Corporations are a separate entity under the law and as such are subject to taxation at both the state and Federal levels. In general corporations are subject to Federal income tax on the annual profits in many ways similar to the tax on individual income. However, there are significant differences.

One of the most difficult and complex accounting functions that small businesses face is their payroll. Because of the various state and Federal taxes that must be applied and the myriad government forms that must be prepared, the handling of a business payroll often causes accounting nightmares. Even if there is only one employee, there is a potential… Read More »

Asset and liability accounts are collectively referred to as Balance Sheet Chart of Accounts. This is because the information collected on them is used to prepare your business Balance Sheets. You will set up current and fixed asset accounts and current and long-term liability accounts. Types of current asset accounts are cash, short-term notes receivable, accounts receivable, inventory,… Read More »

These are the accounts that you will use to keep track of your expenses. Each separate category of expense should have its own account. Many of the types of accounts are dictated by the types of expenses which should be itemized for tax purposes. You will generally have separate accounts for advertising costs, utility expenses, rent, phone costs,… Read More »

These are accounts that are used to track the various sources of your company’s income. There may be only a few sources of income for your business or you may wish to track your income in more detail. The information which you collect in your income accounts will be used to prepare your Profit and Loss Statements periodically.… Read More »

The financial recordkeeping system that you will set up using this book is designed to be adaptable to any type of business. Whether your business is a service business, a manufacturing business, a retail business, a wholesale distributorship, or a combi­nation of any of these, you will be able to easily adapt this simplified system to work with… Read More »

There are a few more items that must be understood regarding financial recordkeeping. First is the method for recording the records. There are two basic methods for measur­ing transactions: the cash method and the accrual method.

The other main business report is the profit and loss statement. This report is a sum¬mary of the income and expenses of the business during a certain period. Profit and loss statements are sometimes referred to as income statements or operating statements. You may choose to prepare a profit and loss statement monthly, quarterly, or annually, depending on… Read More »