that is what you want in a double entry set of books. Do not mistake double entry books with a double set of books. If you have two sets of books, you are looking for trouble. Do you have to have certified financial statements? Only if your banker requires them for a loan. But you certainly wants to stay on top of your numbers.