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Common problems with bookkeeping either manual or
Electronic.
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Did you know that one of the most important functions
in preparing your books is to reconcile your bank and credit card
accounts? You can do it manually or a software package such as
MYOB, ATTACHE or QUICKEN will help you do it faster. At the end
of the day a reconciled account not only means your bank agrees but it
allows you to ensure that you have not double counted income, or
expenses. Helps track your financial transactions and give peace of mind
that what came in is there and what went out is what should have. If the
bank and credit accounts are reconciled you know everything else is
pretty much accounted for.
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Understanding the reports. Some clients
believe that if there's no cash in the bank, there's no tax or GST to pay!
Wrong, regrettably. Your outgoings could include a reduction of a loan or an
existing overdraft, purchases of plant or equipment or, even more extreme, land
or buildings. And money you've taken out, which you've forgotten how much.
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Do you know that having no money in the bank at the
end of the day does not mean that you made no profit? Reading reports
correctly is a must and understanding what you have read is an
imperative. You may have repaid a loan, the profit may be sitting in
Receivables because people are slow paying; you may have paid of last
years accrued liabilities or bought plant or property. There are many
possibilities and have you recognised them? You may be still liable for
the tax, of the outstanding GST even though there is no money. That is
why it is said that " cash flow is king".
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Not understanding and not using the
Assets or Liability accounts. If these aren't arithmetically correct, the profit &
loss statement you produce will be arithmetically incorrect and misrepresent
your position.
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Accounting is an age old science, first developed by
Fr. Luca Pacioli in 15th century, over 500 years ago and some people
still can't get it right. Basically he said this, if you have income and
expenses on one side of the ledger the net result, or the profit,
becomes an asset on the other side of the ledger when it is banked and
it is part of your equity since you are the principal. So Assets must at
all times equal Owners Equity. Each of these groups can be broken up
into sub groups but intrinsically it is a closed system must always
achieve equilibrium. Often movements on the Asset and Liability side of
the ledger will affect your Revenue and Expense side as in the case of
depreciation, amortisation or interest expense. If you as the bookkeeper
do not understand the basis of this simple theory you are set on the
road to utter confusion and that is why training is a must. It is not
expensive, it is necessary and it will SAVE you money. Ask Us.
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Misallocation of information be it manually or
electronically is a great problem and it is often cheaper and easier for
us to process the data than to repair what has been done by an untrained
receptionist or junior or some other poor soul to whom the bookkeeping
task had been relegated. GST is often the victim of such machinations
and it takes for ever to rectify.
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In the case of software managed business bookkeeping,
it is imperative that if the accounts have been adjusted by your
accountant or that the quarter or the month or the year or
whatever period it may be, has been reported on, it should never be
changed in that period. Never go back and fix anything, put in a journal
entry to reverse, or add or ask your accountant how. Remember if you go
in and erase, liquidate, duplicate or add entries in a prior period, by
years end you have created a myriad of errors which can only be found by
scouring and trawling through every file in you accounting system -
EXPENSIVE!
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Be sure to have only one working file at a time. Some
software packages allow multiple copies and versions of the same file
which means that invariably at some point the wrong file will be updated
with current transactions and they will not show up at some later date
because another incarnation of the same file is being used. Very Very
expensive to fix.
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Remember, if your not sure why we changed something,
ask us, we may not be wrong. If you want to change something ask us, you
may not be wrong either. But COMMUNICATE. It will ultimately cost you
less.
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