Bookkeeping & Write-up

The disclosure principle requires that the financial statements inclusive of the income statement, balance sheet and cash flow statements present the most useful material amount of relevant information. Notes may be included to the financial statements for additional disclosure. All information that is necessary in order not to be misleading and for investors to make informed decisions if applicable.

The conservatism doctrine states that when exposure to uncertainty and risk is significant, an accounting entry should be made and accounting measurement and disclosure should take a cautious and prudent stance until evidence shows sufficient lessening of the uncertainty and risk. The allowance for bad debt account is an example of the realistic approach needed in the conservatism doctrine.

The consistency criterion states that the accounting procedures used at a given time should conform to the procedures previously used for that activity. Such consistency allows data of different periods to be compared. This is important for comparative financial statements such as the income sheet, balance sheet and cash flow statement. If there is a change in the consistency or accounting methods, the financial statements have to be restated for consistency purposes.

The matching principle states that income is calculated by matching a period's revenues with the expenses incurred in order to bring about that revenue. The accrual concept is used to accomplish the matching principal. The bookkeeper will set up accruals of income earned but not received and expenses incurred but not paid to get a better matching of the company's income and expenses for a period.

The realization concept states that a accounting transaction takes place only for those economic events to which the entity is a party. This principle rules out recognizing a gain based on the appreciated market value of a still owned asset. A gain or loss on a marketable security occurs only when sold, not on the daily fluctuation of the share price.

Forecasting is a projection of the anticipated financial performance of a company. Forecasts typically include a projected income statement, a pro-forma balance sheet and a cash flow statement. In order to arrive at projected figures, extensive research should be done to including statistical information on the competition, product trends and client demographics. This information will help you obtain reasonable estimated sales amounts. You should also get quotes from suppliers and realtors to obtain estimated expense amounts. Projections are not a picture of what you would like to see happen to your company, but carefully calculated, realistic numbers. Speak to your local CPA to assist you in this process.

W-2 forms should be furnished to your employees by January 31. It is your responsibility as an employer to file Forms W-2 with the Social Security Administration (SSA) for your employees which will show the wages paid and taxes withheld for the year. You must send Copy A to the SSA with Form W-3 by February 28. Form W-3 is a summary form that shows the total of all W-2's being sent. Go to the IRS website http://www.irs.ustreas.gov/prod/forms_pubs/forms.html or get Publication 15, Circular E, Employer's Tax Guide or Forms and publications can be requested by calling 1-800-829-3676.

You can elect to expense part or all of the cost of section 179 property (defined earlier) that you placed in service during the tax year and used predominantly (more than 50%) in your trade or business. Generally, the maximum section 179 expense deduction is $500,000 for section 179 property placed in service in 2010 during the tax year beginning in 2010. Qualified real property that is elected to be treated as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2010. If you elect to expense section 179 property, you must reduce the amount on which you figure your depreciation or amortization deduction (including any special depreciation allowance) by the section 179 expense deduction.

The term executor means the executor, personal representative, or administrator of the decedent’s estate. If none of these is appointed, qualified, and acting in the United States, every person in actual or constructive possession of any property of the decedent is considered an executor and must file a tax return. IRS Form 706 is the form that must be filed. Speak to your local CPA about the filing requirements.